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\tBy HOWARD STUTZ
\n\tLAS VEGAS REVIEW-JOURNAL
\n\tThe outlook for U.S. slot machine industry continues to be bleak.<\/p>\n
\tAnalysts said this month the replacement market \u2014 in which slot machine manufacturers sell casinos newer games to change out older products \u2014 has fallen from previous estimates.<\/p>\n
\tEilers Research founder Todd Eilers said slow demand from casinos in the United States and Canada through June could result in a 28.6 percent decline in North American slot sales for all of 2014. He lowered his 2015 projections by 6 percent.<\/p>\n
\tBuckingham Research Group gaming analyst Brian McGill didn\u2019t change his sales estimate for 2014, but he lowered his 2015 prediction by 5 percent.<\/p>\n
\tHe said delays in new casino openings, particularly in Massachusetts and Philadelphia, were to blame.<\/p>\n
\t\u201cThis is especially worrisome because we do not anticipate the 2015 total will move higher over time,\u201d McGill said.<\/p>\n
\tMeanwhile, six casino closings this year contribute to the sales reduction.<\/p>\n
\tEilers said 9,675 slot machines will have been taken out of commission by the end of the week.<\/p>\n
\tOn Tuesday, Trump Plaza becomes the fourth casino to close in Atlantic City. Margaritaville in Biloxi will become Mississippi\u2019s second closure Friday.<\/p>\n
\tCaesars Entertainment Corp. controls more than 3,600 of the silenced slot machines. The company closed Harrah\u2019s Tunica in Mississippi in June and the Showboat Atlantic City was shut down Aug. 31.<\/p>\n
\tMany of the slots could be redeployed to other Caesars casinos, and Eilers said manufacturers could try shipping up to 40 percent of the remaining slot machines to U.S. casinos.<\/p>\n
\tMany of the games have a lot of wear and tear. Others, such as the 2,200 machines from Revel in Atlantic City \u2014 which closed after Labor Day \u2014 are practically new.<\/p>\n
\tSome of the slots \u201cwill be destroyed, as they are too old, or shipped into international markets,\u201d Eilers said.<\/p>\n
\tSuppliers will try to redistribute leased machines, which they own but share revenue with the casino.<\/p>\n
\tThe slot machine sector\u2019s depressed outlook is inopportune.<\/p>\n
\tSlot machine manufacturers have spent millions of dollars to develop and display their newest games at the Global Gaming Expo in Las Vegas, which opens in 15 days.<\/p>\n
\tAlso, the manufacturing sector is consolidating.<\/p>\n
\tScientific Games Corp., a New York-based lottery provider, which bought WMS Industries last year for $1.5 billion, is spending $5.1 billion to acquire Bally Technologies. Last year, Bally bought gambling equipment manufacturer SHFL Entertainment for $1.3 billion.<\/p>\n
\tMeanwhile, Italian lottery giant GTECH Holdings is buying International Game Technology for $6.4 billion in the gaming industry\u2019s largest deal in almost 10 years.<\/p>\n
\tBoth mergers are expected to close in early 2015.<\/p>\n
\tLast week, Global Cash Access announced it was buying Multimedia Games for $1.2 billion.<\/p>\n
\tAnalysts say the deals will strengthen and change the prospects of the slot machine companies by furthering development of new game titles and technology. Meanwhile, the channels to place existing games will grow. Scientific Games and GTECH are both primarily lottery companies.<\/p>\n
\tMerging with GTECH should invigorate IGT\u2019s prospects.<\/p>\n
\tMcGill told investors IGT\u2019s business \u201cremains in a free-fall.\u201d The company continues to lose game sales to smaller manufacturers, such as Multimedia, Konami Gaming, Aristocrat Technologies and Ainsworth Game Technology.<\/p>\n
\t\u201cOur checks really couldn\u2019t come back much more negative on the outlook for sales for (IGT),\u201d McGill said. \u201cWe expect that IGT will continue to see a share loss going forward, which should create an opportunity for the combined Bally-Scientific Games and Multimedia Games.\u201d<\/p>\n
\tMcGill said previous acquisitions by Scientific Games and Bally will benefit the combined company formed by the merger.<\/p>\n
\tEarlier this month, Bally announced a deal with the Ontario Lottery and Gaming Corp. for a gaming management system to oversee slot-machinelike lottery games in the Canadian province. The transaction, for which financial terms weren\u2019t disclosed, was announced in 2011 but was delayed over political issues.<\/p>\n
\t\u201cThis deal could also calm some fears about a falloff in Bally\u2019s systems business as it represents a major new customer which should help fill the void left from the conclusion of (other large-scale projects),\u201d Eilers said.<\/p>\n
\tThe slot machine makers\u2019 biggest challenge is finding new markets.<\/p>\n
\tMcGill said casino expansion efforts appear dead in Kentucky, Florida, Illinois and New Hampshire. Colorado is considering a constitutional amendment to allow slot machines at racetracks.<\/p>\n
\t\u201cWe think it would be a long shot to pass,\u201d he said.<\/p>\n
\tMassachusetts eventually could house 9,000 slot machines unless a referendum seeking to overturn the state\u2019s casino expansion plans passes in November.<\/p>\n
\tMcGill also is watching casino expansion developments in New York, which is looking to add four casinos upstate. As for Philadelphia, Pennsylvania gaming regulators might award a final casino license by year\u2019s end. The matter has been debated for almost two years.<\/p>\n
\tMany analysts see little hope for improvement.<\/p>\n
\tTough market conditions will hurt slot machine sales, reduce the number of new casino management systems and shrink the revenue shared by casinos and manufacturers from participation games.<\/p>\n
\t\u201cIn our opinion, it is difficult to see significant upside in terms of revenues across the industry for anyone,\u201d McGill said.<\/p>\n
No replies were posted for this topic.<\/p>\n","protected":false},"excerpt":{"rendered":"
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