Sands Bethlehem Announces Sale for the Second Time

Las Vegas Sands sold its property in Pennsylvania to an Indian tribe from Alabama.  On the surface the story is pretty straightforward, but it does have some interesting twists and turns.  The Poarch Band of Creek Indians through its affiliate, Wind Creek Hospitality, has agreed to buy Sands Bethlehem for $1.3 billion.  A year ago, MGM and Sands came to that same agreement, but MGM decided with a dramatic expansion of gaming about to begin, it probably wasn’t a good idea.

Actually, the expansion is why the Sands wants to unload the property, even though it is the best property in the state. Last year the net revenue was $579 million and because it has a hotel, Sands has been really good at marketing table games, much better than its competitors.  In the fiscal year 2016-2017, the Sands generated 27 percent of the total table game revenue in Pennsylvania with only 19 percent of the tables.  In 2016, the management was so excited about its prospects that it planned a $90 million expansion. The press releases described in glowing terms the great things that would come with the new addition.  It was to add 35,000 square feet of gaming, an additional restaurant and a separate poker room.  The expansion would have made it the largest casino in the state.  However, the expansion did not happen, even though the company broke ground on the project before declaring it dead in the water. Why the drastic change?  The same reason MGM backed out of the deal.  Pennsylvania is in the process of its largest expansion of gaming since slot machines were first authorized in 2004.

The Poarch Band of Creek Indians apparently did not get the memo about the risk.  Or may it did and is not worried.  The tribe operates three Class II casinos in Alabama.  It has tried numerous times to convince the state to authorize casinos so the tribe could add class III gaming with real slot machines and table games.  During one of the discussions the tribe offered the state over $200 million for Class III legislation, but all to no avail.  Without any success in expanding in Alabama, but with plenty of money in hand, the tribe has branched out to Florida, Nevada and the Caribbean.   The tribe also bought land in Mississippi for a casino and in 2016 sought to purchase the Margaritaville Resort Casino in Bossier City, Louisiana. The sale was canceled because of a dispute over licensing payments for the Margaritaville name.

So while some observers think “the Indians” are biting off more than they can chew, those opinions are likely to be based on a lack of understanding of the tribe’s management abilities and resources.  Regardless of the tribe’s skills and financing, Pennsylvania is going to be a challenge, as it will be for every operator in the state.  The legislation that authorized expansion was passed in October, 2017.  The process is only beginning; a series of auctions is being conducted for one of ten mini-casino sites and licenses.  Ten more casinos in the state with an additional 7,000 slot machines is going to make the Pennsylvania market quite crowded.  However, that may not be the worst thing coming down the track.  The state has also authorized online gambling, including online lottery games.  And the legislation includes slot machines in truck stops and airports.  No one is quite sure what any of those will mean to the existing casino industry or when they might begin.  The mini-casinos are first in line and when the bidding is finished it will still probably take a year and maybe two before the first mini-casino opens.  In a heavily regulated industry like gaming, everything takes time.  It will take a year, for the Poarch Band of Creek Indians to be approved by Pennsylvania and complete their financing.  That will still leave them a little window to learn the lay of the land before the new gaming options get started.  In the meantime, the Sands hopes it is free of the stress of the increased competition in Pennsylvania. And once it has the billion dollars in hand it can invest it more profitably.  As good as the Sands Bethlehem is, it only represents about 6 percent of the total revenue that Las Vegas generates in Las Vegas, Singapore and Macau.  If the Sands is lucky, the second time will be the charm.  If not, it is difficult to imagine where another buyer willing and able to pay $1.3 billion for the Sands Bethlehem might be found.


Japan Moves into the Casino Business

Japan is embarking on a casino adventure and it is carving its own unique path.  In December, the Japanese Diet passed initial enabling legislation.  The law as it stands is too vague and could not be implemented without more structure. It needs the where, when, how many, how much and who before anyone puts a shovel in the ground.  But it does not appear lawmakers will find common ground on some issues easily or quickly.  The idea of legalizing casino gaming has been floating around in Japan for most of the 21st century and has run aground in previous efforts.  At one point analysts were predicting casinos would be open in Japan in time for the 2020 Summer Olympics Games, which is clearly no longer possible.

