When the late Jens Halle brought the Novomatic name to the Americas in 2012, new business in video gaming terminals was as much a goal as bringing the games of the Austrian slot manufacturing and operating giant to American casinos.
Halle, who was managing director of Novomatic’s Austrian Gaming Industries at the time, first established Novomatic Americas in Florida, but it was clear that a big opportunity existed in Illinois that suited the company’s European expertise. Illinois passed its VGT law in 2009, but a lawsuit filed by Chicago Blackhawks owner and liquor distributor Rocky Wirtz over tax rates dragged on until 2012, when VGTs first appeared in Illinois bars, taverns and at new “gaming cafes” in strip malls and other public locations.
Today, the market contains more than 36,000 machines, according to an August report by the Illinois Gaming Board.
Ultimately, Novomatic Americas would make its headquarters in the Chicago suburb of Mount Prospect, Illinois. In 2013, Halle tapped Rick Meitzler, who had brought Bally Technologies into the Illinois VGT market, to bring Novomatic into the new VGT space.
Meitzler, now president and CEO of Novomatic Americas, says Halle had quickly realized that Novomatic was perfectly suited for establishment of a route in Illinois. “Novomatic saw Illinois; Jens Halle saw Illinois, and Novomatic is the king of the route machines globally,” Meitzler told GGB News. “That’s where 90 percent of our income from slot machine sales come; it’s from the routes. In Europe, we run 230,000 machines ourselves. So they were keen on the routes, and wanted to explore Illinois.”
By the time Halle passed away unexpectedly in 2015, Illinois authorities had changed the technology required for VGTs, moving from a SAS to a G2S (game-to-system) reporting standard, similar to Canadian VGTs. “Scientific Games had never done that before, but Novomatic had never done it either, so that delayed us to where we launched in Illinois in 2016-17, which is when we hit our stride,” Meitzler recalled.
Within the space of 18 months, Novomatic has placed more than 2,000 VGTs in Illinois. “We’re averaging about a 20 percent ship share right now,” Meitzler said. “Our games have quickly become among the best. If you look at the market today, IGT and Sci Games have been dominating, but now the new guys are starting to take a pretty good chunk out of the market—us, and now Aristocrat’s just entering.”
Novomatic even sells some of its more exotic casino games to some VGT locations—including titles equipped with the immersive V.I.P. slot lounge chair. “We just placed the cabinet we used for Dusk to Dawn and MacGyver in a location five minutes from our office in Mount Prospect,” said Meitzler. “Operators love it. If they’ve got the space, the big machines do two times house average, just like in the casino. We’ve recently had great demand, and have sold around 40 of the big machines here, which is a lot for a bar market.”
The fact that Novomatic has operated for years in the European street markets positions the company well in new VGT markets. For one thing, the company’s game developers know the VGT player intimately. “They’re a different player,” says Meitzler. “If you look at Nevada, you have your your local players, who like poker, and tourist players, who like time on device. In Europe, we found that time on device doesn’t work in a bar-type market—what we call a street market, with limited-payout machines. They want to come in and play, and they’re regular, like a route market in Nevada. They want a better feel and experience of a win.
“What we see in Europe is a higher return percentage to the players, for a more entertaining experience. Here, we’ve held our line to keep a higher percentage to the players. In Europe, we’ve held to a 92-94 percent (RTP). Here, we’re holding to a 90 percent game.
“These people come in every week or two weeks when they get their paychecks, and you want to give them an experience that is entertaining and positive. They want a little more bang for their buck. So, we’ve been pretty successful with that. That’s been one of our little secrets; we try to keep the higher percentage.”
Meitzler added that VLT players, like those in the street markets, appreciate a more volatile game. “They could put $20 or $40 in and may lose right away, but then they might win $200, $300 or $400. That’s what they play for. They don’t want to sit there for 20 minutes and have (the machines) slowly bleed their money away. They want to have a chance to gamble; they’re true gamblers. And volatility is the word.”
That doesn’t mean other styles of games don’t thrive in Illinois, where locations are seeing an increasing variety as new suppliers enter the market. “You have to have a good mix,” Meitzler said. “That’s why in a bar here, you’ll see a couple of Bally, a couple of IGT, and us. And now, they’re getting Aristocrat as a sixth machine. You’re starting to see a nice blend, softer volatility up to higher volatility.”
The market also is seeing a variety of game styles, including some unique additions from Novomatic such as Riches Ahoy!, a takeoff on English pub-style games in the “Bar-X-0” format. “The Bar-X-0 machines are simple—bars you win, X’s you win, zeroes you lose,” explained Meitzler. “It’s a simple game. And for the losers, we give you treasure chests. And if you get five losers, those losers may turn into treasure chests, and give you a winner.
“It’s a simple concept that the English pubs do well with. We said, why not try it over here? And it’s been one of our top performers.”
Other top performers include the Fortune Series, Novomatic’s Asian Fortune-style of game that is popular in casinos; and games including
Hold Your Horses, Roaring Fortunes and Galactic Cherry, which are in the supplier’s multi-game mix.
