Transcript An Evolving Perspective on the Gaming Industry

State of the Gaming Industry
Presentation by
Frank J. Fahrenkopf, Jr.
President and CEO
American Gaming Association
East Coast Gaming Congress
May 24, 2010
2009 Review: A Valued Partner
AGA’s 2010 State of the States was released earlier
this month and reveals many of the benefits casinos
bring to communities. In 2009, despite the recession,
commercial casinos:
– Employed more than 328,000 people who earned $13.1
billion in wages
– Paid almost $5.6 billion in direct gaming taxes to states
and communities
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An Unprecedented Time
Past two years have been some of the most difficult in our
industry’s history
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Gaming revenues in 2009 were $30.74 billion – a 5.5 percent
drop from 2008, which was a 4.7 percent drop from 2007
Atlantic City operating profits dropped 25 percent in the first
quarter of 2010
Consumer spending on gaming and leisure travel dropped
significantly
Credit markets seized up as many capital expansion projects
got underway, forcing many to be scaled back or cancelled
(Echelon, Las Vegas; proposed Pinnacle property in Atlantic
City)
Economic difficulties caused many companies not to bid on
expansion opportunities (Md., Kan.)
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2009 Review: Positive Results
Some markets saw revenues increase as a result of new
properties or changes to gaming laws
New properties
– Pennsylvania – Revenues up 21.6 percent, driven by new
properties in Pittsburgh and Bethlehem
– Indiana – 2009 was the first full year of operations for two
properties (Hoosier Park, Indiana Live) ; revenue up 4.9 percent
Revised gaming laws
– Colorado – Revenues up 2.6 percent after expanding hours,
raising the bet limit and adding new games
– Missouri – Eliminated loss limit; revenues up 2.9 percent
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2009 Review:
Racinos Remain Strong
The racino sector continued to grow in
2009
– Gross gaming revenues increased 5 percent
to $6.40 billion
– Racinos paid more than $2.6 billion in direct
gaming taxes, a 1.2 percent increase over
2008
– Racino employment stayed steady with
more than 29,000 people
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2009 Review:
Equipment Manufacturers
Gaming equipment manufacturers also have
struggled in the recession, but made vital
contributions:
– $12.1 billion in direct economic output, a 4.7 percent
decrease from 2008
– 30,000 jobs, an increase of 1.4 percent from last year
– $2.1 billion in wages, an increase of 5 percent
compared to 2008
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2009 Review: East Coast
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Gaming Revenues
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New Jersey: $3.943 billion (-13.3 percent)
Pennsylvania: $1.965 billion (+21.6 percent)
Connecticut: $1.448 billion (-7.8 percent)
New York: $1.019 billion (+7.6 percent)
Delaware: $564.2 million (-4.2 percent)
Tax Contributions
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New Jersey: $347.62 million (-18.6 percent)
Pennsylvania: $929.04 million (+21.2 percent)
New York: $455.48 million (+2.1 percent)
Delaware: $227.55 million (+8.1 percent)
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2009 Review: East Coast
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Employment
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New Jersey: 36,377 (-5.7 percent)
Pennsylvania: 9,126 (+55.5 percent)
New York: 3,180 (-6.8 percent)
Delaware: 2,363 (-8.5 percent)
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2009 Review: East Coast

Clear evidence that gaming expansion has
cut into the revenues of existing markets
– Pennsylvania’s growing industry has led to
declines in Atlantic City and Delaware
– New York’s success has affected Connecticut
and Atlantic City
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Turning the Corner?

