Gaming Equipment Slot Machines

Jul 31, 2018 The Final Word about Slot Machine Manufacturers. The brand names in the slot machine manufacturers category are many, but, of course, IGT (International Game Technology) towers above the rest like Walmart towers over other retail establishments. The list above gets longer when you account for the companies making online slot machine games, too. Get New Slot Machine Glass Themes For Slots. We carry a wide selection of used slot glasses for manufacturers such as: Bally, Atronic, Aristocrat, IGT, Bally, Konami, Ainsworth, WMS, Aruze Gaming and many more.

The gaming industry is big business in the U.S., contributing an estimated US$240 billion to the economy each year, while generating $38 billion in tax revenues and supporting 17 million jobs.

What people may not realize is that slot machines, video poker machines and other electronic gaming devices make up the bulk of all that economic activity. At casinos in Iowa and South Dakota, for example, such devices have contributed up to 89 percent of annual gaming revenue.

Spinning-reel slots in particular are profit juggernauts for most casinos, outperforming table games like blackjack, video poker machines and other forms of gambling.

What about slot machines makes them such reliable money makers? In part, it has something to do with casinos’ ability to hide their true price from even the savviest of gamblers.

The price of a slot

An important economic theory holds that when the price of something goes up, demand for it tends to fall.

But that depends on price transparency, which exists for most of the day-to-day purchases we make. That is, other than visits to the doctor’s office and possibly the auto mechanic, we know the price of most products and services before we decide to pay for them.

Slots may be even worse than the doctor’s office, in that most of us will never know the true price of our wagers. Which means the law of supply and demand breaks down.

Casino operators usually think of price in terms of what is known as the average or expected house advantage on each bet placed by players. Basically, it’s the long-term edge that is built into the game. For an individual player, his or her limited interaction with the game will result in a “price” that looks a lot different.

For example, consider a game with a 10 percent house advantage – which is fairly typical. This means that over the long run, the game will return 10 percent of all wagers it accepts to the casino that owns it. So if it accepts $1 million in wagers over 2 million spins, it would be expected to pay out $900,000, resulting in a casino gain of $100,000. Thus from the management’s perspective, the “price” it charges is the 10 percent it expects to collect from gamblers over time.

Individual players, however, will likely define price as the cost of the spin. For example, if a player bets $1, spins the reels and receives no payout, that’ll be the price – not 10 cents.

So who is correct? Both, in a way. While the game has certainly collected $1 from the player, management knows that eventually 90 cents of that will be dispensed to other players.

A player could never know this, however, given he will only be playing for an hour or two, during which he may hope a large payout will make up for his many losses and then some. And at this rate of play it could take years of playing a single slot machine for the casino’s long-term advantage to become evident.

Short-term vs. long-term

This difference in price perspective is rooted in the gap between the short-term view of the players and the long-term view of management. This is one of the lessons I’ve learned in my more than three decades in the gambling industry analyzing the performance of casino games and as a researcher studying them.

Let’s consider George, who just got his paycheck and heads to the casino with $80 to spend over an hour on a Tuesday night. There are basically three outcomes: He loses everything, hits a considerable jackpot and wins big, or makes or loses a little but manages to walk away before the odds turn decidedly against him.

Of course, the first outcome is far more common than the other two – it has to be for the casino to maintain its house advantage. The funds to pay big jackpots come from frequent losers (who get wiped out). Without all these losers, there can be no big winners – which is why so many people play in the first place.

Specifically, the sum of all the individual losses is used to fund the big jackpots. Therefore, to provide enticing jackpots, many players must lose all of their Tuesday night bankroll.

What is less obvious to many is that the long-term experience rarely occurs at the player level. That is, players rarely lose their $80 in a uniform manner (that is, a rate of 10 percent per spin). If this were the typical slot experience, it would be predictably disappointing. But it would make it very easy for a player to identify the price he’s paying.

Raising the price

Ultimately, the casino is selling excitement, which is comprised of hope and variance. Even though a slot may have a modest house advantage from management’s perspective, such as 4 percent, it can and often does win all of George’s Tuesday night bankroll in short order.

This is primarily due to the variance in the slot machine’s pay table – which lists all the winning symbol combinations and the number of credits awarded for each one. While the pay table is visible to the player, the probability of producing each winning symbol combination remains hidden. Of course, these probabilities are a critical determinant of the house advantage – that is, the long-term price of the wager.

This rare ability to hide the price of a good or service offers an opportunity for casino management to raise the price without notifying the players – if they can get away with it.

Casino managers are under tremendous pressure to maximize their all-important slot revenue, but they do not want to kill the golden goose by raising the “price” too much. If players are able to detect these concealed price increases simply by playing the games, then they may choose to play at another casino.

This terrifies casino operators, as it is difficult and expensive to recover from perceptions of a high-priced slot product.

Getting away with it

Consequently, many operators resist increasing the house advantages of their slot machines, believing that players can detect these price shocks.

Our new research, however, has found that increases in the casino advantage have produced significant gains in revenue with no signs of detection even by savvy players. In multiple comparisons of two otherwise identical reel games, the high-priced games produced significantly greater revenue for the casino. These findings were confirmed in a second study.

Further analysis revealed no evidence of play migration from the high-priced games, despite the fact their low-priced counterparts were located a mere 3 feet away.

Importantly, these results occurred in spite of the egregious economic disincentive to play the high-priced games. That is, the visible pay tables were identical on both the high- and low-priced games, within each of the two-game pairings. The only difference was the concealed probabilities of each payout.

