Pros, cons of increased casino tech in the LVBP

This week, my Las Vegas Business Press column takes a look not at what technology is being introduced into casinos, but how it’s being used–and should be used:

The technology used on casino floors has evolved considerably in the past two decades. And, as showcased at the recent Global Gaming Expo, it continues to do so.

But, as always, it’s the application, not the innovation itself, that’s going to matter. Casinos can use new tools to go in two divergent directions: cutting costs and bettering the player experience. While the former is tempting and seems the better bet, the latter might be the smart long-term play.

via Las Vegas Business Press :: David G. Schwartz : Pros, cons of increased casino floor technology.

I’ll admit that my hope that casinos use technology to drive profits in the long-term by adding convenience to the player experience as opposed to driving profits in the short-term by cutting labor costs is probably naive, but it’s not exactly a radical notion. Ultimately casinos are in the hospitality business, and making guests feel like they’re in a hospitable place would seem to be the first step towards succeeding in that business.

G2E convergence in the LVBP

I wrote up some of my thoughts on the new tech stuff at G2E for the Las Vegas Business Press. Take a look:

The official theme of the Global Gaming Expo, held Oct. 3-6 at the Sands Expo and Convention Center, was “innovation,”; but it could have been, more specifically, “convergence.”

As always, there were plenty of new products on display on the exhibit floor. International Game Technology alone demonstrated 400 new games for potential casino clients (and the occasional industry rival), and the other large manufacturers boasted similarly large offerings. But the real story was how the casino industry is converging, on several axes, with popular culture the latest technology, and, in the end, itself.

via Las Vegas Business Press :: David G. Schwartz : Annual gaming expo all about convergence.

I’m mulling a piece right now that will consider the consequences of all that new tech. How will casinos use it, and how should they use it?

Updated G2E panel info: Social media & ROI

Here’s the latest info on the panel I’ll be moderating at this year’s Global Gaming Expo–at the Sands Expo Center for the first time–about social media and ROI. I’d love to see a lot of people there. Personally, I think this lineup of speakers will make a great start to anyone’s conference day:

Date: Wednesday 10/5//2011

Time: 9:15 AM – 10:15 AM

Room: 704

Social Media Insights, Part III: ROI

Although it officially costs nothing to tweet, the hard costs associated with staffing and content development are undeniable. This session will examine how casinos are using Facebook, Twitter and other avenues to produce a quantifiable return on investment. Experts will present statistics from casinos using social media to various degrees of success and discuss why approaches based on market size, target customers and similar factors may prove most effective.

Key Takeaways:

• Creating a quantifiable return on social media investment

• How to measure the real costs

• Finding the correct approach for your market

Moderator: David Schwartz, Director, Center for Gaming Research, University of Nevada, Las Vegas

Speaker: Ryan Leeds, Vice President, Strategy, Masterminds

Speaker: Marlene Reyes, Executive Vice President & Chief Client Officer, The Fine Point Group

Speaker: Jim Wise, Senior Vice President of Marketing, Seneca Gaming Corporation

G2E–Registration

Not only does everyone have a unique perspective on social media, gaming, and ROI, each of us has spent at least some time working in Atlantic City, so it should be a rollicking session, to say the least.

Me @ G2E: Social media insights

A little while ago I received an invitation to participate in G2E‘s conference track. Here are the details:

9:15AM – 10:15AM (Wednesday, October 05, 2011)

Social Media Insights, Part III: ROI

Although it officially costs nothing to tweet, the hard costs associated with staffing and content development are undeniable. This session will examine how casinos are using Facebook, Twitter and other avenues to produce a quantifiable return on investment. Experts will present statistics from casinos using social media to various degrees of success and discuss why approaches based on market size, target customers and similar factors may prove most effective.

Key Takeaways:

# Creating a quantifiable return on social media investment

# How to measure the real costs

# Finding the correct approach for your market

via All Sessions – Education & Conference Programs – Global Gaming Expo.

As soon as I get the names of the speakers, I’ll share them with you. Looks like I’ll be doing another Casino Twitter Study between now and then.

