We are a few days away from the start of second quarter earnings reports and accompanying forecasts on the direction of the gaming industry.
At this point, it appears there will be few surprises and the outlook might be for more of the same—weakening in some regional markets but otherwise steady as she goes, softening in low-value play in Las Vegas but optimism over the city’s near-term future, continuing progress towards sports betting profitability but not quite there yet and Macau continuing to come back—perhaps ahead of expectations.
One question for which the answers might provide new direction is how casino operators’ new cost-control religion is holding on in the face of inflation, labor challenges and the need to reopen operations in anticipation of growing visitation.
Another question will be what avenues of growth remain, or has gaming become largely what it is going to be and investors should now look at it as a mostly mature industry?
Finally, the biggest near-term question for this most discretionary of consumer discretionary industries may be when America’s long-predicted economic recession is going to come—or are we actually experiencing the much-hoped-for soft landing?
ARTIFICIAL INTELLIGENCE …
… is the buzzword of 2023. It is driving up stock prices of many companies in the space to perhaps bubble levels. The gaming industry, with its growing data-driven approach to player marketing, would seem a prime candidate to adopt AI.
And yet, there may be obstacles—walls, in fact—that limit the amount of AI that will actually be implemented by casino operators.
The biggest limit would appear to be regulatory.
To date, the big pitch on software aimed at marketing to players has been basically one of efficiency: learn a player’s preferences and you can tailor marketing, cutting the costs of broader approaches and, using the industry euphemism for taking more of the customer’s money, getting a larger share of their wallet.
But at what point does knowing more about your player cross the line from appealing to them to manipulating them? And if that point is reached, how do regulators respond? Not kindly, is the likely answer.
The other issue gets to the very essence of gambling, which is risk-taking as entertainment.
Players know the odds favor the house, but also know that outcomes are random and there is a chance to beat the house. The thrill of winning, even a small amount for many players, is the delight that prompts many of them to come back again and again.
The ultimate protection for players is the regulatory requirement that game outcomes be random. As long as a game is structured, or slot machines programmed, to pay back, say 95 percent, there will always be the chance to win.
The trick for casinos will be to use AI to gain efficiencies, but not to the point that it burns out players.
The opportunity for casinos may be to keep AI off the gaming floors so casinos can remain a refuge of pure chance in a world increasingly dehumanized by ever smarter computers.
Imagine a gaming world without Aristocrat Leisure, without the “Australian-style” video slot machines that revolutionized the gaming industry.
There would be a big hole.
That hole doesn’t exist because Len Ainsworth started the company that changed the industry and continues, in many ways, to lead it.
Len Ainsworth is now celebrating his 100th birthday. In addition to Aristocrat, he also founded Ainsworth Gaming Technology, now a global public company operating out of Las Vegas.
As might be expected of someone of such accomplishment and longevity, Len possesses rare energy and determination. Deep into his 90s, Ainsworth stood for hours on the hard concrete floors of trade shows including G2E, greeting customers and friends of long-standing as well as new ones.
Congratulations on your birthday, Len. Enjoy many more.