Server-Based Casino Games on Horizon - Monday 6th of February 2006

LAS VEGAS, Nevada Some day gamblers will be able to stride up to a slot machine, insert their slot club cards and be offered a list of their favorite games at the exact denominations they like to play.

And if it's the player's birthday, the machine may automatically print out a voucher for a free meal at one of the casino's restaurants.

Welcome to the world of server-based casino games. Experts say they have the potential of being the next big advancement in industry technology, an innovation that could increase the appeal of slot machines the way ticket in, ticket out technology has.

Industry professionals got their first look at the technology at this year's Global Gaming Expo in September. Regulators are slowly advancing the rules and technical standards to equipment manufacturers and casino operators so that field trials can begin next year.

The top Nevada players in server-based games Reno-based slot machine behemoth International Game Technology and Las Vegas rival Alliance Gaming Inc. are excited to bring the technology to the market, but aren't talking much about how it will change a slot player's experience. They don't want to tip their competitive hands.

In the early stages, the focus will be on how the technology can make a slot floor more profitable for operators.

"Today, if I have a slot floor with 2,000 machines and I want to make changes, I'd have to go to each and every one of them, open them up and change out the components," IGT spokesman Ed Rogich said. "Not only does that take a lot of time, but the machines are down for that period of time."

Rogich said that type of transformation is particularly cumbersome for software changes involving currency modifications because every machine has to be altered to recognize the new bills produced by the U.S. Treasury.

But with server-based games, every machine is electronically linked to a central computer file server and changes can be made in the time it takes for a software download. With the large bandwidth most slot systems use, changes can be made almost instantaneously.

Bob Luciano, Alliance Gaming's chief technology officer, demonstrated the capability of one of its system by changing games and denominations on 10 slots linked in a showroom. The modification involved a few computer mouse clicks and took just seconds.

Luciano said some downloadable technology has been a part of the gaming industry since the 1980s, but it has only been in the last four years that manufacturers have begun solving applications problems and security issues.

Nevada regulators have moved slowly on approving standards for systems, completing a series of workshops in 2005. State Gaming Control Board Chairman Dennis Neilander said regulators took a slow and deliberate pace to gather suggestions from all corners of the industry before setting final approval.

Once final approvals are adopted early next year, field trials on limited numbers of games and systems will be conducted. The casino companies will be able to determine just how much revenue will be generated by the technological advancements.

Analysts believe the results could be huge. By having the ability to change games instantly, floor managers will be able to analyze what games and denominations would perform best at any particular time of the day. They can also alter hold percentages within regulatory parameters.

For example, a floor manager could determine that most video poker players are on the floor in the afternoon, but that nighttime crowds lean toward reel games. A manager could change a machine, a row of them or an entire floor in seconds.

Do afternoon players prefer nickel slots while the nighttime crowd enjoys playing a dollar at a time? Change it. Does a certain game theme resonate more with the weekend tourist? Put more of them in as the Californians get off the highway.

Then, there's the matter of hold percentage. Will the appearance of "loose slots" produce more volume and more revenue than a higher hold percentage?

Aimee Marcel, a gaming analyst with Jefferies & Co., New York, said IGT, Alliance, WMS Industries Inc. and Aristocrat Leisure Ltd. are poised to capitalize on server-based gaming, but the advancements won't begin affecting most companies' bottom lines until 2007 or 2008.

Large companies that have the most to gain by economies of scale and can afford to change out their floors would likely be the first to move on installing new systems, Marcel said.

As with the change to ticket in, ticket out technology, other companies would follow to keep up competitively. When that happens, the manufacturers will capitalize.

"The MGMs of the world would be able to afford the transition, then the smaller operations would follow," Marcel said. "Eventually, there could be a replacement cycle involving replacing a million slots."

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