G2E evolves in the Las Vegas Business Press

In this week’s Las Vegas Business Press, I offer a long view of the Global Gaming Expo:

The conference panels are finished though they have been recorded for posterity, and the last of the exhibit booths have been disassembled at the Las Vegas Convention Center. It is an appropriate time to consider how the industry has changed since the first G2E — and how the conference has adapted to suit it.

via Las Vegas Business Press :: David G. Schwartz : Expo keeping pace as gaming evolves globally.

When you look back it, there really have been a lot of changes over the past decade. Many of them didn’t seem that game-changing at the time, but together they’ve made for a vastly different casino landscape.

Tales from G2E in Vegas Seven

It may be Thanksgiving, but it’s still Thursday, so a new Vegas Seven has hit the streets with its usual Green Felt Journal adorning the local news section. This week, I look at the mayhem that was the Global Gaming Expo, with a focus on a smaller exhibitor:

The exhibitors are a diverse lot, as casino suppliers and potential casino suppliers go. For every heavyweight such as Global Cash Access or International Game Technology with a massive spread on the expo floor and private areas for salespeople and buyers to work out deals, there are smaller, almost mom-and-pop operations. The developer of Die Rich Craps, Ken Coleman, is one of them, demoing the game himself in his booth.The big exhibitors might be the heart of G2E, but the one- and two-person setups valiantly selling everything from chip-cleaning machines to name badges might be its soul.

via Tales from the Global Gaming Expo | Vegas Seven.

This was a fun story to write. I didn’t want to just rehash the usual reportage about the slot giants or echo what was going on in the conference sessions, so I decided to look for a small booth that exemplified what the show is all about. After ten G2Es, I’ve got a good feel for that.

Just think about the hope and courage it takes to cram a booth into your luggage somewhere in Budapest and fly out to Las Vegas, with no guarantee of making a single sale. To me, that’s what the conference is all about.

And if you want a neat flash-based intro to Kabala 6 (which didn’t work so well on my laptop, but YMMV), check this out: http://www.numbersplay.com/kabala6/.

G2E on the move in V7

It’s a busy week, but I still had time for a Vegas Seven column about G2E moving:

Over the course of a week, Las Vegas hosts conventions and trade expos for industries from baking to sheet metal. So it’s not surprising that the world’s premier casino industry trade show, the Global Gaming Expo, is held here each fall. A recently announced change of venue for the convention highlights the important role the meeting plays in the national casino landscape.

via Gaming show finds a new home | Vegas Seven.

It’s a huge show, and I agree that the move will reinvigorate it. For now I’m going to enjoy G2E’s swansong at the LV Convention Center. Look for me to cover this in greater depth as we get there. I’m planning to pick out one, and perhaps two, stories to focus on, which will trade clarity on a single subject for a more comprehensive view. I figure that since the dailies will be doing the big picture stories, I can use my column to zero in on a single subject that might otherwise be neglected.

More G2E

I’ve just wrapped up at G2E and probably have about 2 months worth of Business Press article ideas. I’m going to need some time to process everything I’ve learned, but when I do I’m going to be on a roll.

My session this morning went well, even though it was at 8 in the morning. It was on RDE, which is casino-speak for Retail, Design, and Entertainment. There’s a lot of it out there, and there’s going to be more, at least if we on the panel have anything to say about it.

Good times.

G2E and the industry’s future

This week my job is to spend too much time at the Las Vegas Convention Center, walking the exhibit halls and stalking the conference rooms of the Global Gaming Expo. Here’s a takeaway from the first day, from KLAS:

The economy took center stage at the largest gaming conference in the world that opened in Las Vegas. But the nation's economic struggles may actually be a win for the expansion of the gaming industry.

These days almost anything is just a click away except legal gambling. For that, you must walk into a licensed and regulated casino. Next year that may change when congress goes back into session, according to American Gaming Association President and CEO Frank Fahrenkopf.

"Looking at our industry in hard times, it is a way to provide some revenue for state government," he said.

Nevada alone faced a $1 billion deficit this year. The federal government deficit makes that look like pocket change.

As the lobbyist for the gaming companies, Fahrenkopf says the internet may be the solution. He believes a bill setting up federal regulation and taxation of legal internet gambling can pass in 2009.

