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Takeaway: No need to panic now but the small players need to be watched

The little slot guys trying to play with the big boys

We've been waiting years for this but could the small guys finally be making their move?  Ok, we're not ready to call the end of the big boy dominance of the slot market.  Outside the top 5, the small guys will still only comprise 7% of North American ship share (excluding Canadian replacements).  However, that's more than double what it was in 2008.  The product is much better coming out of MGAM, Aruze, et al.  So while there is no need to begin cutting estimates on IGT, BYI, WMS, Aristocrat, and Konami, this is a trend that needs to be monitored.  We continue to believe that IGT, at least over the near and intermediate term, is the least likely to bear a material (to them) share impact from the new competition because of their product depth.

  • In 2008, we estimate that the top 5 suppliers had North American ship share of 97%
  • In 2012, we estimate that the top 5 suppliers will only have 87% ship share in North America
    • 6% of the decline is due to Spielo’s large share of the currently ongoing replacement cycle in Canada
    • However, even without the Canadian replacement cycle, we estimate that the top 5 share would still decline to 93%
  • Some of the small players that are slowly but surely gaining traction in the for-sale market include:
    • MGAM
      • 2009:  entered the market with 132 units
      • 2012:  on track to ship over 2,000 units to NA
      • Continuing to get licensed in many state jurisdictions, including Nevada in 2013, which should almost guarantee MGAM above market growth
    • Aruze
      • We estimate that Aruze had approximately 300 units “sold” in 2010 and are currently on track to sell about 750 units this year.
      • They are still predominantly focused on participation / leases
    • Spielo - They are a player in VLT/VGT markets and are beginning to develop better content for Class III.  Through Wells-Gardner, they have already secured over 1,800 IL VGT contracts.
    • Ainsworth
      • In 2010, Ainsworth sold approximately 475 machines into NA. 
      • In 2012, they are on track to sell around 1,700 units