Things are moving fast.
A few weeks ago, planning for a panel discussion on industry consolidation at Southern Gaming Summit, I put Tropicana at the top of the list of likely takeover candidates. Eldorado came in and bought Tropicana before the conference even began.
Then, thinking about alternative kinds of consolidation, the proliferating and fractured slot route business—fast becoming known by the classier term of distributed gaming—came to mind. Then Boyd bought a slot route in Illinois, again before the conference even began.
One factor discussed in consolidation is the ability of REITs to purchase casinos. And, no sooner thought than, voila, VICI buys the Octavius Tower at Caesars Palace and Harrah’s Philadelphia from Caesars Entertainment and will lease them back. The deal puts more than $500 million in CZR’s pocket and adds $56 million a year of rent to VICI.
The point of all of this is that changes occurring in the structure of the gaming industry are not theoretical or hypothetical. They are happening, and fast.
Slot Routes. In a way, slot routes today are like riverboats of a generation ago. They are proliferating as states legalize machines at liquor-licensed establishments, truck stops, fraternal organizations and the like.
And, like the early era riverboat companies, operators of slot routes are being bought out by bigger companies.
The publicly traded acquirers had been Golden Entertainment and Penn National. Now Boyd brings another casino company into the business.
Slot routes aren’t sexy, and their margins aren’t as high as casinos, but they are a steady, emerging and scalable business, and worth watching. In Illinois, for example, routes are now up to nearly 30,000 machines and running at $1.2 billion a year in revenues, more than the state’s casinos generate from slots and tables combined.
If many states legalize slot machines in similar enterprises, the potential is obvious, not just for operators, but for slot machine manufacturers who could conceivably be looking at a market in the hundreds of thousands of machines someday.
Who Says Millennials Don’t Like Slot Machines? While so many in the gaming industry worry about young people leaving slot machines in the age of mobile, social and peer-to-peer games, a fella named Brian Christopher has created a phenomenon that suggests the worries might be over stated.
Two years ago, the aspiring actor began live-streaming videos of himself playing slot machines. Those videos have garnered 47 million YouTube views and Brian now has a fan club of more than 70,000 members.
Brian tells his fans when and where he will be playing, and upwards of 200 routinely show up to meet Brian and watch him play at casinos throughout the country.
Who’d a thunk it? Conventional slot machines providing the online and social experience that millennials want.
The moral of the story: Innovate. Look for ways to continue to appeal to young customers. But stop obsessing about millennials. They’ll be around.
Anyone wanting to see what this phenomenon is about can visit www.briangambles.com.