The issue of how to protect vulnerable Japanese citizens is the stickler in the process.  Some of the opposition political parties in the Diet are determined to address the social issues such as organized crime and gambling addiction before any of the casino-specific issues.  The debate is centering on limiting the number of visits to a casino by Japanese citizens and an entry fee intended to discourage would-be gamblers from going to a casino very often.  The opposition also wants to limit the size of a casino to 15,000 square feet and not more than 3 percent of the total floor space of the resort. The passion behind the debate can be found in pachinko parlors, the country’s shadowy gambling industry.  While casinos were illegal, slot- like parlors existed in abundance.  The parlors functioned much like their counterparts in other countries.  Currently, there are 11,000 parlors in Japan with literally millions of pachinko games.  There is an ongoing trend of fewer games and less revenue year over year for at least five years.  The i

The existence of such a huge gambling industry in a country that has banned casino games has undercut the casino discussion and reflects a basic conflict in Japanese values.  On the surface, Japan maintains gambling is anti-social and harmful.  However, gambling in Japan is very big business.  Besides several million pachinko games, Japan has a very large and healthy horse racing industry.  There are approximately 21,000 horse races held in the 288 annual race days; the handle is estimated at $30 billion.  Lawmakers have tightened down on pachinko, but have stopped short of banning it or horse racing.  Still, they have been very reluctant to authorize casinos and the opponents are clearly dragging their heels now.

However, the government of Shinzo Abe has been pushing the idea.  Abe is seeking to strengthen the country’s tourism appeal and generate additional revenue, employment and investment.  The idea has certainly been met with enthusiasm by the gaming industry. Many international gaming companies are extremely interested; it is being estimated that a Japanese casino industry would generate in excess of $20 billion annually.  Given the size of both horse racing and pachinko games in Japan, the estimate does not seem unreasonable.  Initial investment proposals by companies such as Wynn, MGM, Sands and Genting have been in the neighborhood of $5-10 billion.  And while the strict limits on Japanese gamblers and casino size pose a problem, they may not be a deal breakers.  However, both will likely have an impact on the amount of money gaming companies are willing to invest.

Limited access to casinos by locals and casino size are not the only issues that darken the picture.  The tax rate is singly the most important detail that needs to be added to the legislation. Because the debate has centered on social issues, very little discussion on taxation has taken place.  However, recently the government floated a 30 percent gross gaming tax rate.  Although there are jurisdictions that charge more, thirty percent of gross is a steep price to pay.  It is especially high when the government is expecting each licensee to spend at least $4 billion on a resort that will only have a very limited local clientele.  By implication, casinos would have to spend at least four billion dollars to compete with casinos in Macau, Cambodia, Vietnam and the Philippines for Chinese gamblers.  The lawmakers and the government are working through all of the issues that are important to them.  But it seems to me that little consideration is being given to the operators.  However, I have yet to hear of any of the major casino companies being ready to jump ship because of increasingly complicated and much less appealing opportunity to build a casino in Japan.


Pennsylvania Reverses Directions and the CDC Newsroom Responds

CDC Gaming Reports has matured over the last 15 years. It has grown from being the distributor of a single report, the Adams Daily Report, to a news outlet that five days a week publishes the early morning Flash, mid-day Adams Daily Report and the late afternoon Last Call.  And on the weekend CDC publishes Hot Clicks & Picks and the Weekend Report.  The CDC website is constantly updated and many additional features have been added over the years, including videos, podcasts and commentaries.  The changes have grown organically, so that most of the time I barely notice the differences.  However, unusual events sometimes highlight the changes; one of those events was G2E.  At the 2017 G2E, CDC had a full staff on the floor covering the event better than any other media outlet; the team published From the Floor every day of the show.  Another of those unusual events happened on February 21st. On that day, the Pennsylvania gaming regulatory agency granted a license for a new mini-casino and then dramatically reversed its decision all within a six hour period of time.  The CDC team stepped up to the plate and kept its readers up-to-date through the changes.

Here is the story.  In a desperate bid to balance its badly unbalanced budget, the Pennsylvania legislature approved a major expansion of gaming in October.  The legislation had many component parts, one of which was called “mini-casinos.”   The law allowed for ten mini-casinos with 300-750 slot machines and up to 30 table games for an additional fee.  The mini-casino licenses were to be awarded to top bidders at auctions held by the Pennsylvania Gaming Control Board.  The law also allowed communities to opt-out of the process; by the deadline on December 31, 2017 over 1000 communities had declared themselves unwilling to host a casino.  However, the state has 2,500 communities, so there were still plenty who were willing to receive the $1.6 million per year host fee.

