Rob SaboNorthern Nevada Business Weekly

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March 3, 2013
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Participation games deliver wild rides

Gamblers taking a magic carpet ride with Aladdin, a trip down Willy Wonka’s chocolate river, or stepping out with Michael Jackson are playing games that casinos lease much like that shiny new Lexus in your neighbor’s driveway.As slot-makers keep their pipelines of new products filled with new introductions in coming months, casino operators will continue to lease games rather than tie up their capital with purchases.Popular theme games such as “Sex in the City,” Monopoly, “Wizard of Oz,” “Tarzan” and a slew of others are typically installed on casino floors under lease agreements with gaming manufacturers rather than being purchased outright by casino operators. The games are called participation games because manufacturer and operator participate in the revenue stream.Though their presence on casino floors is relatively small — participation games make up just 5 percent of the machines at the Atlantis, for example — they are an important part of a casino’s offerings because of the excitement and newness factor they offer.Participation games allow casinos to keep their floors fresh without having to expend large amounts of capital or face the depreciation costs. Gaming manufacturers are developing a host of participation concepts based on popular culture, comic books, movies, classic literature and television — anyone ready to play “Judge Judy”?International Game Technology has slots slated for a 2013 release based on “Family Guy,” “CSI: Crime Scene Investigation” and Dolly Parton, while WMS Gaming will introduce its Willy Wonka, “Wizard of Oz” and Spider-Man games later this year. American Gaming Systems, meanwhile, is developing “Family Feud,” Ripley’s Believe it or Not and “Are You Smarter Than a Fifth Grader?”Many new concepts, such as Aladdin and Willy Wonka, are being developed with fully movable chairs and gut-rumbling Bose sound to further enhance the gaming experience. s Rob Bone, senior vice president of North American sales and marketing for WMS, says gaming manufacturers weigh a host of options when deciding which licenses to pursue and the subsequent fee structures for casino operators.WMS has agreements in place with Hasbro and Warner Brothers to license many popular concepts into slot machines. Many games are designed with sequel versions in mind to extent their shelf life and popularity, as well as to re-purpose the hardware and infrastructure laid out specifically for those themes.“You use those brands as a way to get players in the seat, and you use the experience to keep them there,” Bone says. “We are really looking to get the optimum effect out of our R&D dollars. We look at what we can take on, and the science and art of it — how to attach a license to particular game that brings the experience to life.”For manufacturers, fees for participation games are determined in large part by when the game is made available, how it is played, and most importantly, its familiarity and likeability.Games such as Willy Wonka can generate tremendous momentum on a casino floor, since just about everyone knows of the Roald Dahl’s eccentric candy maker. Nostalgia and likeability for the concept are “through the roof,” Bone says. The rub: transforming a concept into a moneymaker.For Willy Wonka, WMS pulled out all the stops and created a game with a full-motion chair that follows the animation of the screen for a vibrant ride down the chocolate river. The Aladdin game has a similar experience with a magic carpet ride.“The game is married to the technology of the chair to optimize the experience,” Bone says.Such factors largely determine how much casinos will pay to have the games on their floors. Gaming manufacturers typically operate under two basic fee models:•an 80-20 revenue share, or percentage of coin-in•fixed feeThe revenue-sharing model usually is reserved for wide-area progressive games and is the most expensive for the operators, Bone says. Games with the most earning potential typically are developed as WAP games.“If we charge the customer for a percentage of the coin that goes into a game, it had better perform well,” he says. “We want the value proposition for the casino to feel like that experience is something they need to have on the floor.”Long-term planning is crucial in determining fee structures, shelf life and playability. Games such as Monopoly, Yahtzee, the Game of Life or Lord of the Rings have great exposure and work well across several different pricing models.Manufacturers also look at markets such as Reno and Las Vegas much differently than jurisdictions with little competition. Games can stay longer on casino floors in captive markets because they aren’t competing with other properties for gambler’s dollars.Andrew Burke, director of marketing for American Gaming Systems of Las Vegas, which only develops participation games, says the revenue-sharing model marries game developers to casino operators.“We are highly incentivized to put out a successful game,” Burke says. “It aligns our interests with the operators. In Nevada you need a premium product if you are going on participation basis; the standard to stay on the floor is extremely high.”Burke says interest in participation games dipped near the start of the recession in 2008 but has since returned in full strength. The explosion of capital spent on branded products has created tremendous competition to create a winning concept and land valuable casino floor space.But there’s no guarantee a game won’t flop. Gaming developers follow detailed roadmaps for product creation and release that might include alternative licensing, secondary versions or even cross-licensing to mitigate risk.As older concepts fade from popularity and are removed from casino floors, they usually aren’t relegated to dusty warehouse space in Las Vegas. WMS operates in 72 countries internationally and always has casinos clamoring for its assets, Bone says. The company based in the Chicago suburbs has a dedicated team that manages older inventory to guarantee games don’t come back too fast or stay on the market too long.David Farahi, chief operating officer of the Atlantis Casino Resort Spa, says that use of participation games is limited because they are extremely expensive to develop, and a great deal of that cost is passed on to the casino operator.The Atlantis owns the vast majority of the 1,450 machines on its casino floor, but participation games typically aren’t for sale, Farahi says. Licensors such as Hasbro or Warner Bros. often won’t allow those products to be sold, and the game makers also want a continued piece of the action.Despite the high costs, though casino operators bank on the allure of branded games to attract gamblers to their properties.“The theme or the entertainment value associated with a specific licensed brand might be so compelling for a guest that they will choose to play at the Atlantis,” Farahi says. “We work very hard to have the latest and greatest participation games on our floor.”Not all participation games are worth the additional cost, Farahi notes. The executive team at the Atlantis scrutinizes each offering before deciding to add it to the casino floor.“Just like every other business, we have to decide where our highest return on is on investment.”Though there are a goodly percentage of gamblers who prefer to play participation games, many casinos have reduced their offerings due to the costs, and some have even removed them completely, Farahi adds.

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The Nevada Appeal Updated Mar 3, 2013 02:17AM Published Mar 3, 2013 02:16AM Copyright 2013 The Nevada Appeal. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.