Investors Concerned About Slot Machine Industry Changes
Slot machines have been changing a lot throughout the recent years. Even today, there are changes being made to them. All of these changes have been making an impact on the casino industry. These changes have some investors concerned.
After $16.8 billion was spent on mergers and acquisitions during an 18 month time period, the consolidation in the gaming equipment manufacturing has changed.
Scientific Games Corps. and International Game Technology were developed by buyouts that were created. However, they will not be controlling the market.
Smaller companies have been increasing their research and developing capabilities. The competition has been impressing the casino decision makers.
According to the Review Journal, Janney Montgomery Scott Gaming analysist Brian McGill stated, “Our contacts believe Scientific Games is eventually set to be a 25 percent share of the replacement market going forward in North America.” He then continued by saying, “This is a considerable drop from the potential 40 percent chatter about a year ago.”
IGT (This use to be known as GTECH Holdings) and Scientific Games control a huge amount of the worldwide lottery market. This makes the company feel comfortable financially as they continue to navigate through the challenging slot machine business. Operators in the casino industry are moving at a slow pace to replace the old games. There a few new casino openings in North America before this year ends.
Christopher Jones, the Union Gaming Analysist, has stated that the lottery market is traditionally stable. He also mentioned that it provides a steady revenue stream as the Scientific Games and IGT maneuver through the process of integration.
Jones said, “Overall the lottery business represents the primary cornerstone of the gaming technology segment,” according to https://www.reviewjournal.com/columns-blogs/inside-gaming/slot-machine-industry-changes-concerned-investors.
The casino is moving towards creating skill based slot machines. This is done by overhanging the investment community uncertainty. The skilled based slot machines are expected to incorporate video and arcade style elements.
The Association of Gaming Equipment Manufacturers has a strong belief the new slot machines will the most important technological changes on the casino floor in over a decade. These manufacturers are a trade organization that supported the legalizing of skill based gaming.
Manufacturers think that the skill based slots are in the works to increase the amount of money that are wagered on the machines. Wagers have been declining more than 23 percent in Nevada.
The state gaming regulators have been writing regulations for skill based slots. This has been creating more competition. Different technology businesses and other forms of nontraditional gaming manufacturers have been trying to become the main providers for skill based games.
The Global Gaming Expo that took place in Las Vegas last year have been giving previews of the changes expected to take place.
Gaming analyst for Goldman Sachs & Co, Steve Kent, told reporters that the transitions in the slot machine industry will take a while to hit the casino floors. “We do not expect to see any major game-changing innovation (at G2E), and we also believe casinos are unlikely to make major changes to budgets in the fall”, according to the same source. He also continued by stating, “Skill-based gaming could also be a potential catalyst, but likely not for another few years.”
IGT and Scientific Games are on the top. After they bought the slot machine manufacturer WMS for $1.5 billion and Bally technologies for $5.1 million, the Scientific Games was considered the largest manufacturer in the industry within a 13 month time frame.
Late last year, the company’s headquarters moved to Las Vegas. The Rome based company, GTECH acquired IGT for $6.4 billion. IGT is based in Nevada. Then the company took on IGT. After making this move, they moved the corporate headquarters to London. IGT has been downsizing its presence in Las Vegas. During the time they have been downsizing, it located its North American gaming equipment manufacturing building in Reno.
Like Konami Gaming and Ainsworth, smaller manufacturers have been getting business.
Kent told Review Journal said that the competition has not eased. Analysts has been expressing a lot of concern over two certain aspects of the Scientific Games and IGT Mergers. Their two main concerns are the time being spent on cost-cutting synergies and the debt load the equipment giants need to have.
IGT announced that it will cut $240 million in costs. Scientific Games are expecting to slice $235 million since the Bally deal was made. Jones stated that cost synergy projects are much simpler to achieve than reducing the efforts.
There are similarities between the long-term debt numbers. IGT contains $8.7 billion in debt. Scientific Games have an $8.5 billion debt. Kent has stated that investors have been sharing their concerns over the financial leverage level for the Scientific Games IGT were very high.