A brave new future for those with an imagination

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This, indeed , is the question of the hour in gaming – Howard Stutz from the Las Vegas Review-Journal asked it – what is IGT thinking?  Howard’s question is simple, why does the leading slot machines manufacturer in the world not hire executives with industry experience?   In the last few years, IGT has looked everywhere, except in the gaming industry, for executive leadership.  When asked about it, Patti Hart the CEO, said she had worked in the industry for six years, what more does she need? ” I now have six years in the gaming industry,” Hart said last week. “I believe that qualifies my experience.” 

You could make an argument in her favor, the industry has changed dramatically since the old three reel, coin and handle operated games.  IGT has been a big part of the change, it got its start by selling video poker games; not only did poker machines alter the industry, it introduced the technology that now drives all slot machines.  In Ms Hart’s defense what the industry needs now is new thinking, a new vision to drive the industry for the next 20 or 30years. Isn’t gaming just entertainment and aren’t slot machines just computer terminals? And isn’t the technology they use just another application of the same things that telephones, computers and video games use?  If so, old fashion gaming experience is highly overrated.

All of that may be true, but IGT’s machine sales in the few years does not indicate the company produces the best games, 20 years ago IGT slot machines dominated the industry because the customers like them best; and therefore the casinos bought them more.  Since then IGT has used its financial muscle to secure the big sales, especially when a new casino opened and needed thousands of slot machines at one time, but did not have the cash flow from operations to pay for them.  To provide than many machines, other companies had to charge more, demanded enough money upfront to complete the manufacturing and charge interest on the money due.  Instead, IGT demanded a significant percentage of all of the slot machines purchased, with that IGT did not require upfront payments, it could deliver the order on time and wait for its payment.  Simply,  IGT has more money and can make better deals that other slot companies; that has helped IGT keep ahead of its competitors, but it has been a very long time since the best performing – meaning coin-in and profit for casinos – slot machines were made by IGT.

After hire some ask, ‘What’s IGT thinking?’

  A major car manufacturer wouldn’t hire an executive from Victoria’s Secret to design automobiles. Nor would an international oil company bring aboard someone from Baskin-Robbins to plan growth initiatives. So why does the gaming industry’s largest slot machine manufacturer believe it can stock its corporate offices with executives who have little if any experience in the casino business? Ten days ago, International Game Technology named John Vandemore …comes to IGT from Walt Disney Co…Since taking over as chief executive officer nearly three years ago, Patti Hart has filled IGT’s corporate offices with executives from IBM, Microsoft, Broadbank Interactive Television, and SunGard Availability Services.  Hart spent years with California Silicon Valley technology firms before joining IGT’s board in 2006. Howard Stutz, Las Vegas Review-Journal, 2-18-12

IGT also has more money for research and development; which as the industry is trying to figure out what is going to happen next, is giving IGT an opportunity to prepare for online gaming in a way no other slot company (or casino company for matter) can.   That research and development budget may be a clue into the company’s plans for the future and the answer to the hiring dilemma.  IGT has always been a forward thinking company, the last few years it has concentrated its research on server-based games; believing all the while it was the future of the industry.  However, reluctant casino executives and a depressed economy have acted in concert to delay that particular future.   The company has been very open in its thinking and planning, telling anyone and everyone who would listen that sever-based gaming was the next big thing and would total change the way slot machines are made, sold and managed.  However, there has been much less talk about server-based gaming since Hart took over has CEO, for good reason I think.  One she was new to the industry and wasn’t in a position to preach to industry veterans, but two she may have a different plan – online gaming.

It would be hard to be totally open on that subject – but I suspect if one could be the proverbial fly on the wall in the IGT boardroom you might hear of a completely re-engineered IGT – one that did not design, manufacture  or sell slot machines.  Instead the talk would be of an exclusively online gaming company that provided the format for the players and collected the profits directly – no middleman or casino necessary.  If that is the plan, it must be kept secret, especially hidden from the casinos that now buy its slot machines.  The casinos have always resented it when IGT owned a casino and competed directly with them.  You can guess how they would feel about IGT snatching the future of gaming right out of their hands and leaving them in the dust.  For the moment IGT still needs casinos to buy or lease its slot machines, but it won’t always.  The casinos are in a very different position and will not find the transition quite so easy for them.   Casinos will be tied for a long time to their brick and mortal casinos and the debt the goes with it.  IGT will have the best of technology for an internet gambling experience and have no brick and mortal ties or thinking to hold it back.  Howard did not ask me what IGT was thinking, but if he had, this is what I would have said; they are not thinking about the current industry at all – IGT is thinking about a brave new future online.