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October 1999

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October 1999 Powered By Docstoc
					                    The
                          ADAMS REPORT
                  A Review of Current Gaming Literature
                                            Volume 2, Issue 10
                                           October, 1999


Editorial
Development:
What Does an 800-Pound Gorilla Do? Whatever It Wants to Do!! The world of Indian
gaming in California may be in for some dramatic changes. This editorial is not intended to
imply that the tribes have not done a very good job of operating their casinos. But a new player is
coming, Station Casinos, Inc (Station). And with Station will come a new paradigm, based on a
more advanced model than most tribes (or other casino jurisdictions for that matter) have been
using; the model is the residential or „locals‟ casino from Las Vegas. In Las Vegas, born of
intense competition, these casinos have become sophisticated residential entertainment-shopping
malls. Designed to serve a well-defined residential area, surrounding the casino, they serve much
more than just gaming needs.
One, if not the best, of the best is Station. The Station‟s model is very well developed much like
a Wal-Mart or Starbucks. Station Casinos knows how to spend the $250 million they allot for
each new location. All of the operating units, movie theatres, shopping, restaurant, etc. are as
well understood and managed as the casino unit.

        Station and United Auburn Indian Community Sign Agreements for Sacramento-Area Gaming and
        Entertainment Facility. Las Vegas, Oct. 12/PRNewswire – Station Casinos, Inc. announced today that it
        has entered into a Development Services Agreement and a Management Agreement with United
        Auburn Indian Community (the “UAIC”). Subject to the receipt of certain governmental
        approvals, Station and the UAIC will develop a gaming and entertainment facility on
        approximately 49 acres adjacent to Highway 65, approximately seven miles north of Interstate 80,
        in Placer County, California, near Sacramento. Company Press Release, PRNewswire, 10-12-99

        Station Casino Dispatches Top Executive to California. Station Casinos Executive Vice President
        Mark Brown has plans to head to suburban Sacramento, Calif., to develop community support for
        the Las Vegas-based gaming company‟s newly announced venture to build a locals‟ casino with a
        Northern California Indian tribe. Dave Berns, Las Vegas Review-Journal, Column: Gaming Chips, 10-18-99

Station isn‟t a bait and switch company, but what you see today is not what you get tomorrow.
The regional-locals‟ casino market in Las Vegas is extremely competitive. The best companies
are continually reinvesting in their properties. The investments are not simply more casino space,
in fact, casino space is only a small part of the growth and development. The best of the Las
Vegas regional-locals‟ operators, and certainly Station is one of the best, are continually
developing and refining their entertainment and shopping concepts.
        Texas Station to Expand Again. Bowling center proposed for locals‟ property. Less than a year
        after completing a $55 million expansion, Texas Station is proposing yet another expansion. The
        four-year-old hotel-casino has filed plans with the North Las Vegas Planning Commission to add


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        another 200,000 square feet of space. Once complete, Texas Station would span nearly half a
        million square feet – triple its 1998 size.
        …“We‟re looking to expand literally all of our properties (in Clark County), said Glenn
        Christenson, chief financial officer of Station Casinos. …“They‟re generally very low risk, very
        high return investments.”
        …Plans filed with the city call for an additional 15,000 square feet of casino space, which would
        allow the property to increase its gaming operations by 15 percent…the bulk of Texas Station‟s
        expansion will be entertainment offerings. [Kevin Kelley president and general manager of Texas
        Station] David Strow, Las Vegas Sun, 11-3-99

Out on a Limb:
What Happens When an 800-Pound Gorilla Hits You? It Really Hurts! Station Casinos
will create more than a casino in California; Nevada casinos will not be the only businesses to
feel the pressure of the competition. Every entertainment business in the immediate area will feel
it. Certainly, the Reno casinos will have to find ways to adapt to the competition in a prime
feeder market. But, so will other Indian casinos in Northern California and entertainment
businesses in the area have to adapt (as much as Reno‟s casinos), if they are to remain
competitive.


Operations:
Easy Pickings! While Station Casinos, Inc. represents the leading edge of casino development
as entertainment and shopping centers, there is always the guy with money and the desire for an
easy buck. To outsiders, Nevada appears to be easy picking. There are real estate deals that seem
to be no-brainers and what could be hard about operating a casino? Here is a not untypical story:

        Bay Area Whiz Kid Investor Buys Silver City. A San Francisco real estate mogul who tried to
        land the Desert Inn has settled for the Silver City. Luke Brugnara purchased the downscale Strip
        casino and its adjoining retail plaza for $32 million and plans to put “tens of millions” more into
        the eight-acre site at Las Vegas Boulevard and Convention Center Drive. The property, owned by
        United Hotel and Casino of Los Angeles, has been a hard-luck corner for years. Its 40,000 square
        foot retail plaza is half empty. The 32,000-square-foot casino has been operated by Mandalay
        Resorts on a $130,000 monthly lease. When that expires Oct. 31, the gambling hall will close . Ken
        Ward, Las Vegas Business Press, 10-25-99

Now Mandalay Resorts, née Circus Circus, does not think this is such a great deal or location or
the slam-dunk Mr. Brugnara does, but what do they know? He is 35, successful and knows a deal
when he sees one.
        Brugnara, 35, is in the process of applying for a state gaming license. He says he doesn‟t plan to
        reopen the casino until he gets the permit, probably sometime next summer. And while Brugnara
        has no gaming experience, his attorney, Frank Schreck, has proven adroit at getting his clients
        through the sometimes Byzantine approval process. “He‟s batting a thousand and I don‟t want to
        be his first loss,” Brugnara said. Ken Ward, Las Vegas Business Press, 10-25-99

Gaming in Nevada (and in every jurisdiction in the US) is a heavily regulated industry. The State
of Nevada and the Nevada Gaming Commission take its role very seriously. The licensing
process is key in keeping the integrity of Nevada‟s gaming industry. But, of course, it is all a
matter of politics, just hire the right lawyer; what else could there be to the process? If his
background, his money and his activities are clean and clear, as the state requires, then there is
nothing more to it; if not he may acquire a new appreciation for gaming regulation.
        A Nevada gaming license is not something to which someone is entitled as a matter of right or
        Constitutional guarantee; it must be earned. I believe the first line of defense against problems in



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          the gaming industry is to assure that undesirable people are kept out. The application process is
          demanding; every pertinent aspect of an applicant‟s life is examined to seek evidence that he will
          be trustworthy as a gaming licensee and sensitive to the exacting demands of our state‟s gaming
          control system. No one should initiate the gaming license application process unless he is
          prepared to make complete disclosure about his personal and business life and committed to
          enabling investigative agents to timely complete a comprehensive report on the applicant. James
          Avance, Chairman, Nevada State Gaming Control Board, 1983085, Nevada Gaming License Guide, Lionel Sawyer &
          Collins, Jerome J. Vallen, Editor, 1988

My point, though, is not about regulation; it is more about greed and oversimplification. Mr.
Brugnara saw “an old lady” lose money in a slot machine. What could be simpler? Buy a
building full of slot machines and you will make lots and lots of money. I wonder how the
management of the Maxim, Four Queens or Santa Fe would react to that? Somehow, I believe
they might tell Mr. Brugnara that there is more to this industry than that.
          Unabashed, Brugnara is bullish about the prospective profits in gaming. “I saw a little old lady
          put a $100 bill into a slot. In 2 ½ minutes it was gone. I was shocked,” he said. With that kind of
          cash flow, Brugnara said he is shifting his attention to Las Vegas from his pricey Bay Area home,
          where commercial tear-downs are selling for $650 per foot. “The good San Francisco deals are al
          gone,” he said. Ken Ward, Las Vegas Business Press, 10-25-99


