Machine makers wonder if G2E buzz will yield buying

23 October 2012

LAS VEGAS -- So who won?

We're not talking about the presidential debates.

Gaming equipment manufacturers annually put their best efforts -- along with millions of research and development dollars -- into the Global Gaming Expo.

The sector wants to impress not only casino floor executives who make decisions on which new games to purchase, but Wall Street analysts who tell shareholders which companies are worth their investment.

The recently concluded G2E at the Sands Expo and Convention Center contained a clear message.

Slot machines themed after the rock band Kiss, NASCAR, entertainers, movies and television series showed that game makers had prioritized their capital budgets to focus on licensed brands.

Manufacturers also want the same content to work across multiple channels, including casinos, lottery games, online wagering, mobile gaming and social gaming.

"For the third year in a row, suppliers have made a concerted effort to produce games focused on a younger generation," Macquarie Securities gaming Chad Beynon said.

The large slot machine developers -- International Game Technology, Bally Technologies and WMS Industries -- traditionally dominate the G2E floor.

Beynon and other analysts said smaller companies, such as Multimedia Games, Aruze, Spielo and Ainsworth, impressed slot machine buyers.

"We were encouraged by the product that was on the floor, however, the increased competition was clearly evident at the show with smaller, more nimble players having a strong presence," Beynon said. "The reality is that there is just a huge amount of content out there, making it harder for all suppliers to differentiate themselves."

Deutsche Bank gaming analyst Carlo Santarelli told investors that the trade show floor had an overall lineup of new content that was stronger than a year ago and has the potential to arrive in casinos on a much quicker time frame.

However, an innovative title doesn't always translate into a hit slot machine.

Santarelli said G2E didn't change his opinion that the slot machine industry was competitive and that it's still a challenge for game makers to persuade casino operators to increase their purchasing.

"We do not believe spend levels are about to accelerate in 2013," Santarelli said. "And, as such, we see only modest replacement demand acceleration."

Slot floor buyers are continuing to evaluate the products offered by smaller companies that were on display side-by-side with the largest game providers.

"The trend of turning over every stone to find machines that play well at relative values is not only going to continue, but could accelerate, thus, we anticipate further competition from smaller, less-known suppliers," Santarelli said.

So who had the best G2E?

Roth Capital Partners gaming analyst Todd Eilers gave the nod to Bally Technologies and Multimedia Games. He also thought Aristocrat Technologies and WMS offered "improved" slot machines compared with a year ago.

"IGT showed a number of new game themes and premium leased product, but we remain concerned about the loss of its exclusive deal with High 5 Games (a design company that developed the "Pawn Stars" slot machine for Bally) and intense competition in the premium lease segment," Eilers said.

Brean Capital gaming analyst Justin Sebastiano said Bally's NASCAR slot machine was the best game he saw at G2E.

WMS drew attention to its booth with an appearance by Kiss band members Gene Simmons and Paul Stanley and the Oompa Loompa characters promoting the "Willy Wonka & the Chocolate Factory" slot machine.

But a packed booth may not result in increased sales figures.

"WMS had a better G2E this year than last year, but the bar was set pretty low, in our opinion," Sebastiano said. "The concern we have is that the games that garner the most attention are not slated to be launched until the back half of fiscal year 2013."

Sebastiano said WMS' biggest problem is that casino operators were not "clamoring" for the company's current game lineup.

"The next two quarters will remain difficult for WMS," Sebastiano said.

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Global Gaming Expo (G2E) 2012

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