Casino operators limit their slot revenue by overlooking popular core games that would attract non-high-value players, says Andrew Cardno, co-founder and CTO of Quick Custom Intelligence.
At the same time, having too few well-performing premium games appealing to high-value players restricts how much they can spend, according to Nick Hogan, co-founder & CEO of ReelMetrics.
Those somewhat differing perspectives from two leading gaming-industry analysts emerged Wednesday at a G2E panel discussion titled “Optimizing Casino Floor Mix: Strategies for Revenue and Engagement.” Even the session’s name reflected a contrast in viewpoints, as moderator Buddy Frank, owner of consulting firm BF Slot Strategies and a CDC Gaming contributor, displayed a slide showing his suggested title: “To Lease or Not To Lease: How Much Is Too Many?”
Serving on the panel in addition to Cardno and Hogan were Stephanie Lau, vice president of sales enablement with Konami Gaming, and Ryan Scott, vice president of commercial strategy/slots for Light & Wonder.
Frank, also a writer for CDC Gaming, said the percentage of leased machines on slot floors has risen dramatically in the past decade: from 4 percent to almost 14 percent, according to an Eilers-Fantini report, and from 3 percent to almost 16 percent according to Hogan’s firm ReelMetrics.
Hogan said ReelMetrics, the leading slot-data aggregator, has found that changing just 3 percent of a casino’s overall slot lineup resulted in dramatic increases in top-tier players getting onto a machine they favored, while the top segment of second-tier players stepped up their play as well. ADT rose significantly, even doubling in some cases.
While leased games require a monthly payment from an operator, a title whose performance falls below an acceptable level can be swapped easily for one likely to do better, Hogan said. A core game’s productivity typically falls annually and starts to enter obsolescence in the fourth year, he added, and becomes a “boat anchor” before it’s fully depreciated.
Cardno, co-founder and chief technical officer for Quick Custom Intelligence, said the metric of Win Per Unit Per Day “doesn’t matter,” because an operator’s goal is to increase total revenue. The key to doing that is a market-basket approach used by retailers: determining which types of customers like which types of machines. “Use the right metric, understand your groups of customers and their preferences, and yield each one,” Cardno advised.
Noting the rise in the amount of floor space devoted to leased games, Cardno urged operators to think about the possibility of a slot manufacturer being bought by someone who decides to raise rates. “Could you imagine a world where some finance guy wouldn’t want to increase the price on the product?” he asked. Operators ignoring the possibility risk ceding their control over a prime revenue generator, he added.
Despite some operators’ suspicions, Lau and Scott said manufacturers aim to produce the best games for both core and premium lines. Lau said it’s a push-and-pull question. “We want to make sure operators have the ability to get the best games on the floor. At the same time, we have to find a way to fund our development to get those higher-performing games. Some people don’t have enough capital to purchase, so lease is a great option.”
Scott said a manufacturer’s goal is to make as many good games as possible in every line. “Not every good game is lease. It just happens that the production value and the investment that operators spend in those pricing models allow us to do that.”
Scott suggested that operators compare the additional costs of a leased title to the amount of revenue increase from the game. “If the revenue increase exceeds the cost increase, it’s successful. We want to continue to create a margin gap. That way, we’re generating value for the operators.”
Lau said operators need to appeal to all segments of their customers. Removing a lower-performing game that is someone’s favorite means losing the entire wallet of those fans, she said.
Cardno warned against the idea of trying to change player behavior. “We should try to give our players what they would like,” he said. “The knowledge of player experience is the essence of making more money on the game.”