Update:
Bill Would Invalidate Rules on Casino Labor Unions. The present compact with Gov. Davis
requires tribes to allow unions. – Washington – An Arizona congressman wants to invalidate an
agreement between Gov. Davis and California Indians requiring the tribes to recognize labor
unions in their casinos. Rep. J. D. Hayworth, a Republican whose northern Arizona district is 22
percent American Indian, says such a requirement is a violation of tribal sovereignty, and sets a
precedent for other states to require labor agreements. California Indian Gaming News, 10-8-99

Teamster Target Mandalay Bay. Group cites „vicious anti-union campaign‟ at Strip resort. In
the public eye, the Strip is viewed as friendly ground for unions. And one of the friendliest has
been Mandalay Resort Group, formerly Circus Circus Enterprises Inc. But organizers at two
local unions attempting to organize on the Strip say things aren‟t as they seem. These unions –
the Teamsters and Operating Engineers – say they‟ve fought heavily every step of the way along
Las Vegas Boulevard. Now their most contentious battle is being waged at Mandalay Bay –
flagship resort of Mandalay Resort Group.
          “We‟re seeing a very vicious anti-union campaign, in which all stops have been removed on the
          part of the employer,” said Mike Magnani, secretary-treasurer for Teamsters Local 995. “We will
          not quit until we have that organized. If it means we have to take some kind of economic action,
          we‟ll do that. But we will do what‟s necessary to organize those people.” David Strow, Las Vegas Sun,
          10-25-99

Where Will They Go to Find the Workers They Need to Grow? The jobless rate in the
Reno/Sparks area dipped to 2.8 percent from 3 percent in August. That‟s the lowest rate since
December 1998, when the Reno jobless rate dropped to 2.6 percent, a four-decade low. Ken
Altucker, Reno Gazette-Journal, 10-28-99, p. 1E

The Height of the Competitive Bar. Johnny Chan has twice won the World Series of Poker,
played annually at Binion‟s Horseshoe Casino in Las Vegas. His second victory in 1988 is
legendary: He lost the biggest pot in the history of the tournament, then came back to take the
title. Two months ago, he signed an exclusive contract with Fort McDowell Casino off the
Beeline Highway to develop card games and play heads up against tournament winners.



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Spectators say he cleaned out his first challenger in less than 10 minutes.                  Phoenix New Times, Feature,
July 22-28, 99



No Comment:
Start Your Own Casino on the Internet: GamblingSoftware.com Tel 604-681-2858.
Advertisement, Entrepreneur, Vol. 27, No. 11, November ‟99, p. 159
“Funny makes money” is Kaminkow‟s (VP Engineering, IGT) mantra. “People are going to
see this stuff, and they‟re going to want to tell their friends about it. It‟s cool. It‟s like knowing a
secret.” Marian Green, Pushing the Envelope, Slot Manager, IGWB, October 1999, p. 17

Stock Market Holds Money from 48 Percent of Americans.                      Washington – The stock market has
become America‟s main pension plan and savings bank, attracting funds from 48 percent of
American households and becoming a key source of retirement savings, according to a
comprehensive survey of investment patterns released Thursday. Only 19 percent of American
families held stocks or mutual fund shares in 1983, soon after the stock market began its
extraordinary climb. Washington Post, Reno Gazette-journal, 10-22-99, p. 3B

Steve is a Little Testy. “We‟re all through talking about the last quarter. I‟m done with the
subject.”      Steve Wynn, chairman and CEO, Mirage Resorts. IGWB, Vol. 20, NO. 10 October 1999

What Happens When the Mexican Workers Stay at Home? What Southeast Was to U. S.
Companies, Mexico is Becoming. Torreon, Mexico – The U. S. has a new “New South.” It is called
Mexico. Four decades ago, U. S. industry migrated to Georgia, Alabama and other southern
states in search of cheap land and labor, eventually transforming what was once a largely rural
backwater into one of the country‟s most economically vibrant regions. In a single generation,
millions of Southerners vaulted from poverty to the middle class, and the South became an
important market for the very goods it was producing. A similar process is now unfolding in
Mexico. In the five years since the passage of the North American Free Trade Agreement, U. S.
manufacturers have hired 600,000 new workers in Mexico, a pace of job creation almost identical
to what took place in the U. S. southeast in the 1960s and 1970s. Joel Millman, The Wall Street Journal, 10-
29-99, p. A1




But that is just my opinion!




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Literature
Each of the following articles is a direct quote from the publication as cited. The articles in the original publications vary in length
and detail, but are always more detailed than as presented in this report. The original article should be consulted any time the issue is
of importance to you.



American Indian Report
A Very Different Point of View. Numbers Please. I was reading through the September, 1999
issue and saw the blurb in NewsBites on “Numbers Please.” It‟s not easy promoting the U. S.
2000 census. Nor should it be easy to promote the U. S. census. For all our talk about being
sovereign nations, why are tribes lining up to divulge what basically are state secrets? The 1930-
40 U. S. census was used to identify and locate Japanese Americans for arrest and transport to
detention camps during WWII. The correlation follows. The line the feds give Tribal leaders to
entice members to participate in the census is that if we do not cooperate with the census, tribes
will not be allotted sufficient funds to provide adequate programs and services to tribal members.
The amount of aid given by the U. S. to tribes is generally negotiated through peace treaties, land
cessation treaties, mineral leasing agreements and other such agreements, not by census
(enumeration) figures. One has nothing to do with the other. This is an interesting issue. Should
sovereign tribes (nations) encourage their “citizens” to divulge their income, location, property
owned, type of house, etc. on the U. S. census questionnaire or should tribal citizens be
encouraged to remain anonymous and hidden from the American government? Hasn‟t it been our
remoteness and invisibility that have kept us alive and not assimilated thus far? Tribal people
should not participate in the U. S. census. Ray Wahnihitiio Cook, Mohawk Nation, Letters to the Editor, Vol. XV,
No. 10, October 1999, p. 2


Amusement Business
Staples to „Boss‟ Way into L. A.: „Most Expensive Arenas Home to Three Major League
Teams. On Oct. 17, a 10-acre parcel of land located in a long-neglected southern corridor of
Downtown Los Angeles will officially be born again with the opening of what is reportedly the
most expensive U. S. arena ever built – the $375-million Staples Center. Comprising nearly one
million square feet, with a maximum seating capacity of 20,000, the Staples Center will serve as
the new home of the NHL‟s Los Angeles Kings, the NBA‟s Los Angeles Lakers and Los Angeles
Clippers and the AFL‟s Los Angeles Avengers. It is the only arena in the country to host three or
more professional teams under one roof. The facility opens with what started as a two-date
performance, Oct. 17 and 18, by Bruce Springsteen and the E Street Band. Tickets for “The
Boss” sold out Sept. 18 within minutes, prompting promoters to quickly add two more dates –
Oct. 21 and 23.
…”The materials are very sleek and machine like. We like to think of these buildings as an
entertainment machine. This is a building that we want to make very active, light on its feet and
dynamic.” Dan Meese, lead designer.
“From an architectural standpoint the building clearly is a major addition to the skyline,” Tom
Leiweke, Staples Center President, said. “So to add that entertainment element of lighting at
night, the building becomes a mirror image of what‟s going on at night and it‟s a reflection, too,
of the dynamic of the events taking place inside.”
…But in addition to its aesthetic contributions, the facility‟s founding partners, city officials and
downtown alliance groups are confident the arena will breathe new life into the downtown area.
Not only do they believe the building will set off a trend of rejuvenation, they also are confident
local restaurants, hotels and downtown businesses stand to benefit from the potential revenue
Staple Center is expected to generate for the city. “As to the economic impact, it‟s going to be
exactly what we‟ve always expected,” Leiweke said. “There‟s no question, Staples Center is