"Having $8 to $15 billion, as the offshore folks say, is there in new taxes has to look very, very inviting to a new congress," he said.

Las Vegas Now | Insiders Look to Online Betting as Big Business.

As I’ve been saying for years, there’s simply too much money in online gaming for the industry–and for states–to let it go untapped for long. But I have an issue with the $8 to $15 billion in government revenues figure floated there. I’d like to try to deconstruct this estimate and come close to a better figure, using just logic and educated guesswork.

In 2007, Nevada casinos “won” $168 million from 907 poker tables, yielding state tax revenues of slightly less than $13.5 million. Poker is not a big money-maker for Nevada casinos: by contrast, the state’s slots took in $8.5 billion.

But the online poker market will be much larger. Let’s say that customers will spend $10 billion on online poker in a year. That’s more than double the entire take for Atlantic City casinos in a year and one-eighth of the current total national gambling win, but we’ll think big here. Poker players are winning and losing that money to each other. The house is only collecting a “rake” from each pot. This money is going back and forth between players, and each time, the house takes its cut.

I’m going to be generous to the industry and suggest a 10% rake–players, I know you won’t like this, but this is just a thought exercise.

Out of $10 billion wagered in pots in a year (and won by players), the house would keep 10%, or $1 billion. From that billion dollars they’ve got to pay their bills and, hopefully, leave a little something for profit. Before you say “that’s a lot of money!” remember that this is for the entire industry, and they’ve all got IT guys to pay, plus hopefully something left for the shareholders.

But before they can drive that money off to the bank, the state has to take a cut. If online gaming is taxed at the going Nevada rate, we’re talking about an effective tax rate (figuring in licenses and per-game costs) of 8% or so. So out of that $1 billion won by all casinos, the state gets $80 million.

If, however, we assume that the industry would assent to a higher tax rate, let’s say 20%, you get $200 million collected in taxes in a year when $10 billion is wagered on online poker (again, with a very high average 10% rake).

Right now, that would barely make the Clark Country School District solvent, let alone put a dent in Nevada’s budget deficit. But wait, that $200 million won’t all go to the Silver State: we’ve got to assume that if other states are letting their citizens gamble online (and not play at state-taxed casinos), they’ll want a cut. So that $200 million is spread out over the entire country.

I think my math here is sound, and my assumptions about rake and tax rates are, I think, at the high end.

So can someone explain to me how online gambling is going to generate even $8 billion in taxes a year, as was mentioned above? I’m not at all being sarcastic–I’d really like to know if there are some data points I’ve missed. According to my calculations, people would have to bet $400 billion on online poker to get $8 billion in annual tax revenue. That’s more than five times the total combined annual take for all kinds of gambling in the United States.

According to my calculations, that about $1.3 million per capita for the entire population of the United States. So unless each of us has been sitting on $1.3 million in mattress money that we’ll play online (and that money would have to magically renew itself each year), I honestly don’t see how a figure of $8 billion in revenues is defensible. I’d say that $200 to $500 million in state tax revenues is possibly in the ball park but still optimistic, given that we don’t even have solid figures on the size of the industry.

Common sense would seem to suggest that allowing people to play poker online won’t magically quintuple the annual American spend on gambling. Even if it doubled the total amount of American gambling, we’d still only get, at best, an additional $1.6 billion a year. And we’re still talking about Americans suddenly gambling twice as much as they’ve been in the past.

If I wrong on the numbers (quantatative work isn’t my strongest suit, but I think I’ve got a decent grasp on simple arithmetic), please let me know and I’ll amend this. By $10 billion poker handle might be low: the table games (non-poker) handle for the whole state of Nevada was $30 billion last year, but that includes a lot of high end play. Even if I’m off by a magnitude of ten, and there is actually $100 billion wagered each year, I don’t see how we get to tax revenues of $8-$15 billion, unless we’re talking about a dramatically different tax model.

I’m not saying that we shouldn’t legalize online poker. I’m just saying that we should do it for the right reasons (personal liberty, player protection, minimizing hypocrisy), not because we’ve been promised a magic $8 billion treasure chest with no logical proof.