The auctions began on January 10th with a new one to be conducted every two weeks.  At the moment, four auctions have been held. On January 10th, Hollywood Casino submitted a winning bid of $50.1 million; on the 21st the Cordish Company and a partner won a license with a $40.1 million bid; and on the 8th of February Mount Airy Casino was approved for its $21.1 million bid.  And then on the 21st the Sands Casino was approved for its $9.9 million offer.  Each of these bids was for a specific community.  By law, a host community cannot be within 25 miles of an existing casino or within a 15-mile radius of another mini-casino.

And therein lies the rub, the community proposed by the Sands was within the 15-radius of the one already approved for the Mount Airy Casino bid. It took the gaming regulators just six hours to realize their error and reverse their decision.  The license was subsequently awarded to Prax Casino’s bid of $8.1 million for a location in South Central Pennsylvania.  The complete story developed during one single CDC day, Wednesday, February 21, 2018. In the morning Flash readers were alerted to an auction that day and the Adams Daily carried a story that the Sands Casino had been awarded the fourth license. In the Last Call readers learned that Sands no longer had a license, it had been granted this time to Prax Casino.  As the story developed during the day the CDC team worked to stay on top of it. It was a “wow” moment for me; I could almost close my eyes and see a newsroom filled with reporters, copywriters, photographers and editors scurrying to get the story.  That newsroom vision in my head comes from an old superman comic book and is sadly out of date, but the CDC team fit into it quite nicely in my mind.  “The story, get the story,” they cried in unison.  They got it and in the process became a real team.  It may not have been a great day for the Sands, but it was a great day for CDC.

Can Wynn Resorts Find Its Way Out Of This Quagmire?

It is almost impossible to avoid talking about Steve Wynn and Wynn Resorts these days. Wynn has always been an important figure in gaming, a marketing genius and a game changer.  But, since January 26th, Wynn has transcended the gaming industry, becoming an international headline.  The Wall Street Journal, New York Times, Forbes, London Daily Mail, El Pais, Sydney Morning Herald and the South China Morning Post have all done stories on Wynn since the Wall Street Journal broke the story of the alleged misdeeds of Steve Wynn.  The story “Dozens of People Recount Pattern of Sexual Misconduct by Las Vegas Mogul Steve Wynn,” was reflective of the investigative journalism of recent months.  Since the Harvey Weinstein scandal there has been a growing trend to delve into the inappropriate sexual behavior of major political, media and business personalities.  The investigation and Wynn’s alleged behavior fit perfectly into the trend.  In its investigation, the Journal sought out women who claimed Wynn had assaulted them and created a culture of intimidation within Wynn Resorts.

According to one article on the subject, Journal reporters interviewed over 150 current and former employees of Wynn Resorts.  Did Steve Wynn commit crimes against women? Did he violate gaming regulations in Nevada, Massachusetts or Macau?  Wynn’s guilt or innocence has not been fully investigated or adjudicated yet and the process is not likely to be quick.  But guilty or innocent he has been forced to resign as CEO of Wynn Resorts and as chairman of the Republican National Finance Committee.  The resignations were the first of the reverberations from the Wall Street Journal article and more are certain to come.

Macau, Massachusetts and Nevada regulatory agencies have begun formal investigations into Wynn’s behavior and the company’s culture.  Also, the board of directors of Wynn Resorts has hired an outside law firm to investigate Steve’s actions.  As a result of the Journal article, the price of Wynn Resorts stock dropped 20 percent from $200 to $163 a share. When Wynn resigned, it bounced back 10 percent.  But then to further complicate matters, during the week of February 5th, the stock market lost nearly 2000 points bringing down all gaming stocks with it, including Wynn Resorts.  Wynn stock has hovered in the mid-$160 range since the stock market took that major dip.

The damage done to the stock price and the company’s reputation by the accusations against Wynn also triggered a shareholder lawsuit.  Norfolk County Retirement System sued Wynn and the company’s senior vice president, Kimmarie Sinatra for breaches of fiduciary duty; the suit also claims the board of directors failed to exercise proper control of Wynn’s behavior, salary and expenditures.