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going to be a major contributor to the rejuvenation of the downtown area and all of the businesses
here are going to reap the rewards of that. Jacqueline Fox, Vol. 111, No. 41, 10-11-99, p.15-16

Mandalay Bay Center Off to Auspicious Start with Big Names, Trendy Image. The Sept.
18 Oscar De La Hoya-Felix Trinidad fight put the “eyes of the world” on Las Vegas‟ six-month-
old Mandalay Bay Events Center, said Gordon Absher, director of public relations for the venue.
Hundreds of journalists and thousands of tourists descended on the 3,700-room Mandalay Bay
Resort & Casino for the boxing match, he said.
…Since the Events Center opened April 10 with a sold-out Luciano Pavarotti concert, the venue
has hosted a wide range of mainstream entertainment. Concerts, including the International
Mariachi Festival and Alanis Morissette, have been rounded out by sporting events, including
rodeos and ice skating. One night, Mandalay Bay hosted the International Mariachi Festival in
the Events Center, Championship Boxing in the Conference Center, Dwight Yoakam in the onsite
House of Blues and the Broadway musical “Chicago” in the 1,700-seat Mandalay Bay Theatre.
…The inside of the Events Center‟s 30,128-square-foot main area features a full-size ice rink and
retractable bleachers, which can accommodate hockey, basketball and tennis. Seven luxury suites
range in size from 560 square feet to 6,460 square feet. Upscale tile and padded seats accent the
venue. Additional space includes 83,050 square feet on the concourse level and 25,100 square
feet in the private meeting rooms. The Events Center doubles as a convention venue. Natasha
Emmons, Vol. 111, No. 43, 10-25-99, p. 10


Atlantic City Insider
Eminent Domain in Atlantic City: What is a Public Purpose? Price Wars. While the pieces
to its Atlantic City puzzle are finally falling into place, Las Vegas-based MGM Grand has one
more area of land to acquire before it starts construction on a new casino project here. The
company, which has been assembling land east of the Showboat for years for a $700 million to $1
billion casino complex, still has to attain two parcels that equal almost 6,000 sq. ft. from one
owner who has set his price a little too high to bring MGM to the table for discussion. New York
businessman Shalom Dai first bought two vacant lots…for $15,000. Dai has never responded to
any offers until recently, when the city offered $478,000 for the two lots. Dai rejected the offer
claiming the lots are worth $11.8 million or $2,000 per square foot. Now MGM says it‟s too late
for discussions, and it will let the city proceed with its attempt to acquire Dai‟s land through
powers of eminent domain.
…In terms of the eminent domain process, Dai‟s lawyer has stated that private casinos cannot be
considered a public purpose. City officials say that the allowance of MGM to build its casino
complex would result in the creation of thousands of jobs and tax dollars, which would justify its
use of eminent domain to claim Dai‟s land. Vol. 4, No. 2, October 1999, p. 3

Cabazon Circle
Tribal Gaming Compacts: History in the Making. Voters must give OK in March.
                – After more than a decade of futile negotiations, the Cabazon Band of Mission
Sacramento, Calif.
Indians and 58 other California tribes rewrote the history books Sept. 10 as they signed tribal
government gaming compacts with Gov. Gray Davis and the State of California. The compact
authorizes Class III gaming, which includes house-banked card games and slot machines, though
it limits the number of gaming machines to no more than 2,000 per tribe. However, the compact
does not take effect unless and until a constitutional amendment is approved by California voters
in the March 2000 general election. SCA 11 authorizes Class III gaming on tribal land. “For too
long, California‟s Indian nations have been denied the respect and dignity they deserve,” said
Governor Gray Davis in announcing the compact signing. “That sad history ends here today.”
Vol. VIII, Issue X, October 1999, p. 1-2




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Casino Crime Digest
The Mob Goes to the Web. Odds Are Internet Gambling Will Continue to Grow. Revenues of
the approximately 400 online gambling sites will surpass $1 billion this year, compared to $300
million in 1997, according to Christensen Capital Advisors, a New York-based management
consulting firm.
…It costs less than $500,000 to set up an Internet gambling site, which most operators should be
able to win back within a year, according to The Economist. Sue Schneider, the publisher of
Interactive Gaming News, says that more than 40 places, including most tax havens, now allow
Internet gambling. One of the biggest havens for Internet gambling is Australia, with most of the
big casinos involved in operating sites. The leading sports bookie, Centrebet, is pushing into
Scandinavia, accepting bets on Finnish baseball and Danish ice hockey. When Centrebet was
taken over by Jupiters, a company part-owned by Hilton Hotels, American bettors were turned
away. Despite that handicap, its Internet business, which now generates $50 million a year,
doubles every year, according to The Economist.
…In a few years, the odds are that much of sports betting will have moved to the Internet. In
Britain, both William Hill, a high-street bookmaker, and IG Index, a spread-betting firm, report
big increases in Internet gambling, The Economist said. And in the United States, it is a pretty
sure bet the mob will also be moving the Web. (italics are mine) Vol. 5, No. 10, October 1999, p. 12

Casino Journal
How High Can Gaming Go? …We are increasingly optimistic about the outlook for gaming
stocks throughout the remainder of 1999, particularly as it relates to gaming companies with
significant exposure to the Las Vegas Strip. While we believe second-quarter earnings reports
were generally strong, with Mirage being the sole exception, we also believe gaming stocks were
unfairly punished as investors took profits following Mirage's disappointing second-quarter.
…In fact, several pieces of recent data have caused us to be more optimistic about the outlook for
these stocks for the remainder of 1999. In our view, there are five major issues that should drive
gaming stocks higher:
   Recent visitation and air service statistics provide good insight for the next several months.
   Convention bookings look very strong for the second-half of 1999.
   Park Place‟s Paris opening on Sept. 1 concludes the last major wave of new supply until Aladdin in the
    second half of 2000.
   Las Vegas room rates should remain strong despite more difficult comparisons.
   The millennium celebration should provide a good pop to fourth-quarter earnings. Jason Ader, Vol. XII,
    No. 10, October 1999, p. 14-15

Imagine the Synergies. Should gaming‟s giant companies merge? Analysts and investors
debate the wisdom of “fantasy combinations.”
…Casino companies playing the M & A game know it‟s a lot like high-stakes gambling. It‟s
expensive and tricky. Which probably explains why so little of it occurs.
         …An advocate for mergers is Joseph Coccimiglio, Prudential Securities‟ specialist in gaming
         equities. “Consolidation drives improved returns because the industry suffers from too many
         companies chasing too few customers. What consolidation can do is eliminate the duplication
         overhead, marketing and development costs. This would be healthy for the industry and gaming
         investors,” Coccimiglio says.

         Analyst David Anders of Credit Suisse First Boston is not so sure. “It doesn‟t seem the market is
         rewarding diverse portfolios. Harrah‟s and Park Place are trading at some of the lowest multiples
         in the universe. And in general, in gaming it‟s difficult to make a good case for doing deals on the
         basis of cost-savings itself. Plus, the large-caps don‟t need the headaches.” Anders adds. “Except
         maybe for Harrah‟s, which can cross-market. If you‟re not adding value, your multiple can suffer.


