Aristocrat Leisure leaders believe time is right for renewed refocus on U.S.

Australian slot machine developer Aristocrat Leisure Ltd. has invested millions of dollars and spent nearly a decade trying to break into the American casino industry.

The effort has yielded Aristocrat just a 13 percent market share to date.

The figure may not seem impressive on the surface. But as Aristocrat executives explain things, the company had only been selling into half the market, concentrating on video slot machines and ignoring mechanical games.

That aspect, along with Aristocrat's focus on American casino customers, is changing.

The company, which operates Aristocrat Technologies in Las Vegas, is refocusing its efforts to grow its American business. Aristocrat Technologies serves as the parent company's American headquarters.

"We used to think of ourselves as Australian exporters, but we now want to imbed ourselves more into the U.S.," Aristocrat Chief Executive Officer Jamie Odell, who has been on the job since February, said in an interview this week.

"The U.S. is by far our most important market," Odell said. "We're absolutely going to invest more in the U.S. at the expense of our other markets, unapologetically. Because this is where the growth is going to come from."

Aristocrat has spent almost two years developing and testing mechanical slot machines for American casinos. The idea is to build slot machines geared toward American gamblers, rather than bringing more games from Australia into the U.S. market.

The company was credited with helping change the American casino market during the past decade by importing multidenomination video slot machines that were popular in Australia to U.S. casino jurisdictions.

"For awhile, Americans loved them," Odell said. "But our competitors caught up."

Nick Khin, who is nearing a full year as president of Aristocrat's American division, said the company holds up to 28 percent of the video slot machine market share in North America. Adding a mechanical slot machine product will allow the company to compete in that market, which covers about 40 percent of the slot machines now on U.S. casino floors.

Aristocrat executives believe the timing is right for a renewed focus on the U.S. gambling industry. In its recent six-month earnings report, the company said the emphasis on growing the American business is part of a three- to five-year company growth plan. Aristocrat is publicly traded on the Australian Stock Exchange.

The move puts Aristocrat in direct competition with U.S. slot machine giants International Game Technology, Bally Technologies and WMS Industries, as well as Japanese-based manufacturer Konami.

Union Gaming Group principal Bill Lerner said Aristocrat's timing could be ideal.

Analysts suspect that casino operators, who have held a tight grip on their capital expenditure budgets over the past few years in light of the recession and slumping gaming revenues, may be looking to update slot machine floors in 2010.

"If the replacement market starts to free up, Aristocrat could be in a good place," Lerner said.

Also, states such as Ohio and Illinois are looking at adding more slot machines and using tax revenue produced by the games to shore up large budget deficits.

"We've come into a replacement cycle, which gives us an opportunity to go for a better market share," Odell said. "Content is king and you have to have the best games. Truth is, we're looking for a double whammy."

In the past year, video-based games Aristocrat introduced at last year's Global Gaming Expo have been gaining market share, including titles based on the movie "Jaws" and the cable television series "The Sopranos." The company plans to introduce its mechanical reel machines this year.

"We're only now looking at introducing ('Jaws') into Australia," Odell said. "The U.S. is the core business."

Along with the focus on new slot machines, Aristocrat is moving two of its top Australian executives, the company's chief technology officer and its chief marketing officer, to Las Vegas.

Odell said the idea is to have key Aristocrat executives on the ground to interact with American casino operators more directly than in the past.

Lerner said Aristocrat needs to show a sustained push into the American market to succeed.

"Historically, Aristocrat has not had a whole lot of follow through, but they have certainly been a meaningful player in the video slots market," Lerner said. "They may have a real shot in a short period of time."

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.