Predicting the final outcome of the accusations, the lawsuit, resignations, stock drop and regulatory actions is far beyond my skill level.  However, it is possible to speculate on some of the possibilities.  The most likely outcome is the end of Paradise Park.  Paradise Park was to be the next Las Vegas casino built by Wynn.  Based on a Carnivale theme, the $1.5 billion resort was to be the latest instance of Wynn changing the Las Vegas paradigm.  But without Steve’s vision, it is difficult to imagine how anything unique could be created on the 130-acre Strip land the company owns.  It is also hard to see where the company would find that $1.5 billion without Mr. Wynn to weave his magical web.  Wynn Resorts is, of course, bigger than one man, but this man has had the vision for every property ever built under his name.  And the same man is the one bankers and financiers have believed could pull the rabbit out of the hat each time.

Other potential fall-outs include a continual decline in stock prices over the next couple of years and a sale of the company or some of its assets to one of its competitors.  I cannot imagine a scenario wherein the stock price ever recovers to pre-scandal levels, although if revenues grow year-over-year, stock prices would likely follow. The properties should continue to generate revenue at current levels.  Steve Wynn’s contribution to the company was conceptual, not operational.  The managers in place are among the best in the industry and will continue to do their job, unless some of them run into licensing issues also.  If the property under construction at Boston Harbor opens as scheduled a year from now, corporate revenue should go up significantly.  Even the undeveloped property in Vegas could be sold or developed and add to the company’s cash flow.

The worst possible outcome of the scandal is the loss of one or more of the company’s casino licenses.  Macau, Massachusetts and Nevada are all investigating.  To be considered unsuitable for gaming license a person, whether called Wynn or any name, need not be convicted of a crime.  Criminal behavior is reason to deny or revoke a license, but it is not the only cause.  Nevada Gaming Regulation Five includes the following:

Methods of operation.

It is the policy of the commission and the board to require that all establishments wherein gaming is conducted in this state be operated in a manner suitable to protect the public health, safety, morals, good order and general welfare of the inhabitants of the State of Nevada.

Responsibility for the employment and maintenance of suitable methods of operation rests with the licensee, and willful or persistent use or toleration of methods of operation deemed unsuitable will constitute grounds for license revocation or other disciplinary action.

Grounds for disciplinary action.

The board and the commission deem any activity on the part of any licensee, his agents or employees,  that is inimical to the public health, safety, morals, good order and general welfare of the people of the State of Nevada, or that would reflect or tend to reflect discredit upon the State of Nevada or the gaming industry, to be an unsuitable method of operation and shall be grounds for disciplinary action by the board and the commission in accordance with the Nevada Gaming Control Act and the regulations of the board and the commission. Without limiting the generality of the foregoing, the following acts or omissions may be determined to be unsuitable methods of operation: Failure to exercise discretion and sound judgment to prevent incidents which might reflect on the repute of the State of Nevada and act as a detriment to the development of the industry.

The Nevada Gaming Control Commission will have to decide if Steve Wynn or one of his agents or employees did anything harmful to the state’s public health, safety, morals or discredit the state or the gaming industry.

Chapter 23 of the Massachusetts Gaming Expansion Act in states: …gaming licensees shall be held to the highest standards of licensing and shall have a continuing duty to maintain their integrity and financial stability; and…any license awarded by the commission shall be a revocable privilege and may be conditioned, suspended or revoked upon: …a breach of the conditions of licensure…any civil or criminal violations of the laws of the commonwealth or other jurisdictions; or …a finding by the commission that a gaming licensee is unsuitable to operate a gaming establishment or perform the duties of their licensed position.  Therefore, the Massachusetts Gaming Commission must decide if Wynn Resorts and Steve Wynn have complied with the regulations.

 Macau has a separate set of criteria, but for the moment no one outside of the actual regulators seems to know what they are. Whatever the criteria might be, Macau like Nevada and Massachusetts will have to decide if Wynn Resorts is in violation of regulations.  The answers to those questions will determine the fate of the corporation.  The process promises to be painful for both the regulators and the company.  The fate of Wynn Resorts is being separated from Steve Wynn.  The question for Wynn Resorts is whether it can divorce itself from Steve sufficiently to placate gaming regulators and investors.  It will likely need a new name, but with a little luck it could have a new, exciting and profitable future.

