There is great optimism in the gaming industry. There was palpable energy on the trade show floor at G2E this year. Exhibitor after exhibitor talked about the high volumes of people and the business-serious visitors to their booths.
The supplier industry is as competitive as ever, maybe more so. It was common to hear people say the number of vendor choices has declined after the Scientific Games and IGT mega mergers.
That isn’t so. The environment is increasingly competitive.
That was obvious simply by walking the floor. Aristocrat, Konami and Novomatic took up major space. Ainsworth, Aruze, Interblock and Everi all took much higher profiles and bigger spaces than in the past.
No gaps among exhibitors. No dead space. More new games introduced by more suppliers.
• Skill-based gaming? Not so fast. Nanotech Gaming boasted that it has the only original skill-based game and one designed specifically for casino patrons. Gamblit made skill-based gaming its theme.
Otherwise, the first skill-based products were mostly modest extensions of existing or previous games.
Nor is there a consensus about how to proceed—develop games to draw millennials, or develop games to better appeal to more likely casino customers? Build modestly from current products or dare to do combat with, well, Mortal Kombat? Dive in now and get the first-mover advantage or wait and see, and then become a fast follower?
Perhaps the best comments I heard about skill-based gaming came from Scientific Games CEO Gavin Isaacs during our CEO One-On-One interview when I mentioned that skill-based gaming is the buzzword this year.
“We’ve had buzzwords in this industry for quite awhile,” Isaacs said in a reminder of hot ideas past, such as server-based gaming.
But Isaacs went on to describe Sci Games’ efforts. “When regulations allow you to innovate, you should innovate,” he said.
(Isaacs full interview and those of other industry CEO’s are in the G2E section at www.FantiniResearch.com.)
Regulating Macau
Macau casino stocks rebounded from their lows after the Chinese government made vague statements of support for the industry, and initial reports of strong Golden Week visitation.
The spike in prices was not surprising. Shares had fallen so steeply that almost any good news was bound to fetch some bargain hunters.
It didn’t hurt that a few analysts began sensing a turnaround, too.
David Katz at Telsey Advisory Group said that Macau is starting to see the beginning of the bottom as he raised his rating on Wynn to market perform and his target to $68.
And Steve Kent of Goldman Sachs called Wynn a compelling growth story with a compelling valuation that can skim off business in a steadying Macau market.
That Macau is steadying, as Kent said, or is at the beginning of the bottom, as Katz said, appear to be true. And stability and growth from there certainly will be good for casino companies.
However, the statement from the Chinese government should not be read as anti-corruption lessons learned, book closed, let’s return to halcyon times.
A perhaps more likely assessment is that the government has proven 1) that it can control this industry that is putting profits in the pockets primarily of Hong Kong and American businessmen and investors, and 2) that it can, and will, regulate industry profitability.
If that is correct, it doesn’t mean Macau casino operators aren’t good investments, especially from their more realistic prices. But it does suggest no more booms.
