A new type of slot machine that blends skill with chance could give casino companies like Las Vegas Sands, MGM Resorts and Wynn Resorts a boost next year, just as Macau’s downturn is expected to worsen.
The machines will be radically different from today’s one-armed bandits in look, feel and potential payoff. They are also seen as a way to attract key demographic groups, such as millennials.
Slots are critical to U.S. gaming. In Nevada, casinos generated $6.75 billion from slot machines in 2014, more than half of the state’s total $11.02 billion from gambling, according to the University of Nevada Las Vegas Center for Gaming Research.
In Q3 2016, some skill-based slot machines will start to come out in Nevada and should spread to the rest of the country from there, MGM (NYSE:MGM) Senior Vice President Tom Mikulich told IBD.
“Once it catches fire, you will see a land rush,” he said.
Moody’s Investors Service sees a shorter time frame. “Skill-based games could be designed, manufactured and on the floors of Nevada casinos as soon as early 2016,” it said in a May 28 report.
Which Companies Cash In?
Nevada is the first state to have approved their use and is currently working on technical standards to ensure that skill-based slots provide fair and accurate payouts. MGM Resorts, the biggest casino operator in Las Vegas, will be an early adopter, Mikulich said.
In addition to the global casino giants, regional casino companies with high IBD Composite Ratings — like Pinnacle Entertainment (NASDAQ:PNK), which operates more than 21,000 slot machines; Boyd Gaming (NYSE:BYD) with 30,000; and Isle of Capri Casinos (NASDAQ:ISLE) with 13,000 — also stand to benefit.
And because slot machines make up a greater share of casino revenue in the U.S. than they do in Macau, the domestic companies could see outsized benefits vs. their international peers.
Game machine makers such as Scientific Games (NASDAQ:SGMS) and International Game Technology (NYSE:IGT), the two largest slot-machine makers, are designing skill-based versions.
Trivia, ‘Space Invaders’
At the moment, the outcome of a spin on a slot machine is 100% driven by chance. But the skill-based games could test a player’s knowledge of sports and Hollywood trivia or academic prowess, industry officials say.
Another big difference is that players will be able to compete against each other, a feature that will particularly appeal to millennials, Scientific Games Senior Vice President Bryan Kelly said.
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