Beginning to come out of the recession
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1st quarter national revenues were flat, down only 0.2
percent
Atlantic City – April revenue down only 0.7 percent
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Compared to declines of 9.8 percent, 8.5 percent, 15.7 percent
and 5.6 percent in December, January, February and March,
respectively
Optimistic signs from Nevada
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Las Vegas Strip up 2.4 percent; Reno up 4.6 percent; and
South Shore Lake Tahoe up 7.2 percent in March
MGM MIRAGE reports that convention and booking
rates are on the upswing
Las Vegas Sands announced a $2.50 quarterly dividend
Las Vegas visitor volume is up 1.5 percent 2010 YTD
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First Quarter Comparisons
1Q 2009
Colorado
Illinois
Indiana
Iowa
Kansas
Louisiana
Michigan
Mississippi
Missouri
Nevada
New Jersey
Pennsylvania
South Dakota
Total
1Q 2010
$175,340,957
$371,633,000
$713,967,663
$356,511,621
First property opened
in Dec. ‘09
$662,249,809
$343,902,970
$186,227,221
$355,536,000
$705,009,226
$344,125,570
% change
6.21%
-4.33%
-1.25%
-3.47%
$9,666,310
$594,976,193
$353,623,697
N/A
-10.16%
2.83%
$673,026,105
$443,702,165
$2,661,953,221
$950,079,244
$433,002,783
$22,467,266
$7,807,836,804
$628,149,584
$439,324,177
$2,742,109,633
$856,554,563
$552,657,408
$24,474,670
$7,792,434,252
-6.67%
-0.99%
3.01%
-9.84%
27.63%
8.93%
-0.20%
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Expansion on the Horizon
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Entering a period of expansion in the East,
especially in the mid-Atlantic
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Table games in Pennsylvania, Delaware and
Charles Town, W.Va.
– Casinos in Maryland, Ohio, Aqueduct (Queens,
N.Y.)
– Possible expansion in Massachusetts, New
Hampshire
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Existing markets must adapt
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Public Perceptions of
Gaming Entertainment

Public opinion polling released in State of the
States
– Consisted of phone interviews conducted with
804 adult (age 21+) Americans from Feb. 10-17
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Polling found that acceptance of casino
gambling remains high 81 percent of
Americans view casino gaming as acceptable
for themselves or others
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Public Perceptions of
Gaming Entertainment
Polling also revealed that that
– Casino gaming is a good value
Nearly three-quarters (73 percent) of those polled think
that going to a casino for an evening out is a good
value compared to other entertainment options
– 36 percent of survey respondents see job creation as
the most important benefit of casinos, 21 percent say
taxes
– 28 percent of Americans visited a casino during 2009,
up from 25 percent in 2008
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Poll of Casino County Residents
A 2010 poll of 304 casino county residents
nationwide found that:
– 42 percent have visited a casino to gamble in the
past year
– 64 percent describe the impact of casinos on their
community as very or somewhat positive
– 68 percent would vote “yes” on a referendum on
keeping casino gaming
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Spotlight on Gaming Machines
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In 2009, there were nearly 833,000 gaming machines in
38 states
– Nevada has the most with 191,110, followed by California and
Oklahoma
– New Jersey – 30,782
– Pennsylvania – 24,754
– Delaware – 7,532
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All commercial casino states get at least 65 percent of
their gaming revenue from machines (N.J. – 69 percent)
59 percent of survey respondents say slots are their
favorite game
– 49 percent say they prefer slots because they don’t feel
embarrassed or pressured when playing
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Casino Visitation
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Casino gambling (28 percent participation) was the
second most popular form of gambling for survey
respondents, behind only the lottery (46 percent
participation)
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Approximately 61.7 million casino visitors
Of those who visited casinos:
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50 percent visited local casinos for a few hours at a time
13 percent took long-distance trips to gambling
destinations
23 percent visited both local and destination casinos
10 percent took one- or two-night trips to local casinos
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Not Just Gambling
When visiting a casino during the past year
– 75 percent ate at a fine dining restaurant
– 60 percent saw a show, concert or other live
entertainment event
– 48 percent visited a bar or club
– 41 percent went shopping
– 35 percent used recreational facilities, such as a
spa, pool, fitness area or golf course