Handle versus Win: A Case of Mistaken Identity

Many people confuse handle and win, equating handle with gross income and therefore a suitable target for taxation.  However, handle is not the equivalent of revenue in other industries, nor is win when it comes to taxation.  In retail, revenue is a straightforward concept; it is the money generated by sales of products or service.  So for example, a retail grocery, clothing or electronics store sets its prices and the customer pays; that money is the store’s cash flow.  Retail taxes are collected by the outlet directly from customers and that money is then forwarded to the taxing agency. Even punitive taxes, such as those on tobacco and alcohol products, are paid by the consumer, not the retailer.  In retail, all of the cash from sales can be used to pay normal operating expenses. Things do not work that way in a casino.

In a casino, the customer is offered a wide range of betting options and prices; the customer chooses the option and the price.  The casino and the customer play a game to see who wins.  If the casino wins, that money becomes part of its cash flow.  If on the other hand, the customer wins there is no cash flow.  Casinos are taxed on the gross win and that money comes off the top, if you will.  All additional expenses are paid from the cash leftover after that tax.  Casinos cannot collect the tax directly from the player and in that sense the gaming industry is unique. That unique status is confusing at times to lawmakers and the media and it creates a very challenging environment for casinos.

Lawmakers in their endless search for revenue look to tax everything.  Unfortunately, they sometimes think of gaming revenue in the same way they think about retail revenue.  And thus, casino taxation is frequently thought of in the same category as tobacco and alcohol; if anyone wishes to engage in this unhealthy behavior they will have to pay a premium.  That thinking leads to the extremely high tax rate in states such as Pennsylvania.  One can imagine the impact on retail if stores were taxed on their gross sales. No grocery store could remain in business with even an eight percent tax on gross sales; the lowest gaming tax rate in the country.  But imagine a tax of fifty percent of gross sales, like the gaming rate in Pennsylvania – you would not be able to buy even milk and bread, as no retail stores could exist.  To further complicate the comparison, consider the impact of a retail license in the millions of dollars.  It is obviously an untenable model and yet lawmakers consider it perfectly reasonable as a model for casinos.

There is nothing new in anything I have said, but people are pushing the refresh button due to the current interest in legalizing sports betting.  The United States Supreme Court is poised to set the stage for legal sports betting in the country in any state that chooses to legalize it.  New Jersey passed a law authorizing sports betting within the state, but federal authorities said the law violated federal law.  The federal government and New Jersey have been in a lawsuit ever since and now it is before the Supreme Court.  If the court rules in New Jersey’s favor, as many people believe it will, then the door will be open for other states to legalize sports betting.  Some states already are passing legislation in anticipation of that decision.  To fans of sports betting, it seems like the dawn of a new era; no longer will they have to travel to Nevada or gamble illegally online to bet on their favorite team.

But, a word of caution – no one should get too excited yet.  Whether or not sports betting becomes legal and successful depends on the legislation in each state.  There are already some warning signs and most of those signs can be related to the faulty comparison of retail sales to casino revenue.  As lawmakers examine the issue of sports wager, they are looking for the moral high ground.  To protect their reputations they want to insure that only the most upstanding operators will be allowed to offer sports betting.  Those found suitable will be expected to pay a high licensing premium.  This too comes from the myths surrounding casino gaming; many people believe a casino license is a license to print money.  And because those operators are going to be making so much money, the state is entitled to a tax rate that is commensurate with the profits.  Illinois thinks 20 percent is appropriate and Pennsylvania wants 36 percent. That is fair, isn’t it?

No, it is not fair.  And the reason is simple, sports betting, like all casino games is not the sale of a product.  It is a contest between the gambler and the bookie.  As everyone knows, over the long-term the house usually wins, but far less than one might expect. Nevada is the only state that can serve as a model.  The University of Nevada in Las Vegas publishes the numbers on sports betting since 1984.  The win varies from year to year; the largest win percentage was in 2006 when sports books won 7.8 percent; the worst year was 1987 with 1.5 percent.  In general for the last ten years or so, the win has averaged between 4 and 5 percent. Clearly if a tax were to be imposed on gross handle, a sports betting industry could not exist.  But even if the win were to be taxed, a high tax rate would make it nearly impossible for sports books to operate profitably.  Besides the tax, the win has to service the debt incurred in setting up the book, which includes the infrastructure – a modern Las Vegas sports book costs between $20 and $50 million to build and there is the cost of the initial license, wages, utilities and other related expenses such as advertising and marketing. After expenses, sports books in Illinois or Pennsylvania would not be profitable.