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           It‟s more than saying, „My stock is trading at 20 times price to earnings or 10 times price to
           earnings.‟ You‟ve got to look at operations.”

           “I have yet to see any benefit to shareholders from acquisitions,” says equity analyst David Wolfe
           of CIBC-Oppenheimer & Co. “MGM may be the exception to that. And Harrah‟s, I think, is
           beginning to get some benefit. But I wonder if a company buying back shares instead wouldn‟t
           work better toward an increased valuation.”

           …“Harrah‟s, Mandalay Bay, MGM, Mirage, Park Place, Sun – combinations between these, that‟s
           what investors would love to see,” says Coccimiglio. “Then you have three companies, and let‟s
           have a real industry.” James Rutherford, Vol. XII, No. 10, October 1999, p. 67-69

Casino Player
Death of the Theme: The next wave of Vegas resorts will shed their facades. The Las
Vegas resorts of the near future may have as few as 1,000 rooms, say local resort architect Paul
Steelman, owner of Nevada‟s largest architectural firm, Paul Steelman & Associates. They will,
according to him, also have windows in two walls. “Rooms with two light exposures do not exist
in Las Vegas,” says Steelman, who is working on designs for the World Wrestling Federation‟s
planned Vegas hotel-casino, as well as three new local resorts. “In 18 months, you‟ll see it. We
want to create a hotel where every room feels like an end unit.”
…Steelman also sees “dramatic change” ahead for casino design. “Theme is dead. We want
„remember, repeat‟ for customers. Instead of the Bally‟s theater, we‟ll have the Sydney Opera
House. Instead of a theme, we will try to build a space that will make you feel better in it. There
will be less and less faux finishes.” And, he predicts, no marble, no heavy drapes, no silk wall
coverings. Despite preparing to preside at the funerals of Casino Theme and the cliched faux sky,
Steelman sees The Mirage and Mandalay Bay as having succeeded with their theme concepts.
“They have the big, big staying power, with 25-year or 30-year themes. Those hotels will sustain
and increase their business.” Vol. 12, Issue, October 1999, p. 14

Christian Science Monitor
Just Saying No to Gambling. Citizens in Alabama and South Carolina have shown it‟s
possible for states to resist gambling. At a time when legalized gaming has become a nearly
irresistible revenue lure, such examples are needed. Alabamians voted last week to stay in the
minority of states that don‟t have official lotteries. That outcome was hardly predictable since the
state‟s governor, elected just last year, has made a lottery his top priority.
…South Carolinians will, however, have another chance to vote next year – on whether to have a
lottery.
…Yes, these states are turning their backs on big revenue gains – up to $300 million a year in
South Carolina from taxes on video poker. But a majority of their citizens have come to realize
that the losses are huge when the public treasury depends on wasteful, often addictive, behavior.
10-19-99


Gaming Newsletter: Atlantic City-Colorado-Mississippi
Atlantic City: Atlantic City gaming revenues grew 2.4% in August. …AC slots were up 4.1%
with nickels gaining 98.5% over last year‟s results. Quarters were up 6.6%, while $1 slots were
down 5.6%.
Colorado: Colorado revenues grew 10.6% in August. …All slots except quarter slots were up
and gained 11.5% for the month. Nickels grew 51.3% and quarters fell 1.5%. $1 slots were up
2.7% and $5 slots had a 9.2% increase for the month.




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Mississippi: Mississippi revenues grew 13.6% in August. All slot denominations were positive
in August, with nickels up 50.0%, quarters gaining 4.8% and $1 slots growing 10.3% for the
month. Vol. 1, No. 8, October 1999, p. 1

Gaming Industry Weekly Report
Something Bigger Than a Megaresort. Arthur Anderson and Economic Research Associates
completed a study at the request of Boccardi Capital Systems. BCS says that they are closing in
on the purchase of a LV Strip location to build something that they describe as, something bigger
than a megaresort. The study found that with the strong demand and growing rates in LV, there
could very well be more development there. According to Bear Stearns, advanced bookings
going out to October 30th, weekend rates are up 59%, while weekday rates are up 38%. Vol. 7, Issue
41, 10-11-99, p. 4

LVEN Makes Questionable Bid for Jackpot. The gaming industry has had a problem for the
past 12 months, which they can‟t seem to get away from. In a nutshell, that problem has to do
with press releases, which are either publicity stunts or out and out scams. Who can forget the
supposed $4 billion offer for Caesars Palace or the $1 billion lawsuit against Starnet
Communications. Back when gaming stocks were cheap, there were the below market tender
offers which confused investors. Just last week we warned you about Las Vegas Entertainment
Network. Actually our warnings started last year but the one we gave you last week hopefully
stuck in your mind so you did not get sucked into a roller coaster ride in the stock of this troubled
company.
…LVEN has such a checkered past that the odds of Nevada regulators ever approving them for a
license has to be even greater than the Jets or Giants winning the Super Bowl this year. Even if
the current executives in LVEN could somehow get licensed, the fact that the financing source is
supposedly a foreigner living in LV, the licensing process could take years for these investors. In
addition, the larger investors in Jackpot Ent. still seem to think that their company is worth more
than $12 a share. While the company does have a lot of cash, the company also has a very bleak
outlook in terms of growth. In fact, once Jackpot loses those Albertson store slot routes to
Alliance Gaming and Anchor Gaming, I‟ll wager that Jackpot‟s earnings will drop 20%. So the
highest valuation I could see a normal company paying for them is $9.50. Of course a company
like SLOT or ALLY should pay more only because they would benefit more from the addition to
their existing business. So if someone offered Jackpot an airtight offer of $12, Jackpot investors
should take the money and run and while they are at it, go to temple or church and give thanks.
Vol., 7, Issues 42, 10-18-99, p. 1-2

Casino Companies‟ Earnings Beat Estimates. As we detailed last week, earnings from
gaming companies are now in the spotlight and this past week, we almost had a perfect record on
earnings‟ releases from casino companies. With the exception of Mirage Resorts, which we will
discuss in a moment, casino companies who reported earnings all fulfilled or beat expectations.
MGM Grand, Harrah‟s, Aztar, Boyd Gaming and Station Casinos really knocked the cover off
the ball and many of these companies are pleasing Wall Street with their aggressive reduction of
debt. This is important because one of the final concerns of Wall Street was the leveraged
position of many operators and on our end, a reduction of debt puts them in good shape in the
event of an economic slowdown in the future or a possible lull in revenue growth at times in the
future. Vol. 7, Issue 43, 10-25-99, p. 1

The Net Fought the Law and the Law Won, THIS TIME. Youbet.com (UBET) is the latest in
a disturbing pattern of law enforcement agencies raiding high technology, Internet related,
gaming companies. A California judge granted a search warrant for law enforcement agents to
raid UBET‟s headquarters. A task force including the LAPD‟s vice squad, financial crimes unit,



                                                  9
the DA‟s high technology analysis and litigation team and the Orange County sheriff‟s office
conducted the raid. While UBET said that they are cooperating with the raid and that they feel
they are in full compliance of the laws, their betting agent, Ladbroke Racing, immediately
announced that they would not take bets from California residents until all this was cleared up.
Vol. 7, Issue 43, 10-25-99, p. 1


