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Introduction to Who Builds Slot Machines

Who builds slot machines throughout the world? For such a popular activity, there is a relatively short list of slot machine manufacturers in the world:

Multimedia Games Inc. (a subsidiary of EVERI Inc.)

Of these companies listed, Class III gaming is principally supported in North America by Scientific Games Corp. and IGT. They are both global leaders in the gaming industry. Mergers and acquisitions are the name of the game amongst slot machine manufacturers. It is currently a highly dynamic corporate environment.

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In 2014, for instance, Bally Technologies was acquired by Scientific Games. This acquisition is significant as Bally was the driving force for inventing most of the modern features of slot machines enjoyed by so many.

These gambling companies provide products other than physical slot machines. They often also supply casino-management systems. These software packages help casinos to “run” their operations from day-to-day and even in real-time.

This casino operating system software is crucial to casinos as a way to reduce cost and, I’ve found, a significant advantage play for slots enthusiasts. I’ll provide more on this topic at another time.

This operating or enterprise software business is as highly competitive as slot machine manufacturing. Factors that determine how successful providers are in selling their systems include:

product features and functionality
accuracy
reliability
service level
pricing

Competition is intense because of the relatively low number of providers and the limited number of casinos and jurisdictions in which they operate. Providers are Scientific Gaming, Aristocrat, IGT, Konami, and several smaller companies in international gaming jurisdictions.

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The Gaming Industry

Within the global gaming industry, companies building slot machines is trending towards consolidation amongst gaming equipment and technology companies. The gist of why is to increase scale and therefore operating efficiencies. The hoped-for result is accelerated innovation and product development resulting in broader service and product offering.

Several acquisitions of slot machine and other gaming equipment manufacturers have occurred recently, including the purchase of Bally Technologies by Scientific Gaming Corp. and the acquisition of Multimedia Games by Global Cash Access Holdings Inc.

Following a wave of supplier diversification in the gaming industry, where new providers have been gaining in market share, the industry is experiencing significant consolidation.

This convergence is attributable primarily to a slowdown in North American traditional slot machine revenues as regional gaming revenue headwinds, such as declines in same-store sales, impact the demand for slot machines.

Therefore, the machine gaming sector is evolving from just the sale and leasing of slot machines to include:

multi-channel systems and table games equipment for traditional land-based casino
lottery technology
real-money interactive gaming
online and mobile social casino gaming

A significant threat for the entire gaming and betting industry arises from illegal activities, which may drain significant betting volumes from the regulated gaming industry.

The loss of present players from legal casino operators has a material adverse effect on gaming industry operations, business, financial condition, and prospects.

Scientific Games Corporation (NASDAQ: SGMS)

A global leader in the gaming industry, Scientific Games Corporation (SGC) is the current owner of:

Bally Technologies Inc. (one of the original slot machine companies)
Spielo
WMS Gaming Inc.
Shuffle Master
Barcrest

SGC’s company profile states that they provide:

lottery games
electronic gaming machines
server-based lottery and gaming systems
sports betting technology
loyalty and rewards programs
online social, mobile and interactive content and services

In 2013, Scientific Games Corporation purchased WGS Industries, Inc. Bally Technologies, Inc. was acquired by SGC on November 21, 2014, for $5.1 billion.

The products of SGC are installed in 450 jurisdictions worldwide, including all the major regulated gaming jurisdictions in the U.S. and 146 international gaming jurisdictions. They have 975,000 units installed in North America.

Within the gaming supply segment, SGC sees the competition on several fronts. Primarily, being a global leader in slot machines has resulted in their product lines competing with each other for space on the casino floor.

International Game Technology PLC (NYSE: IGT)

International Game Technology (IGT) PLC is a global leader in gaming that, according to its website, leverages a wealth of

premium content
substantial investment in innovation
in-depth customer intelligence
operational expertise
leading-edge technology

It has not only established local presence and relationships with governments and regulators in more than 100 countries around the world but also approximately 13,000 employees. For U.S. federal tax purposes, under current law, it is treated as a foreign corporation.

In 2014 and 2015, International Game Technology PLC experienced multiple corporate mergers and acquisitions involving GTECH, Holdco, IGT, and Georgia Worldwide Corp. which has been and is a complex, costly, and time-consuming process. The integration process is expected to be completed by the fiscal year 2018.

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International Game Technology PLC’s online social gaming casino offering, DoubleDown Casino, is mainly conducted through Facebook and Apple iOS platform, a relationship governed by Facebook and Apple’s standard terms and conditions for application developers as well as privacy policies, both of which are occasionally modified, rather than by contract.

International Game Technology PLC currently does business in approximately 100 countries worldwide. At the end of 2014, IGT PLC had contracts with 717 casino operators in the Americas segment, with 249 in Latin America and 468 in North America.

Summary for Who Builds Slot Machines

Slot machine manufacturing is principally supported in North America by Scientific Games Corp. and International Game Technology PLC, both global leaders in the gaming industry.

The products of Scientific Games are installed in 450 jurisdictions worldwide, including all the major regulated gaming jurisdictions in the U.S. and 146 international gaming jurisdictions. They have 975,000 units installed in North America.

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Have fun, be safe, and make good choices!
By Jon H. Friedl, Jr. Ph.D., President
Jon Friedl, LLC

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