But that is not all.  The National Basketball Association wants a cut and we have to assume the other sports leagues will also want a piece of the action.  The NBA is not being greedy; it just wants what it considers a fair share.  The NBA argues that it produces the product upon which the gamblers will wager.  In its argument to the New York legislature the NBA asked for a mere 1 percent – reasonable, no?  No it is not reasonable because the NBA like many others seeking to profit from casino revenue does not understand the issue.  The NBA wants 1 percent of the handle, not the win.  Let me quote Richard Wells, a long time industry insider with a very high degree of expertise.  Richard says: For ballpark numbers, the sports betting handle in Nevada was over four billion dollars in 2016. A 1% rake to the NBA would be $40 million. The net win to Nevada casinos was only 200 million.  Thus a 1% fee to the NBA is the equivalent of 20% of win.

In no year did the sports books in Nevada ever win 20 percent.  In fact that is over twice the amount of the win in Nevada sports books.  So, where does that leave us?  If the Supreme Court rules in New Jersey’s favor, sports betting will proceed.  The success of sports wagering will depend on several things including the tax rate, the professional league cut of the action and the population of the state.  Experience tells me not to expect lawmakers in every state to suddenly become reasonable; nor is it reasonable to expect the leagues to make a serious effort to understand the economics of sports betting.  The billions and billions of dollars said to be wagered nationally sound too much like profit to the leagues at this point.  The last point, the size of the potential betting population, is as important as the other two.  It does not matter what tax rate South Dakota or Maine chooses, there simply are not enough gamblers to make it profitable in those states.  New York, California, Illinois, Florida and Texas are the plums, but only if the leagues and lawmakers take the time needed to understand the fundamental economics of the game.  In my mind, that is a very tall order.

A Gambler Turns Unwittingly Terrorist

Recently, police in New York arrested a man for making terrorists threats.  The 47-year-old Wayne County resident was found sleeping on a couch in the lobby of the Del Lago casino. When casino security discovered him sleeping, they called the police. He had been previously banned from the casino for fraudulent gaming.  In all probability, the man had been claiming jackpots or pressing bets and was more of an annoyance than a real threat to the integrity of the games.  However, when the casino caught him, it eighty-sixed him which is a legal fiction all casinos use; they ban players for any one of dozens of offenses and in the process read a statement stating that if the person returns they will be guilty of trespassing and subject to arrest.  He apparently either did not remember the ban or chose to ignore it.

Whatever the cause, when the police were called, he began yelling threats including his intent to destroy the casino.  Now he is sitting in jail and is being treated as a terrorist just as if he belonged to a jihadist organization bent on destroying western civilization. I am certain that he is very confused and feels he is the victim of a vicious plot.  He has probably done the same thing many times before.  Certainly casino security officers have heard those same threats many times as they banned someone.  The process of banning misbehaving gamblers and threatening them with trespassing has been used by casinos for more than fifty years.  This old method of dealing with disruptive customers is undergoing changes as society reinterprets disruptive behaviors of all kinds.  What was once just naughty has become more serious, sometimes even criminal.

The new way of viewing of bad boy behaviors is confusing for many more people than the misbehaving gambler.  It is especially confusing for my demographic – old white men.  The world we knew, that we understood and our comfortable place in the universe is disappearing before our eyes.  In our era we could flirt at any time we chose, we could hire whomever we wanted and turn down others for reasons that are unacceptable today.  We could make jokes about race, gender, gender preference, body image, dress or anything else that tickled our fancy.  We could also get drunk in public and act the fool.  Among other ways that some of us acted out our perceived entitlement was to press bets in casinos, give the dealer a hard time and say whatever came to our deluded minds.  When a casino had had enough of the bad behavior, it sent the miscreant home with a warning. He could stand out on the street and scream any kind of threat and use all manner of obscenities, but no one listened or cared.  Later when the gambler had sobered up, red-faced, he apologized to everyone for everything.  In most cases, he was forgiven or at least he thought he had been forgiven.  He returned to the casino and behaved until the next time and then the process was repeated.  Those days are gone and it seems all of those people hurt by those boys behaving badly did not forgive or forget.

