Size Does Make a Difference

One fact stood out at G2E 2013; slot machines are getting bigger.  In fact, compared to the little boxes of the 1950s slots that provided the basic DNA for today’s games, they are gigantic monsters.  And like the dinosaurs, the long-gone animal monsters that once dominated the planet, today’s gigantic slot machines need a great deal of territory and sustenance to survive.  Seemingly, every year slot machines are getting bigger; that means every year they need more territory – more casino floor space to accommodate their size.

In the airport on my way home after G2E, I ran into the first slot representative that I remember from my Comstock Hotel-Casino days in Reno.  Together, we reminisced a little about those days and the changes time has wrought on our industry.   In the early 1980s, he worked for Bally and was the Bally rep for the Comstock.  In those day, there was no G2E for a slot manufacturer to display its wares; instead each manufacturer held small private showings for individual casinos.  Bally had a small showroom just up the street from the Comstock. Once a year, a few Comstock managers and slot mechanics were invited for an evening of food, drink and slot machines.  We were treated to the latest Bally models, given a chance to pull some hands, open doors and plan our slot purchases for the coming year.  Those were three-reel, mechanical slot machines and they were tiny by today’s standards, less than 3-feet tall, 2-feet wide and 18-inches to 24-inches deep.  Of course, by then there were also machines with higher top-boxes and progressive signs above that, but nothing resembling the size of today’s machines.

It is not just the slot machines that are getting bigger, everything in the industry is getting bigger.  Casinos are bigger, revenues are bigger and the casino operating companies are bigger; like the slot machines, today’s casino companies are 3, 4 or even 10 times bigger than their counterparts in the early 1980s.   Most recently, Boyd, Penn and Pinnacle have each gobbled up smaller multi-property, multi-jurisdictional casino companies.  The same process of mergers and acquisitions is taking place with the manufacturers, Scientific Games acquired WMS and Bally acquired Shuffle Master.

In the 21st century, on both fronts, operations and manufacturing, the industry is dominated by giant corporations with billions of dollars in assets and revenues and a major share of the market in every jurisdiction where they operate.  Small slot machine companies and casino operating companies are disappearing.  The opportunities for small, privately financed companies have nearly dried up.  Although if you are looking, there are a couple of store-front casinos for sale in Deadwood, South Dakota.

Size matters in the gaming industry; it takes a very large corporation to obtain a license to do business in any new jurisdiction.  Larger corporations impress the regulators, but they are also the only ones that manage the expensive process of designing, financing, building and operating the mega-casinos it takes to compete anywhere, except in Deadwood or maybe Cripple Creek, Colorado.  It also takes a large corporation with those big casinos to afford most of the monstrous slot machines I saw in Las Vegas.  Poor little Johnny Nolon’s in Cripple Creek, or dozens of other small casinos in rural locations. Not only can they not afford the price of the new slot machines, they have no room for them in the casino.  The machines are simply too tall.  However, even if they fit in an older, smaller casino, they still take up too much space.  Each of those giant slot machines takes up the space of two or more smaller machines, more if one counts the space lost to complete the configuration of a bank of ten or twelve machines.  So, when one combines the price of the games, signs and seating with the revenue lost from the large number of games being replaced – the price is just too much for a small casino to pay.

In today’s big-casino world, the size of a slot machine does not seem to matter to major casino companies or slot manufacturers, but it matters a great deal to the older, small casinos.  In a competitive world, the small casinos are getting farther and farther behind; they cannot afford the products or services their larger competitors have and in the long-run that means they will lose out completely.  It is the nature of business; newer, larger and better financed businesses win out in the end.  Haven’t Wal-Mart and the other big box stores all but eliminated the small family groceries, appliance, furniture, book and drug stores?  Those huge slot machines on display at G2E 2013 in Las Vegas were more than a foretaste of next year’s slot floors, they are a symbol of the changes taking place in the industry and a reminder that size does, indeed, make a difference.



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