Indian Business
Mille Lacs Band: Strong Community – Promising Future. ...The Mille Lacs Band has
struggled against difficult odds, and their accomplishments have come with what some would
consider a sacrifice: The foregoing of short-term economic gain for long-term financial security.
Yet Mille Lacs‟ leaders, from Band Chief Executive Marge Anderson throughout it Corporate
Commission, argue the opposite – their sacrifice has been an opportunity to leave gifts of
education and economic opportunity for future generations.
“Our policy is a modern example of the ancient tradition of looking ahead seven generations
when making a decision,” Anderson says.
…Hinckley‟s natural-stopping-off-point makes it a perfect location for a casino, and the Band has
been happy to oblige. The Tribe-operated Grand Casino Hinckley, along with the nearby Grand
Casino Mille Lacs, supply the bulk of the money to help the Mille Lacs Band realize their vision.
The Tribe has self-managed the facilities since December 1998: they bring the Tribe gross
revenues of around $200 million each year. Of the $50 million in net revenues, the Tribe‟s 3,000
members each receive $750 annually. The rest is reinvested in the Mille Lacs community.
…Despite a less-than-friendly Minnesota state government, the Mille Lacs‟ gaming operations
seem secure. The Band is committed to the more disciplined path of economic reinvestment and
social development. Visions of a secure future, of well-educated children, of boundless
opportunity make it an easy path to walk. As Anderson says, “We‟ll know we‟ve reached [our]
goal when every Band member has good health care, a comfortable home, educational and
employment opportunities and resources to care for their families.” Vol. 2, Issue 2, p. 1 & 3

Indian Country Today
Nevada‟s Anchor Gaming and Pala Band to Open Casino. Tribe goes against flow to deal
with Las Vegas. San Diego (AP) – The Pala Band of Mission Indians is joining forces with a Las
Vegas gambling company to build a $90 million casino, the first investment by the Nevada
gambling industry in California‟s growing tribal casinos.
…“Nevada (casinos and manufacturers) are going to look at California as a very lucrative
market,” said Bill Eadington, an economics professor at the University of Nevada, Reno. Until
now, Nevada casinos and slot machine manufacturers have been barred by their state from
getting involved with California‟s tribal casinos because the tribes had not signed an agreement
with the governor and were in violation of federal law. Vol. 19, Issue 17, October 18-25, 1999, p. 1-2

Babbitt Beats Charges in Casino Case.            Washington, D. C. – For 18 months Secretary of the
Interior Bruce Babbitt has been sweating bullets, if you will, waiting to see if an independent
special counsel would find him guilty of unduly influencing an Interior decision to reject a casino
permit. The waiting finally came to an end the week of Oct. 10. Babbitt was cleared of any
wrongdoing in rejecting a request from three tribes to operate a casino in Hudson, Wis. A
statement issued by special prosecutor Carol Elder Bruce found that Babbitt did not commit
perjury in his testimony before the Senate Governmental Affairs Committee regarding the Interior
decision to reject the casino application. …The special prosecutor also stated that her
investigation did not reveal any criminal conduct by the secretary in the consideration process of
the casino application. Mark Anthony Rolo, Vol. 19, Issue, Oct. 25-Nov. 1, 1999, p. A1




                                                   10
Indian Gaming
Tribal Economic Development Grants: A New Way to Distribute Gaming Revenues Free of
Federal Income Tax. On March 19 of this year, the Internal Revenue Service provided a private
letter ruling to a tribe that its program of business development of grants to tribal members is not
income to such tribal recipients for federal income tax purposes [PLR 199924026 (March 19,
1999)]. The tribe (whose identity is redacted from the private letter ruling) claimed the income
was exempt from taxation under the “the general welfare doctrine.” The tribe, by establishing its
own program of tribal government grants, was able to avoid federal income taxation in the same
manner as similar federal and state grant programs.
…Tribes with natural resources and gaming revenues often desire to use those revenues as a
spring board for overall tribal economic development. One method to distribute such revenues is
in the form of per capita payments, which are subject to federal income taxation (and also count
against income eligibility standards for a variety of federal and state grant programs). Tribal
economic development grants, if properly established, can avoid federal income taxation, and
more directly promote tribal goals such as self-sufficiency and diversified economic
development. Samuel J. Cohen, Vol. 11, No. 8, Show Issue 1999, p. 16-17

International Gaming & Wagering Business
Lee‟s Big Shoes Left to be Filled. The departure of Mirage Resorts Inc. chief financial officer
Dan Lee was a significant blow for the Las Vegas-based hotel casino operator, analysts said.
…Replacing Lee will be no easy task, analysts said. “I really think it‟s difficult to find someone
of his caliber,” said CIBC analyst David Wolfe. “Guys like that just don‟t fall from the sky every
day. Irrespective of what the management thinks, Wall Street‟s perspective is that Dan Lee will
be sorely missed at Mirage by outside investors.”
…Wolfe questioned Baldwin‟s (Bobby Baldwin) interim appointment. “Bobby‟s an outstanding
operator, but you don‟t make an operator a financier, or vice versa. They‟re different functions,”
he said. “The biggest concern I have is you don‟t want to strain an operating guy. You don‟t
want him to have to handle the day-to-day financial issues when he‟s more valuable as an
operating guy.”
…“He brought a very sophisticated level of financial expertise to some of the most creative
people in the business.” Now, Ader [Jason Ader, analyst Bear Stearns & Co.] said, there‟s a void
to fill, and “the sooner they do that, the better.” Lee‟s departure has added to the uncertainty
surrounding Mirage Resorts. “It‟s obviously raised concerns among investors and analysts. That
company has been through a very rocky three or four months,” Ader said.
…The day the news of Lee‟s departure broke, shares of Mirage hit a 52-week low, at $12.06 ½ on
the New York Stock Exchange. Marian Green, Vol. 20, NO. 10, October 1999, p.10

Las Vegas Investment Report
The Big Ones Ate the Little Ones, All Up. It looks like we are getting out of business at just
the right time. Given a few more months there might not be any more gaming companies for us
to follow. I mean, how much value can we add to the wealth of information available on MGG,
MIR, HET, et. al? Companies like Lady Luck, Sodak Gaming and Primadonna were right up our
alley. However, as we have been predicting for some time now, these companies make very
attractive acquisitions for well-run, well-financed, larger gaming companies. The last few
months have seen the disappearance of Rio, Showboat, Primadonna, Sodak, Lady Luck, Casino
America and Players. At one point, we thought we could replace these companies with Internet
related gaming companies. However, it turns out that Internet related companies are valued in a
manner foreign to our training and instincts. Vol. 8, No. 10, 10-8-99, p. 1




                                                 11
Las Vegas Review-Journal
Maxim Hotel-Casino to Close Dec. 6. The 800-room maxim hotel-casino will be closed Dec.
6, throwing 791 employees out of work just in time for the holidays, employees were told
Thursday. The announcement was made by veteran casino executive Ed Nigro, who was
appointed receiver of the off-strip property before it emerged from bankruptcy earlier this year.
Gary Thompson, 10-7-99

Casinos not Receptive to Total NBA Betting Ban. Most Las Vegas sports books oppose
banning professional basketball bets to help the city attract a professional basketball team, Mayor
Oscar Goodman said Thursday, but they would back a less restrictive rule. Goodman said his
survey of nine casinos found that seven would support a policy allowing them to take wagers on
all National Basketball Association games except for the home team‟s. That is the rule in place
for University of Nevada, Las Vegas and University of Nevada, Reno basketball and football
games. 10-8-99