The gambler in New York is discovering just how drastically interpretations of misbehavior have changed.  An act that was once just a blustering rant is now a criminal threat. As a nation, we are in the process of creating a new definition of terrorism.  One thing has become clear; it is no longer possible to threaten other people without being outside of the law and accepted social behavior.  Those empty, bravado-driven threats that were once considered annoying but tolerable are now felonies.  It is a necessary transition. As a nation we need to rethink many things, especially behaviors both public and private that we once thought harmless – or just boys being boys – and treat them as unacceptable.  Some people are going to be forced to change their behavior and attitudes.  For those people it will be very uncomfortable.  However, for the people who have suffered and endured those unpleasant behaviors it will be a most welcome change.

Finding Something to Trust in a Distrustful World

The times we are living in are times of distrust.  We do not trust the news, but we do believe in false news and we suspect all media of fostering it upon us.  Conspiracy theories abound and many people are willing to accept the idea that there is a conspiracy behind every event.  It is a toxic atmosphere and one that is particularly challenging for the casino industry.  It is extremely difficult for casinos to establish a positive reputations and images under these circumstances.  Most casinos are good citizens, they contribute to good causes and stand ready to make their facilities available during disasters.  In the freezing weather in the Dakotas, the fires in California or during floods and hurricanes casinos have offered shelter and help.  In October, Twin Pine Casino in Middletown, California was an evacuation center for the third time in two years. Graton Casino opened its hotel to refugees from the fires in Northern California and donated $1 million to assist fire victims.  And yet, the belief that casinos are greedy, corrupt and deceitful persists.

Recently I saw a column written by an industry expert that caused me to think about the issue once again.  The writer was answering a question from a casino customer.  The customer wanted to know if casinos use shills to fool customers into thinking they can win.  In the question, the customer said while walking through a casino, two casino players loaded down with buckets of dollars recommended a slot machine. They said it was paying out generously, but they had to leave and could no longer take advantage of the opportunity.  The questioner played the machine and lost and then wrote to ask the expert if he had been tricked.

All-in-all, the columnist attempted to be fair and objective.  He discussed the historical use of shills. In regards to this specific incident, he said he could not say the winning players were shills, but he could not discount the possibility entirely.  The incident itself is from the 1990s; bucket loads of dollar tokens are as rare in a 21st century casino as green eye shades, three reel slot machines and cheap buffets.  I think shills are also one of those no longer existing species, even in places where it is still legal to use them.  Shills originally were used to get a poker or blackjack game started, once there were enough players in the game the shill moved on to another less popular table.  Where it is legal, the practice may still be in use in poker rooms, but I don’t believe it is ever employed with slot machines.  I would as easily believe that Walmart, Safeway, Trader Joe’s or Kroger used shills.  Have you ever wondered if one of the shoppers with baskets overflowing were being paid by the store to encourage you to buy more food?  I think not.  So why is it so easy to imagine that casinos would use false winners to entice others to play?

There is a simple reason, the math.  People probably mistrust casinos because in the long run, the casino wins.  It is simply the mathematics of the games.  However, in the current atmosphere of distrust, it is even worse. Today it is common to distrust professionals, the media, big business and politicians.  Even without false shoppers grocery stories are not trusted. Many customers believe specials are used to trick the shoppers and prices are inherently unfair.  Common wisdom says there is trickery or a conspiracy in everything, even natural major catastrophes.  In that world view, there is a conspiracy behind every event from a mass shooting in Las Vegas to hurricanes on the Gulf Coast.  It those things can be the result of a deception perpetrated by hidden actors, why not jackpots or lottery tickets?

That perception is significant to the casino industry.  Casinos can only exist in an atmosphere of trust.  The players have to believe the games are honest and fairly dealt.  Casinos depend on people trusting them and coming back over and over to play the games.  Without that basic belief casinos could not exist.  Casinos and slot manufacturers know that. They know that players have to believe they have the possibility of winning.  Slot machines are designed to pay back much more than they keep.  In Nevada the win is generally less than five percent of the total wagered.  That is the way casinos and slot machine use shills, they send out winners, real winners.


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March 2018
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