Casino equipment suppliers didn’t display the knockout punch offered by a new product, or a potential industry-changing technological advance, that analysts have come to expect from the annual Global Gaming Expo.
The main theme at this year’s G2E indicated a new focus on specific products, such as advancements in spinning wheel stepper games and competition in the bar-top video slot machine arena.
CDC Gaming Reports
“Suppliers are increasing focus on more segments to take (market) share,” Fitch Ratings Service gaming analyst Colin Mansfield told investors in a post-G2E research note. “Consolidation is occurring around market-proven, licensed titles.”
Stifel Financial gaming analyst Brad Boyer thought innovation was “somewhat lacking” on G2E’s tradeshow floor inside the Sands Expo and Convention Center.
“Don’t get us wrong, there were definitely several interesting new cabinet designs, game themes and sign packages unveiled at the show,” Boyer told investors in a research note. “However, we did not see anything that is likely to trigger a material change in the operators’ propensity to refresh their slot floors.”
Analysts said slot machine manufacturers did their best to answer investor concerns on how casino industry consolidations, challenges in Indian gaming markets, and expansion in various states will influence the budgets casino companies are allocating toward new gaming equipment purchases over the next 12 months.
The overriding worry is the impact the $17.3 billion merger between casino giants Eldorado Resorts and Caesar Entertainment will have on slot floors. Some analysts predict the deal could lead to a reduction of slot games in many of the properties now operated by Caesars.
Other analysts thought Indian casinos now represent a better play for slot makers.
“We remain positive on tribal operators’ willingness to invest in their floors, contrasted with over-leveraged commercial operators looking to better manage through conversion kits and lower premium product,” said Macquarie Securities gaming analyst Chad Beynon.
Union Gaming Group analyst John DeCree said slot machine spending compared to a year ago will either be flat or down, depending on different markets. Smaller equipment manufacturers “continue to be disruptive” and have been taking away casino floor space from the larger providers.
“Companies like Incredible Technologies and Gaming Arts received strong recognition in our discussions with slot buyers at the show,” DeCree said in a note to investors. “In the wake of significant consolidation across the industry, and growing competition from smaller suppliers, we don’t expect much in the way of notable market share gains for the largest slot suppliers.”
However, not all is lost for International Game Technology, Scientific Games, Aristocrat Technologies and other larger equipment manufacturers.
Suppliers have made headway in other product areas. Most companies displayed modern, curved-style slot cabinets, which is now an area of competition. Fewer new game themes were introduced; instead, manufacturers unveiled newer products that enhanced popular game titles.
For example, IGT hosted Jeopardy! sensation James Holzhauer in its booth on G2E’s opening day to help reveal the company’s new “MegaTower” slot machine cabinet, which the company is using to house slot content based on popular television game shows.
Boyer told investors re-introducing proven slot themes on new platforms comes with some risk.
“Though the familiar themes should help attract initial interest in the games from loyal slot players, we believe there is a fairly delicate balance that must be maintained in order to ensure the new games do not cannibalize the prior iterations that already reside on operators’ floors,” Boyer said.
Bar top slot machines
IGT bar top – courtesy IGT
Aristocrat Technologies, after more than two years of development, rolled out “Winners World,” a multi-game bar top game with video poker, keno and traditional slot machine games. All three areas include games with Aristocrat’s popular Buffalo title.
Initially, the company is focusing on Nevada’s legacy slot route market, where more than 19,000 limited stakes games are offered in bars, taverns, convenience stores and other locations with 15 or few games.
With seven states currently offering the slot routes, often described as distributed gaming, Aristocrat and Scientific Games see a growth market to challenge IGT, which has long held the dominant position.
IGT unveiled its “PeakBarTop” product, an upgrade to its standard machine, at the show. Fitch’s Mansfield told investors the game cabinet was the company’s “first bar top innovation in 20 years.”
IGT CEO Renato Ascoli said in a statement the device “underwent extensive focus testing to ensure it’s the most elite, functional, and player-pleasing hardware in its class.”
With Scientific Games also displaying its own bar top product, however, the market is getting crowded.
#exclusive – Analysis: Absent a G2E ‘wow’ product, slot makers focused on gaming market segments. –@howardstutz, CDC Gaming Reports. https://t.co/PWASdUr41A @G2Eshows #CDCgaming
— CDC Gaming Reports (@CDCNewswire) October 28, 2019
SunTrust Bank gaming analyst Barry Jonas said the competition provides a level of risk to IGT’s position, but the games have a much longer lifespan than traditional slot machines.
“While not all legacy product warrants replacement, we could see some operators converting a few of their units per property to competing offerings,” Jonas said in a research note.
Beynon said the owners of small stakes gaming locations welcome the “innovation and refocus” from the game providers.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