Novomatic has partnered with operators in Illinois to add a player reward system, since machine-level player tracking is not permitted in Illinois. “We designed a kiosk which goes into a bar, or location with six games,” Meitzler explained of the system, now on test. “The first time you come in, you put your license in; we age-verify you, and you’re registered to receive rewards. You spin a wheel and win a prize. If you stay there for two hours and check out, you get to spin that wheel again. Every time you come in and log in and out, you get rewards.”
Thus, Novomatic’s kiosks reward people for their frequency of visits, as opposed to average wagers as a player tracking system would. “We reward you for being a loyal customer,” Meitzler says. “You can order prizes—appliances, some monetary prizes—all on this external system. You can do it by location, and if it’s a chain, such as May’s, we can track visits across all of those locations, based on frequency and time throughout. Typically, it’s 1 percent back to the player for their player rewards.”
Expanding the VGT Footprint
Meitzler and Novomatic are very active in fostering the expansion of VGT legislation in other states, joining other route-machine suppliers in lobbying state lawmakers and educating them on what constitutes a legal, fair gaming machine.
In Pennsylvania, Novomatic is currently lobbying for passage of a bill that would place VGTs in bars and taverns. That state’s 2017 gaming expansion law only authorized VGTs at truck stops. Authorization of VGTs in bars and other liquor-licensed locations was removed from legislation due mainly to a powerful lobby for the state’s land-based casinos.
Novomatic has placed VGTs in the state’s truck stops, which are permitted up to five terminals each. He says Novomatic games are currently No. 1 and No. 2 in the Pennsylvania VGT market.
However, the market is tiny by comparison to Illinois’ 36,000-plus games. If VGTs remain restricted to truck stops, Meitzler estimates a total market of perhaps 800 machines. However, he says after election year is over, legislation adding VGTs to other locations stands a good chance of passing early next year.
“We are fighting hard for that bill,” Meitzler said. “I’m on the PAVGA board—the Pennsylvania Amusement Video Gaming Association. We have people on the board from Pennsylvania, a few Illinois people, and a few manufacturers. I sit on that board, and we’re working hard to get this law passed.”
Last week, a state Senate panel heard arguments for and against a proposal that would allow bars, taverns and social clubs to VGTs similar to those at truck stops in the state. Opposition came from casinos and other groups competing for gaming dollars, including manufacturers of unlicensed “skill games” currently operating in the state.
Meitzler says a key factor that may lower opposition from casinos is the fact that Pennsylvania’s bill does not create the “gaming cafes” that dot strip malls in Illinois, serving liquor and offering frequent customers the kind of volatile game they like.
“In Illinois, (the VLT law) kind of snuck in a little bit; the casinos didn’t think it would hurt them that much. It has,” said Meitzler. “Pennsylvania is a little more cautious. The casinos are going to fight us a little bit, and there’s a company out there that is running the skill-based machines that’s fighting us as well. It’s a struggle, but we’re hoping to get it passed in January. That market would be a similar size to Illinois.”
The so-called “skill games” have flooded retail locations in Pennsylvania, offering unregulated, untaxed gaming under the auspices of the “Pennsylvania Skill”-branded machines sold by Georgia-based Pace-O-Matic. That same supplier sells similar games in Wyoming under the title “Cowboy Skill,” and in its home state of Georgia as well.
Novomatic has joined not only other route suppliers such as Golden Entertainment, but the American Gaming Association and Association of Gaming Equipment Manufacturers in an ongoing legal battle against the unregulated skill games not only in Pennsylvania but in several other states.
According to Meitzler, the key to eliminating unregulated games lies in the enabling legislation. “In Illinois, the way we wrote the law, as soon as the law passed, you had to stop running the gray machines, as we call them. If you got caught with a gray machine in Illinois, it was a felony for every machine you had. So the first guy got caught with 1,000 machines and 1,000 felonies were launched against them. Quickly, the machines left the state.
“If you look at Pennsylvania, they have a large skill-based market, they call it. We’re fighting against those guys because we don’t think that’s legal. Virginia went with the skill-based. They didn’t go with the Class III style. And then you have Georgia, which is closest to our market, but still a little gray yet. We’ve stayed out of that one, but we’re looking at that market because there are some operators we know do it legally. That’s another big potential market.”
There’s big money involved. “In August, the VGT markets gave the state of Illinois, through their tax base, $48 million,” noted Meitzler. “The casinos gave them $15 million. So, which one’s better for the state? What state can’t take $48 million-$50 million-plus a month? That’s huge money. And if you look at Pennsylvania Skill games, the state gets no money off those games. Pennsylvania could be doing $50 million or more for the state.”
He’s battling Pace-O-Matic in Pennsylvania on the new legislation as well. “What they’re lobbying to do is to have a hybrid model that doesn’t follow GLI standards,” Meitzler said. “And we’re vehemently against anything that’s not under GLI standards.”
Novomatic and the other suppliers will continue to lobby for new VGT bills across the U.S., as states continue to search to replace tax revenues lost this year because the casinos were closed due to the Covid-19 pandemic .
“Covid has slowed our efforts down because we had worked with governments that were often closed,” Meitzler said. “But Pennsylvania is still the next big target.”