Slot Machine Disruption

Slot machines today are better designed and extremely high-tech compared to their early brethren. However, both old and new still operate under the variable reward system, luck based, and both require us to still sit there in front of the machine.

Smartphones are changing this.

Millennials & Mobile Gaming

Casinos are facing demographic issues. Older people, baby boomers and above, enjoy slot machines. Unfortunately, this group gets smaller every year. Millennials love Las Vegas. Its one of the reasons the number of visitors to Las Vegas continues to increase.

The problem is Millennials are gambling less and spending more on entertainment.

Casinos have noticed a consistent decline in gambling participation from Millennials within the past couple of years. Increasingly, they are spending less on gambling. In the 1990s, 58% of Las Vegas resort revenue came from gambling. Last year only 37% was attributed to gambling. Millennials are visiting casinos for the nightlife, shopping, and entertainment—when they visit casinos at all, that is.

Casinos need Millennials to gamble more and preferably on their slot machines. Casinos earn upward to 60% profit margins on slot machines. For the digital generation, casinos are turning to smartphones and proprietary apps to turn Millennials on to slot machines.

MGM Resorts during its June 2016 Analyst Day discussed its new digital wallet and mobile gaming app.

So, on the fourth picture over, another product that we’ve just soft launched last week and really excited about this it’s mobile slot tournaments. This product is a web app called easyPLAY – easyPLAY.Vegas. And it’s the first of its kind in the U.S. and allows us to conduct daily slot tournaments on our Las Vegas properties and pull the liquidity between every single one of our properties. These tournaments are conducted on our Wi-Fi network, which allows us not only to offer the mobile slot terminals on our casino floors, but really wherever our Wi-Fi extends into the poker room, by the pools, over to the day clubs.

The other exciting news about this product is that, as we optimize it, the platform will not only allow us to do mobile slot tournaments, but allow us to conduct bingo, video poker, skill-based and arcade-style mobile tournament. So, we’ll be able to hit different demographics. We’re going to aim this product right at those competitive millennials that I was talking about earlier. – MGM Resorts Analyst & Investor Day June 16, 2016

With the slot machine in your pocket, there is no need to sit down in front of a traditional terminal.

Skill-Based Games

63% of Millennial who visited Las Vegas in 2014 gambled versus 68% for Gen X and 78% of Baby Boomers. Millennials accounted for 27% of all visitors.

Why are they gambling less? In part, Millennials are turned off by pure luck-based gambling.

Slot machines are luck based. There is no skill involved. You can’t lose on purpose with a slot machine.

Millennials have shown a greater interest in skill-based games. It is one of the reasons Poker Rooms remain popular after the Chris Moneymaker Effect. Casinos are turning towards more skill-based gambling games to get Millennials to gamble more.

In February, Nevada and New Jersey passed legislation allowing for the introduction of skill-based games in casinos as a way to draw in younger players. Imagine Angry Birds and Candy Crush machines next to a high-stakes poker table at Bellagio.

The idea is that one day, different types of skill-based games will exist on casino floors, including games that look and feel more like console video games, from shooters to racing games.

They could be games where single players go against the house, cooperative games like blackjack, or player versus player games like poker. Eric Meyerhofer, the chief executive of Gamblit Gaming, a California company that makes skill-based games for casinos, said the biggest attractions could even be well-known franchises like Call of Duty.

“It won’t be a sea of slot machines. You’ll see smaller, more intimate areas with specialized themes,” he said.

If these two trends continue then this is bad news for makers of traditional slot machines like dividend paying International Game Technology PLC (IGT).

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