Bill Targets Unions in Indian Casinos.       Washington – Indian casinos in California could block
labor unions from organizing their workers under a bill introduced this month by Rep. J. D.
Hayworth, R-Ariz. In an unusual provision, the legislation specifically criticizes John Wihelm,
president of the Hotel Employees and Restaurant Employees International Union, who has urged
tribes to negotiate collective bargaining agreements with gaming employees. Hayworth‟s bill
prohibits labor agreements from being included as part of tribal-state gaming compacts. Tony Batt,
Donrey Washington Bureau, 10-18-99

Workers Approve Union Contract at California Casino. Alpine, Calif. – Communication
Workers of America members have approved the first union contract for employees at a
California Indian casino. Associated Press, 10-19-99

Harrah‟s Returns to Big Easy. The company hopes its second attempt at running a New
Orleans casino goes better than the first. New Orleans – More than seven years after the
Legislature approved the idea, New Orleans is ready for its second foray into big-time gambling
with a huge casino across from the tourist-laden French Quarter and the city‟s giant convention
center.
…“This casino is among the most beautiful in the world,” said Jay Sevigny, president of Harrah‟s
New Orleans Management Co., which will manage the $800 million project that already has seen
a sudden closure and three years of bankruptcy reorganization.
…One large stumbling block is the $100 million minimum state tax, which is due no matter how
much the casino takes in. Sevigny calls it “an ominous number.”
…Sevigny said Harrah‟s will be using a database of 11 million customers at its 17 other casinos,
along with its own in-house travel agency, to steer gamblers to New Orleans. The plan has had
success in other markets: 40 percent of Harrah‟s customers in Las Vegas are regular Harrah‟s
customers in other cities, Sevigny said. Alan Sayre, AP, 10-26-99

Gambling Debate Intensifies. The issue of legalized betting on college sports could soon be
argued in the halls of Congress. The debate over Nevada‟s legal gambling on college sports is
intensifying and appears headed for Congress. The contest would pit the National Collegiate
Athletic Association against Nevada‟s casino industry. Experts agree that the gaming industry
would be the underdog in a battle over legal wagering on college sports. They also say a federal
ban on college sports wagering would take a big bite out of sports book revenues in Nevada.
…“This is a piece of legislation that will be difficult to contain,” said Sen. Richard Bryan, D-Nev.
“It will have some resonance.”




                                                12
…The impetus for the NCAA move appears to come from the National Gambling Impact Study
Commission, which filed its report in June and called for banning college sports betting. John
Edwards, 10-26-99


Las Vegas Sun
Ex-Mayor to Give up LVCVA Position for Harrah‟s Job. Former Las Vegas Mayor Jan
Laverty Jones will give up her controversial position with the Las Vegas Convention and Visitors
Authority when she takes her new executive post at Harrah‟s Entertainment. Jones, who
Thursday was named senior vice president of communications for the company that owns
Harrah‟s on the Las Vegas Strip and the Rio hotel-casino on Flamingo Road, said her new
position would prohibit her from continuing as executive director of Nevada Resort Partners.
Nevada Resort Partners was formed by the LVCVA and the Nevada Resort Association to
develop strategies to keep Nevada'‟ gaming industry vibrant in the face of growing competition
nationwide. Richard N. Velotta, 10-15-99

Nevada Regulators Debate Ban on Slot Advertising, Cartoons. The Nevada Gaming
Control Board took its first look at proposed slot machine regulations Friday – regulations that
could potentially ban all cartoon characters and advertising from Nevada‟s machines. Board
members were quick to caution, however, that no course of action has been decided. A workshop
to discuss new regulations will be held Nov. 9 in Las Vegas. “We weren‟t sure this was an issue,
but it is a point of concern for the board,” said Board Chairman Steve DuCharme. “We may
come to the conclusion that no changes are necessary.” David Strow, 10-18-99

Wrestlers Pin Investors for $170 Mil. WWF still has plans to sell Debbie Reynolds resort in
Vegas. World Wrestling Federation Entertainment Inc., whose performers include stars such as
Stone Cold Steve Austin, on Monday, raised $170 million in an initial stock sale, $20 more than
it originally planned. The Stamford, Conn.-based company sold 10 million Class A shares at $17
each. The sale of the 15 percent stake gave the company a market value of $1.13 billion. Sun Staff
and Wire Reports, 10-19-99

Youbet.com Raided by Police.      Los Angeles – Youbet.com Inc. said it is cooperating with law
enforcement officials who raided the headquarters of the Internet horse-betting service last week.
A search warrant was issued by a state judge, who determined there was a probable cause that
evidence of criminal activity would be found at Youbet.com‟s Los Angeles headquarters, said
Loren Michael Naiman, a deputy district attorney for Los Angeles County. “The issue is whether
attempts by companies like Youbet to skirt the law do successfully get around state and federal
legislation against gambling,” Naiman said. “This is a cutting-edge area of the law.” AP, 10-19-99

LV Headed for 34 Mil. Visitors this Year. Las Vegas is on track to bring a record 34 million
visitors this year, up 10 percent from the 30.6 million who came here in 1998, the Las Vegas
Convention and Visitors Authority said today. …The visitor increase included higher passenger
traffic at McCarran International Airport, where volume was up 13.1 percent in August from a
year ago, to 2.9 million passengers. 10-19-99

Fahrenkopf Warns NCAA. Gaming‟s top lobbyist pledges fight over proposed betting ban.
The casino industry‟s chief Washington lobbyist has warned the National Collegiate Athletic
Association that it risks an all-out war with the industry if it continues to pursue a betting ban on
college sports. Jeff German, 10-25-99

WMS Gaming Results Soar.         Chicago – WMS Industries Inc. reported sharp increases in gaming
industry profits, but posted a net quarterly loss due to its decision to halt pinball and cabinet
making operations. AP, 10-26-99


                                                  13
LV Firm Reports Financial Turnaround. Mikohn Gaming Corp. of Las Vegas reported third-
quarter revenue of $1.3 million or 12 cents a share, up significantly from a net loss of $8.8
million, or 83 cents per share, one year ago. 10-26-99

Lottery, Pari-Mutuel & Casino Regulation
Station Casinos Venture in California May Face Snags. Station Casinos executives are
touting an agreement to build a Northern California casino with the United Auburn Indian
Community as a wise investment. But the company is walking into a contentious political
environment. For more than a year, critics of a casino proposed by the 160-member tribe have
argued that any gambling complex would be inappropriate for the largely residential area just east
of Sacramento, near Interstate 80 in California‟s Gold Country.
…Company officials said that they hope to have the property open by early 2002, but opp9nenets
note that the tribe has yet to receive the OK of the Bureau of Indian Affairs to purchase the 49-
acre site, which the federal agency would then have to designate as sovereign Indian land. Scott
Smith, a Sacramento lawyer representing the group Citizens for Safer Communities, which
opposes the project, said Station Casinos and the tribe are overly optimistic when they point to
that 2002 opening date. “The first line of attack is we are going to oppose the decision of the
federal government to take land into trust,” Smith said. “If the (Bureau of Indian Affairs) chooses
to take the land into trust in all likelihood we‟ll sue the BIA.” Vol. 10, No. 40, 10-4-99, p. 2