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Spotlight on Poker
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15 percent of survey respondents reported
playing poker in 2009
– Highest percentage since 2003 and 2004, the
height of the “poker boom”
– New Jersey’s 2009 poker revenue – $78.1 million
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Poker revenues are more resilient than overall gaming
revenues
The 5.2 percent decline in N.J. poker revenues
compared with 2008 was considerably smaller than the
13.3 percent drop overall gaming revenues
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Global Gaming Developments
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Asia
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Macau
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Singapore
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Continues to set revenue records ($1.76 billion in April); expansion
has resumed on Cotai Strip properties
65 percent of Wynn Resorts’ revenue
80 percent of Las Vegas Sands’ revenue in first quarter
Two new integrated resorts – Marina Bay Sands, Resorts World
Sentosa (Genting)
Genting: 1st quarter results – 46-day period of operations, property
generated revenues of $242.5 million, EBITDA of $78.9 million
(33% EBITDA margin) and $5.3 million/day
Development underway in Vietnam
Other countries considering expansion
G2E Asia 2010 – June 8-10 at the Venetian Macao
Mexico and South America; Europe
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Federal Issues – Internet Gambling
Current Pending Legislation
– The Internet Gambling Regulation Consumer Protection and Enforcement Act
(H.R. 2267) – Introduced by Rep. Frank (D-Mass.), the bill would establish a
federal regulatory and enforcement framework for Internet gambling operations
– Internet Gambling Regulation and Tax Enforcement Act of 2009 (H.R. 2268) –
Introduced by Rep. McDermott (D-Wash.), this companion bill to H.R. 2267
would establish a system of taxation for Internet gambling operations. Under
the legislation, licensed operators would pay a two percent tax on all deposits
– Internet Poker and Games of Skill Regulation, Consumer Protection,
Enforcement Act of 2009 (S. 1597) – Introduced by Sen. Robert Menendez (DN.J.), it would legalize and regulate games of skill on the Internet, also known
as the “poker carve-out bill”
– The Bipartisan Tax Fairness and Simplification Act of 2010 (S. 3018)
Introduced by Sens. Wyden (D-Ore.) and Gregg (R-N.H.), the bill would,
among its many provisions, use taxes and licensing fees on Internet gambling
as a federal revenue generator
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Federal Issues – Internet Gambling
AGA Position
– The technology now exists to properly regulate Internet gambling with
appropriate law enforcement oversight and to provide appropriate
consumer protections for individuals gambling online.
– A properly regulated legal framework for Internet gambling is the best
way to protect consumers.
– Online gambling operators and suppliers should be held to the same level
of probity to which AGA members adhere in their traditional land-based
operations.
– The AGA will continue to put any legislative proposal through three
tests:
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Must not create competitive advantages or disadvantages
No form of gambling currently legal shall be made illegal
Must respect states’ rights
– The AGA remains neutral on all existing legislation being considered
– SEN. HARRY REID?????
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Federal Issues –
Financial Regulation
Restoring American Financial Stability Act of 2010
(Financial Reform Bill; S. 3217)
– Among other provisions, would create new Consumer
Financial Protection Bureau (CFPB) to regulate entities
that extend credit, service loans, engage in deposit-taking
activities or otherwise act as custodian of consumer funds
– Some questions raised about whether the gaming industry
might be subject to oversight by CFPB
– The AGA has reviewed the bill and does not think it
applies to the industry; Sen. Reid’s office has concurred
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Where Do We Go From Here?
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Atlantic City
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Pennsylvania and Delaware
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Transition from slots parlors to full-service casinos
Sports Wagering
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Facing a tremendous challenge in a new competitive
environment
Needs strong leadership
Tough decisions will have to be made
Delaware and N.J. litigation
In the gaming industry, you must innovate or get
left behind, no matter where you’re operating
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2010 State of the States
2010 State of the States:
The AGA Survey of Casino
Entertainment was
released this month and is
available for download at
www.americangaming.org
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