Friday, September 26, 2003
Copyright © Las Vegas Review-Journal

Bingo ruling may benefit slot makers

Nevada slot makers got a boost this week when the National Indian Gaming Commission approved bingo slot machines as legal gaming devices in tribal casinos, analysts said Thursday.

"Any time there's an approval for an alternative (slot) product, manufacturers should benefit from the change in regulations," said Brian Gordon, spokesman for Applied Analysis, a Las Vegas-based financial consulting company.

The federal ruling, in effect, allows American Indian tribes that don't have compacts with states to offer unlimited numbers of bingo slots.

Since the newly approved devices are very similar to traditional casino slot machines, the decision is likely to clear the way for the further growth of tribal gaming, said Merrill Lynch analyst David Anders.

"Because federally recognized tribes do not need compacts with state governments to operate Class II gaming devices, the ramifications of this decision are far-reaching," he said.

Class II gaming is limited to bingo and similar type slot games on tribal lands and does not require a state compact. Class III gaming includes many traditional forms of slot and gaming machines.

The ruling could be a boon for tribes in states where Class III gaming is not permitted, such as Alabama, Florida, Massachusetts, Oklahoma and Texas, since they will be able to introduce the new technologically advanced slot machines into their casinos without entering revenue sharing agreements with states. That will allow them to improve their win per day.

Tribes, such as those in California, where the number of Class III slots is limited, also may choose to install the bingo slots where play levels are high.

Las Vegas professor and casino industry expert Bill Thompson agreed Indian tribes in such states could decide "to tear up compacts and say to heck with agreements that give states revenues."

Wednesday's ruling could have a major effect on competition from California, Thompson said. Compacts limit the number of gaming machines, but Class II gaming halls don't have any limits on the number of seats, he said.

Deutsche Bank analyst Marc Falcone said Class II gaming is one of the next opportunities in tribal gaming for the equipment companies.

Deutsche Bank estimates there are approximately 21,000 Class II machines in the United States now, but that number could grow significantly as tribes get more comfortable with the new rules, he said.

Falcone called the decision part of an "evolution" in tribal gaming.

"As new technologies continue to be introduced into the Class II market, we expect games will continue to bump up against existing regulatory definitions. Stay tuned; we think Class II gaming is going to get very interesting," Falcone said.

Analysts said the companies most likely to benefit are Reno-based International Game Technology, the world's largest slot manufacturer; Las Vegas-based Alliance Gaming; and Waukegan, Ill.-based WMS Gaming, which has its marketing headquarters in Las Vegas.

IGT spokesman Ed Rogich said his company was looking at the ruling and wasn't prepared to comment.

WMS Executive Vice President Orrin Edidin said his company has "always looked at Class II as a market opportunity for us. The (new) ruling clarifies ambiguities about the types of games that fit within Class II," and that in itself will serve as a catalyst.

Alliance could not be reached for comment.

Anders said state governments might be long-term losers because the compact process may no longer be seen as necessary. That would weaken states' bargaining positions on the total number of machines allowed in tribal casinos as well as revenue sharing agreements between the tribes and states.