Reduced Penalties for Video Gambling Machines Part of Wisconsin Budget. A state
budget provision reducing penalties for tavern owners convicted of operating illegal video
gambling machines will expand gambling in Wisconsin if signed into law, critics say. Among the
proposal‟s supporters have been bar owners, including Gov. Tommy Thompson‟s brother, who
was charged with operating the illegal machines in his Tomah supper club. The charges were
later dropped.
…The change would make it a misdemeanor rather than a felony to own and operate as many as
five of the machines that pay out money to players.
…The penalty reduction was pushed by the Tavern League of Wisconsin, which has
unsuccessfully tried to legalize video gambling. Supporters of the proposed change say it will
help businesses trying to compete with American Indian casinos, the only places in the state
where such games are permitted. Attorney General James Doyle said that changing the law
would lead to expanded video gambling and make enforcement more difficult for authorities.
Doyle sent a letter to Thompson urging him to veto the provision. “What we are seeing here is a
very thinly veiled attempt to just get around the (state) Constitution, which says very clearly that
the legislature may not legalize gambling,” Doyle said. Vol. 10, No. 41, 10-11-99, p.2-3

Michigan Gaming Law Newsletter
Lac Vieux Band Renews Challenge to Detroit Casinos. Yesterday, the Lac Vieux Desert
Band of Lake Superior Chippewa Indians (the “Lac Vieux Band”) filed a Motion for Preliminary
Injunction of the three Detroit casinos in the United States District Court for the Western District
of Michigan. The Lac Vieux Band is seeking to have the casino license application process
halted for Detroit Entertainment, L. L. C. and Greektown Casino, L. L. C., pending the resolution
of the case. The Lac Vieux case challenges the constitutionality of preferences granted to the
Detroit Entertainment and Greektown casino groups during the City of Detroit casino operation
selection process. …A hearing has been set on the Motion for November 19, 1999 at the Ford
Federal Building in Grand Rapids, Michigan. Vol. 5, Issue 51, 10-22-99

National Gaming Summary

                                                 14
Station Casinos Enters California Indian Gaming Market: Las Vegas-based operator to run
tribe‟s planned $100 million casino near Sacramento. A second major Las Vegas-based gambling
corporation has announced plans to invest in California‟s burgeoning Indian casino industry.
Station Casinos Inc., a leader in the lucrative market for Las Vegas “locals” gamblers – with five
casinos in southern Nevada and riverboats in the St. Louis and Kansas City areas – will develop
and manage a planned $100 million tribal casino in Placer County northeast of Sacramento. 10-18-
99

MGM Grand Detroit Reports Jackpot Earnings. When MGM Grand Inc. reported its third-
quarter earnings, company executives announced that its interim casino in Detroit was
responsible for generating 20 percent of the company‟s revenue – or $72 million. …“Detroit is a
very happy story,” says Alex Yemenidjian, president of MGM Grand Inc. “Our Detroit casino
has obviously enjoyed tremendous early successes. However, we remain mindful of increased
competition in the coming months and, accordingly, we are working aggressively to further
capitalize on our superior facility in this fabulous gaming market.” 10-25-99, p. 7

Casino Cuts into Lottery, Race Track Profits. The draw of MGM Grand Detroit‟s new
interim casino apparently has been strong enough to have a bigger effect on state lottery sales
than expected. According to state records, lottery wagering has declined by approximately $ 2.5
million a week since MGM Grand Detroit opened July 29. State officials are predicting that
when all of Detroit‟s three casinos are open, state lottery sales are going to drop about 4 percent.
…In addition to putting a dent in the state‟s lottery action, the threat of two more casinos in
Detroit has been enough to place an even bigger damper on state racing action. In fact, the
Detroit Race Track in Livonia closed its doors recently, claiming that it couldn‟t compete against
the casinos in Detroit. 10-25-99, p. 7-8

Native American Law Digest
Tribe Wins Recognition after 150 Years. The 150-member Gun Lake Band of Pottawatomi
became the 558th federally recognized Tribe in late August. Although the Tribe had been
recognized in October 1998, the city of Detroit had temporarily blocked the process. Recognition
makes the Tribe eligible for federal health care, education, housing, and employment assistance.
Recognition also permits a tribe to exercise sovereign rights, such as exemption from taxes and
state and local land-use regulation on tribal lands. The road is not an easy one: of the 150
petitions received by the Bureau of Indian Affairs since 1978, only 13 have successfully
negotiated the cumbersome process, which often requires costly documentation and high legal
fees. A tribe seeking recognition mush show, among other things, direct genealogical descent
from a tribe that existed before contact with non-Indians and a continual authority system with
leaders and followers. Vol. 9, No. 10, October 1999, p. 4

Nevada Business Journal
Survey Reveals a Job Hunter‟s Market in Las Vegas. Steady growth: those are the words
Jane Whisner, CTC, operations manager for The Eastridge Group, uses to describe the upward
trends revealed in the staffing firm‟s 1999 Southern Nevada Salary Survey, its 11th annual
compensation survey. Nevada Business Journal recently spoke with Whisner about some of the
survey‟s most striking findings.
NBJ: What findings of the survey struck you the most?
Whisner: There was a time when human resources departments said, “This is the job description
and the salary range, and we need a person who has these skills and can do the job within these
salary parameters.” With unemployment between 3 percent and 4 percent, companies can't do
that anymore. Companies are adjusting in one of two ways: they‟re literally taking standard



                                                 15
salary ranges off the table and asking what it will take to get someone with the necessary skills.
They‟re asking, “What do we have to pay to get someone with the skill sets we need?”
Companies are also saying they‟re willing to train workers if they can‟t find people with the skill
sets they‟re seeking. If a potential employee has the right attitude, eagerness and willingness to
learn, companies hire them on the low end of the pay scale and then invest heavily in training
them. Vol. 14, No. 10, October 1999, p. 8

Coast Resorts Begins Peccole Ranch Property. Coast Resorts broke ground on its $175
million Sun Coast Resort-Casino situated just south of The Resort at Summerlin. Vol. 14, No. 10,
October 1999, p. 12

Passenger Volume up Dramatically at McCarran. The addition of flights to Las Vegas by
several airlines has given a substantial boost to air traffic into McCarran International Airport.
Arriving and departing passenger volume in July was up more than 13 percent from July 1998
levels; the year-to-date total through July was up almost 10 percent from last year. Vol. 14, No. 10,
October 1999, p. 12


Observer: Michael Pollock’s Gaming Industry Observer
Branded Slots Face Shorter, Shorter Lives. What is the natural life cycle for a branded slot
machine? We may soon have the answer to that question. The first slot machine with a genuine
brand – “Wheel of Fortune” – now has something of a track record that is worth examining. The
first wheels started spinning in 1996, ushering in a new era in slots.
…Now, the hand trucks are carting off many of the generic slots and carting in machines based
on game shows, board games, dead singers and assorted other recognized names, faces and
symbols from other media. How long will they last? “It‟s an important question,” said Eugene
Christiansen of Christiansen Capital Advisors, Inc., a long-time consultant to the gaming
industry. “Before Wheel of Fortune came along, slot machines were essentially commodities.
And the life cycle of a commodity is as long as the supplier wants to keep it on the shelves.
“Wheel” changed that paradigm, Christiansen said, largely by being the first slot brand to have
meaning for the consumer – and the consumers ultimately determine how long the product‟s
profitable life will last. If “Wheel of Fortune” is any indicator, the life of branded slots could be
relatively short – at least in their first incarnations.
…Other brands, like “Monopoly,” even though they would never reach the peaks in performance
enjoyed by “Wheel of Fortune,” could actually outlast the Wheel. The reason: longevity of the
underlying brand.
C. Coin & Slot, which is a national leader in developing proprietary games like “Jungle King”
and “Empire” slots, uses an 18-month life span in developing its own internal projections –
although some of its games are already exceeding those projections.
…[Stowe] Shoemaker [of University of Nevada Las Vegas] believes that complexity is an
important factor. Not, he said, because complexity intimidates players and turns them away.
Rather, he said, players will be attracted by the brand – and then will respond positively to the
complexity by continually playing the games until they master its intricacies and eventually reach
the bonus rounds. When players learn the game, they gain a level of familiarity, which in turn
promotes loyalty….Witness the multi-coin, multi-line games offered by WMS and Aristocrat, he
said.
…One critical side-effect of this branding trend: Slot companies will face increasing pressure to
raise the prices of their products. After all, if a branded slot has an expected life of 18 months to
two years, that means manufacturers and distributors have a limited window in which to recoup
their investments.
…“Whether you‟re branded or not, the more games that go out, the shorter the life cycle,”
Bittman [Bob Bittman, IGT] said.


