The Future of Gambling: Innovation is Served

4 October 2005

Game change may be just a click away for casino slot operators. Server-based gaming will make it so.

At the recent Global Gaming Expo, slot makers previewed the technology that will let casino operators quickly and easily update content on banks of slot machines.

But only a select few G2E attendees were allowed to scrutinize the supersecret gaming systems as manufacturers sought to keep rivals away from their products.

"It's all brand new, so while everything is being developed, we each have our own idea of what it's going to look like and how it will work," said Kent Young, vice president of marketing for Aristocrat Technologies.

For most of the equipment providers, the technology is in its early development stages. How the process will be fashioned for switching out games, adding new themed content and changing the wagering denominations on machines is still to be determined.

Industry representatives and gaming analysts don't believe the technology will reach the casino much before 2007.

But when it arrives, server-based gaming could have the same effect on the slot machine floor as ticket in-ticket out technology, which caused casino operators to spend millions of dollars over the last five years to replace games and sent major slot manufacturers' stock prices climbing.

Thanks to ticket in-ticket out, the stock price at International Game Technology, for example, rose 570.2 percent between the start of 2000, when the technology first emerged, and the end of 2004.

"The concept and the technology are there," Alliance Gaming Chief Financial Officer Steve Des Champs said. "The real questions are how long it will take to get the product on the floor and does it deliver on the promise. There is much to be decided. The (G2E) is giving us an opportunity to display our ideas."

Nevada gaming regulators have drafted 15 pages of technical standards for server-based gaming that are available for viewing on the state Gaming Control Board's Web site, www.gaming.nv.gov. The agency is accepting comments on the standards in preparation for drafting regulations to govern the systems.

Gaming Control Board Chairman Dennis Neilander said the agency hadn't received any comments on the standards as of last week. He thought Nevada regulations on server-based gaming could take effect by year's end.

"We've had three different workshops with the manufacturers to discuss the material," Neilander said. "It seems like we have (the standards) in a comfortable place. We've written into the standards both security descriptions and the ways the games can be downloaded into the machine and the system."

Server-based gaming would, in theory, let casinos better manage slot floors by updating and reconfiguring games through a Windows-based program.

It's expected most centralized servers will have the ability to change a game's content, denomination and hold percentage in seconds.

Slot machines would be preloaded with software and connected to a central server at a casino. The casino operator could then change out the denominations on machines or switch the game offerings based on players' habits.

The machines might have a menu that let players choose a particular game and denomination. Or, because the server in the machine would recognize a player by his slot club card, it could offer a customized game menu inspired by his playing history.

Equipment manufacturers believe server-based gaming could be used to deliver bonuses or other complimentaries to frequent casino customers.

"It's going to give players a number of options," Neilander said. "Of course, there will be a learning curve for customers when (casinos) put something brand-new on the casino floor."

During the G2E, several companies, including Aristocrat and Alliance, set up special areas inside their booths to demonstrate server-based gaming prototypes. The companies used escorts to usher in visitors.

WMS Gaming was so bent on secrecy that it built a metallic-looking bank vault in which to display server-based games. WMS had G2E attendees sign an agreement promising that they'd keep secret anything they saw.

IGT, by contrast, had its server-based technology equipment and games out in the open for all to see.

On a far end of the G2E floor, Cyberview Technology, which has offices in London and Las Vegas, displayed its server-based games. Earlier this year, Cyberview became the industry's first manufacturer to receive approval for the system from Gaming Laboratories International, a company that certifies gaming equipment.

The games are on trial at American Indian casinos in California. Sylvie Linard, Cyberview's chief operating officer, believes the system will expand to cruise ships and Caribbean casinos once it gets regulatory approval.

"We're using the technology right now," Linard said during a G2E panel discussion on new gaming jurisdictions.

Gaming analysts, after touring the G2E booths, said they better understood what equipment providers have been discussing for more than a year.

"Although no one agreed on how the process would work, all of the products were competitive," said Aimee Marcel, who follows gaming manufacturers for Jefferies & Co.

"There are many variables that have yet to be decided considering all of these operators would like to run the casino's central server, and they still have to figure out how to create a hardware replacement cycle once this becomes adopted."

Bear Stearns gaming analyst Joe Greff said the equipment could make downloading games by the casino as easy as shopping online.

"While still years away from being a broad commercially available product, the slot managers and casino operators that we talked to at the show were excited about it," Greff said. "Server-based gaming is a big focus for most investors as it represents the slot technology that drives the slot replacement cycle."


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