“Pigskins want to dance with some Calamari,” ran the playful headline on a Monday investor note by Truist Securities analyst Barry Jonas, summarizing the recently concluded Global Gaming Expo (G2E) in Las Vegas. The “pigskin” was an allusion to new, National Football League-themed slot machines, while the calamari took the form of Light & Wonder’s Squid Game one-armed bandits.
Although Jonas found the 2023 iteration of G2E “amongst the busiest we’ve seen in years,” he prophesied a relatively flat 2024 for slot manufacturers. He added that Aristocrat, maker of the NFL slots, “remains the player to beat, though competitors have invested substantially in R&D to close the gap.”
The analyst’s view was that the gambling technology and business-to-business sectors are resilient following the COVID-19 pandemic. “Supplier offerings,” he continued, “demonstrate innovative, tried and true mechanics.”
In addition to Aristocrat’s gridiron-themed games, Jonas pronounced himself impressed with International Game Technology’s Whitney Houston slots and Light & Wonder’s Squid Game. However, most observers with whom Jonas spoke felt the new IGT games were overshadowed by the possible sale of that division.
Amongst several other manufacturers, Jonas noted that Everi “put out an expansive list of cabinet and content offerings in a bid to return to growth after near-term setbacks,” while “Konami admitted it had lost some share, but believes its new content will help to return to a growth footing.” Ainsworth-made games were also on the receiving end of good word of mouth.
Casino operators, by contrast, seemed to be following the lead of Caesars Entertainment, which told Jonas it was reverting to a normal level of game-floor investment, following an extensive series of slot replacements and refreshes. Regional operators expected “a moderate increase” in their slot capex while others “don’t expect to see large investment on slot floors.”
Caesars was also sanguine about the economy, citing low, 3.5 percent unemployment and a 4.2 percent Federal Reserve interest rate. Company execs expect their revenues to be driven by newer casinos in Columbus, Nebraska and Danville, Virginia.
Penn Entertainment’s alliance with ESPN, and their new ESPN Bet, was a particular source of discussion. Jonas found that digital operators were unfazed by the newcomer, “with no one seemingly changing tactics at this point.” As for customer acquisition, Jonas felt that sanity was prevailing, with operators now more focused on return on investment rather than “market share gains by any means.”
However, “operators noted that product quality remains critical for consumers, and that ESPN Bet’s mid-season entry with … incomplete product could present challenges for their customer retention.” The strength of the ESPN brand was undisputed. If it could leverage its digital-media strengths, rivals thought, “ESPN Bet could become a competitive offering.”
Jonas then proceeding to break down the show by individual manufacturer as follows:
Aristocrat: In addition to a half-dozen NFL slots in the initial launch, the company is also looking to the Georgia market, where it sees potential for 42,000 coin-operated amusement machines, total. Execs added that, since the pandemic, managers of slot floors now prioritize machine performance over diversification of offerings.
Ainsworth: This company “has aligned its teams to execute in lockstep,” Jonas wrote. It perceives growth potential Class II and tribal-casino machine sales. Mergers and acquisitions have become a lower priority compared to internal growth, although tuck-in purchases were seen as a way to obtain game-design talent.
Everi: Eighty-six planned game releases, up from 60 in 2023, highlight Everi’s 2023 plans, which also include five new cabinet designs. Management told Jonas that their insight into operator trends had shortened to two to four months (compared to a pandemic-era two quarters), and that they needed two to three months to determine if their slots were performing well.
Gambling.com Group: Executives told Jonas “it’s been busy looking at small/medium deals, and potentially a strategy of buying affiliate-like businesses that can add technologies or capabilities to the platform.” Its market share was said to be trending upwards “by a meaningful amount,” particularly with regards to online casinos.
International Game Technology: In the event of a game-division sale, IGT has retained consultants to advise it on how to stand out as a lottery-alone firm. Driven by overseas growth, management is looking for 28 percent to 30 percent margins in the gaming division. Also, “While celebrity-based content does not typically have long legs, IGT noted that fan base demographics for both Whitney Houston and slot players had significant overlap.”
Inspired Entertainment: This firm got a lift from the National Basketball Association, which commissioned virtual entertainment from Inspired. “The offering will use archived footage of the last three years of live NBA play, rather than simulated graphics as in other [virtual sports] products,” Jonas explained. Inspired also debuted its Hybrid Dealer, “an alternative to live dealer, with reduced operational and regulatory complexity.”
Light & Wonder: Prioritizing design talent over R&D spending, Light & Wonder execs compared themselves to a movie studio, particularly emphasizing the presence of designers Ted Hase (“Frankenstein”) and Kelsy Foster (“Mystery of the Lamp”). Among the several overseas markets in which Light & Wonder saw growth potential was the Philippines, where the federal government has indicated it wants to raise more gambling revenue and Light & Wonder already enjoys 50 percent market share.
With the exception of domestically unlisted Aristocrat, all the companies with which Jonas and his team met were “Buy” rated.