                                                  16
…Kaminkow [Joe Kaminkow, IGT‟s vice president of engineering and design], indirectly and
unintentionally, illustrates another new trend taking shape in the slot-manufacturing industry: the
hiring of creative talent as a means of differentiating products (and companies) and as a way to
raise the barriers to entry. Companies with fewer resources will find it impossible to recruit and
retain creative talent, giving the IGT‟s of the world yet another arrow in their quiver. Vol. 4, No. 17,
10-8-99, p. 1-3

Technology, Regulatory Sagas: Tolerance for Error May Rise Ushering in Age of Cashless.
The regulatory system in New Jersey may soon be forced to tweak a principle that has guided it
since its founding 22 years ago: zero tolerance. When it comes to accounting for revenues, the
Casino Control Commission and Division of Gaming Enforcement would make Ebenezer
Scrooge seem like a wastrel. Requirements such as those that hard-count teams wear jump suits
(sans pants cuffs) have built that reputation nickel by nickel and quarter by quarter, quite literally.
From plexiglass tables in soft count rooms to see-through purses and the daily wanding of hard-
count teams, regulators have not exactly developed a system that allows much wiggle room. But
in an era when currency is digital, when the security of hard drives is as important as the security
of hard count, such principles are somewhat difficult to maintain.
…Effectively. A truly cashless system cannot be implemented without relinquishing the zero-
tolerance principle. Mistakes will happen, and a fool-proof system is not possible. Consider that,
when cashless gaming rises to the $1 billion level in Atlantic City, which it inevitably will, an
error rate of 1 percent would mean a shortfall of $10 million in casino revenue, of which
$800,000 would come from the state‟s pocket. Since even a 1- percent error rate would be
remarkably efficient, the state‟s share of revenues that fall through the cracks will likely prove to
be much higher than that. Vol. 4, No. 18, 10-22-99, p. 1-2

Reno Gazette-Journal
                           Acquisitions Big and Small.
Nevada Approves Park Place, Caesars Merger. Park Place Entertainment Corp. – parent
company of the Reno Hilton, Flamingo Hilton-Reno and 15 other casino properties – took
another step Thursday in its $3-billion acquisition of Caesars World Inc. after the Nevada
Gaming Commission unanimously approved the purchase Thursday. John Stearns, 10-22-99, p. 1B

New Owner to Take over Silver Club. Nevada gaming authorities gave their final blessing
Thursday to a Florida company‟s purchase of most of the common stock of the Silver Club
Hotel/Casino‟s parent company. The Nevada Gaming Commission unanimously approved The
Holder Group LLC of Tampa, Fla., headed by Harold Holder Sr., buying 94.6 percent of the stock
in Summit Casinos-Nevada Inc. and 2 million preferred shares. Summit‟s Casino Management
Services-International owns and operates the Silver Club in Sparks and El Capitan Lodge and
Casino in Hawthorne. John Stearns, 10-22-99, p. 1B

Washoe Job Market Tightens. Washoe County‟s September unemployment rate hit its lowest
level since last December, renewing fears among local businesses that they won‟t have enough
employees to keep up with the holiday commerce rush.
… Ellis said Reno/Sparks is a lower wage area compared to other metropolitan areas, and
employees frequently jump from job to job to get as little as a 25 cent pay raise.
…Contributing to the tight labor market is steady job growth of 2.7 percent in Washoe County.
Several local businesses have created new jobs through expansions or openings… Ken Altucker, 10-
28-99, p. 1E & 3E




                                                   17
IRS Turning up Heat on Tip Earners. Bartender Chase Patteson doesn‟t know of any waiter
who is getting rich off tips – and he can‟t figure why the Internal Revenue Service is wasting time
going after them.
…And things might have gotten tougher Thursday, when IRS officials said they will no longer
audit restaurant owners as long as they try to comply with tax laws on reporting of tips – and
focus enforcement instead on employees who aren‟t reporting their tips.
…The IRS turnabout, which comes after years of court battles in which the agency fought to keep
its restaurant audit powers, is the latest example of agency reforms that are geared toward helping
taxpayers comply with the law rather than punishing those who don‟t. Anjeanette Damon, 10-29-99, p. 1A

Strictly Slots
Coin-Free? No Way! Responses to the Strictly Slots survey shout a clear message to casinos
and manufacturers: “Leave my slot alone!” For the past year or so, slot manufacturers have been
debating the best way to provide casinos with a feature many in the industry thought would soon
be required coin-free or cashless slot play. In our August issue, we described all the coin-free slot
alternatives currently being discussed within the industry, and asked you to send us your choice
for the one you‟d most like to see. We also gave you a “Leave my slot alone” option if you prefer
things just as they are.
...Well, according to an overwhelming majority of our readers, you cannot eliminate coins from
the game.
…The fact that nearly nine out of 10 of those Strictly Slots readers who took the time to respond
do not want coin-free play is only part of the story. A large number of respondents made it clear
just how strongly this opinion was felt – attaching letters to their survey responses, placing
exclamation points next to their check marks, putting comments on the response sheet like
“Please!” next to the “Leave My Slot Alone” space, placing comments like “No! No! No!” or
“NEVER!” or “I‟D NEVER GO BACK TO A CASINO” next to the coin-free choices.
…Some slot department executives did not need the survey to tell them this. Chuck Hickey,
director of slot operations at Reno‟s Silver Legacy Casino Resort, sent us a note commenting that
the survey verified a point which was “drilled home” to him when he broke into the business
years ago:
        Shelby Williams was the owner of the Holiday Casino in Las Vegas, where I broke into the
        business. I consider Shelby to have been one of the visionaries of the industry, and one shrewd
        operator. One day, Mr. Williams and I were talking about what makes a successful casino. I had
        mentioned all the lights and signs and glamour and glitter. Shelby told me this: „Son, here is how
        you tell a great casino. You walk in the front door and shut your eyes. Just close your eyes and
        listen. If the place feels exciting with your eyes closed – if it sounds like something is happening
        – then it probably is a successful joint.‟
…So before the manufacturers and slot managers begin to transform large portions of the slot
floors to coin-free play, there is one important thought they may wish to ponder: Remember
“New Coke?” Frank Legato, Vol. 1, No. 11, October 1999, p.62-65
        The Adams Report is an executive summary for busy casino industry executives and observers. Each month, I review
        the current gaming literature. Articles selected are of special importance or interest. My focus is on identifying
        significant trends. I do not report the news; there are many excellent news sources available.

        The Adams Report is designed to serve a broad general interest. If your focus is more specific, research or customized
        reports can be created on a project specific basis.

                                                              Ken Adams

                                                    210 Marsh Avenue, Suite 103
                                                          Reno, NV 89509
                                                 (775) 322-7722 Fax (775) 322-7806
                                                       kenadams@softcom.net




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