Armed with this knowledge, management may be more willing to increase prices. And for price-sensitive gamblers, reel slot machines may become something to avoid.

Introduction to Who Builds Slot Machines

Who builds slot machines throughout the world? For such a popular activity, there is a relatively short list of slot machine manufacturers in the world:

Multimedia Games Inc. (a subsidiary of EVERI Inc.)

Of these companies listed, Class III gaming is principally supported in North America by Scientific Games Corp. and IGT. They are both global leaders in the gaming industry. Mergers and acquisitions are the name of the game amongst slot machine manufacturers. It is currently a highly dynamic corporate environment.

In 2014, for instance, Bally Technologies was acquired by Scientific Games. This acquisition is significant as Bally was the driving force for inventing most of the modern features of slot machines enjoyed by so many.

These gambling companies provide products other than physical slot machines. They often also supply casino-management systems. These software packages help casinos to “run” their operations from day-to-day and even in real-time.

This casino operating system software is crucial to casinos as a way to reduce cost and, I’ve found, a significant advantage play for slots enthusiasts. I’ll provide more on this topic at another time.

This operating or enterprise software business is as highly competitive as slot machine manufacturing. Factors that determine how successful providers are in selling their systems include:

product features and functionality
accuracy
reliability
service level
pricing

Competition is intense because of the relatively low number of providers and the limited number of casinos and jurisdictions in which they operate. Providers are Scientific Gaming, Aristocrat, IGT, Konami, and several smaller companies in international gaming jurisdictions.

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The Gaming Industry

Within the global gaming industry, companies building slot machines is trending towards consolidation amongst gaming equipment and technology companies. The gist of why is to increase scale and therefore operating efficiencies. The hoped-for result is accelerated innovation and product development resulting in broader service and product offering.

Several acquisitions of slot machine and other gaming equipment manufacturers have occurred recently, including the purchase of Bally Technologies by Scientific Gaming Corp. and the acquisition of Multimedia Games by Global Cash Access Holdings Inc.

Following a wave of supplier diversification in the gaming industry, where new providers have been gaining in market share, the industry is experiencing significant consolidation.

This convergence is attributable primarily to a slowdown in North American traditional slot machine revenues as regional gaming revenue headwinds, such as declines in same-store sales, impact the demand for slot machines.

Therefore, the machine gaming sector is evolving from just the sale and leasing of slot machines to include:

multi-channel systems and table games equipment for traditional land-based casino
lottery technology
real-money interactive gaming
online and mobile social casino gaming

A significant threat for the entire gaming and betting industry arises from illegal activities, which may drain significant betting volumes from the regulated gaming industry.

The loss of present players from legal casino operators has a material adverse effect on gaming industry operations, business, financial condition, and prospects.

Scientific Games Corporation (NASDAQ: SGMS)

A global leader in the gaming industry, Scientific Games Corporation (SGC) is the current owner of:

Bally Technologies Inc. (one of the original slot machine companies)
Spielo
WMS Gaming Inc.
Shuffle Master
Barcrest

SGC’s company profile states that they provide:

lottery games
electronic gaming machines
server-based lottery and gaming systems
sports betting technology
loyalty and rewards programs
online social, mobile and interactive content and services

In 2013, Scientific Games Corporation purchased WGS Industries, Inc. Bally Technologies, Inc. was acquired by SGC on November 21, 2014, for $5.1 billion.

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The products of SGC are installed in 450 jurisdictions worldwide, including all the major regulated gaming jurisdictions in the U.S. and 146 international gaming jurisdictions. They have 975,000 units installed in North America.

Within the gaming supply segment, SGC sees the competition on several fronts. Primarily, being a global leader in slot machines has resulted in their product lines competing with each other for space on the casino floor.

International Game Technology PLC (NYSE: IGT)

International Game Technology (IGT) PLC is a global leader in gaming that, according to its website, leverages a wealth of

premium content
substantial investment in innovation
in-depth customer intelligence
operational expertise
leading-edge technology

It has not only established local presence and relationships with governments and regulators in more than 100 countries around the world but also approximately 13,000 employees. For U.S. federal tax purposes, under current law, it is treated as a foreign corporation.

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In 2014 and 2015, International Game Technology PLC experienced multiple corporate mergers and acquisitions involving GTECH, Holdco, IGT, and Georgia Worldwide Corp. which has been and is a complex, costly, and time-consuming process. The integration process is expected to be completed by the fiscal year 2018.

International Game Technology PLC’s online social gaming casino offering, DoubleDown Casino, is mainly conducted through Facebook and Apple iOS platform, a relationship governed by Facebook and Apple’s standard terms and conditions for application developers as well as privacy policies, both of which are occasionally modified, rather than by contract.

International Game Technology PLC currently does business in approximately 100 countries worldwide. At the end of 2014, IGT PLC had contracts with 717 casino operators in the Americas segment, with 249 in Latin America and 468 in North America.

Summary for Who Builds Slot Machines

Slot machine manufacturing is principally supported in North America by Scientific Games Corp. and International Game Technology PLC, both global leaders in the gaming industry.

The products of Scientific Games are installed in 450 jurisdictions worldwide, including all the major regulated gaming jurisdictions in the U.S. and 146 international gaming jurisdictions. They have 975,000 units installed in North America.

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Have fun, be safe, and make good choices!
By Jon H. Friedl, Jr. Ph.D., President
Jon Friedl, LLC

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