Sept. 27, 2002

The slots, they are a-changin'

By Steve Friess
Special for USA TODAY

RENO -- You win if Austin Powers crinkles his nose and declares, "Oh, behave!" Or if that recipe for turkey Spam dip wins the bake-off.

Austin Powers? Spam? Clearly, these are not your grandmother's slot machines.

What they are is part of the slot-machine industry's new gamble to reach out to two sets of younger players: baby boomers raised on I Love Lucy and The Honeymooners and Gen Xers weaned on MTV, flashy computer graphics and pop culture tie-ins at fast-food restaurants. Slots, which account for 65% of casino revenue a year in Nevada and more than 70% nationally, are in the throes of an evolution aimed at supplementing -- without supplanting -- its aging core audience: women over 55.

As a rule, younger gamblers prefer table games and migrate to machines as they mature. But given the huge portion of the casino take that comes from slots, casinos want more of the next generation playing them now.

"There's a large number of recreational slot players who are looking for something unique, something different, something fun," says John Marz, senior vice president for Mandalay Resort Group, owner of the Mandalay Bay, Luxor, Excalibur and Circus Circus hotels on the Las Vegas Strip. "We need to tap that."

That's where games with Hollywood themes and innovative bonus rounds come in. A walk through a Las Vegas casino today means an encounter with a litany of games with familiar themes that didn't exist even five years ago, including Spider-Man, The Mummy, Jeopardy!, Regis and Harley-Davidson.

"I grew up in arcades playing games like Pac-Man, Missile Command and Space Invaders, so as an adult, the idea of playing a spinning-reel slot game is as appealing as watching the grass grow," says Jason Ader, a slot industry expert and senior managing director with Bear, Stearns & Co.

"Slot machines today are starting to look a whole lot more like a Sony PlayStation or Nintendo."

At the trend's forefront is International Game Technology, or IGT, whose 1-million-square-foot complex on Prototype Drive in Reno is the world's largest slot-machine laboratory and factory. IGT, an insignificant force in the business 30 years ago, is the name behind the industry's most recent major innovations, ballooning its U.S. market share to more than 70%. In the early 1970s, its technologists irrevocably altered the face of casinos -- and, in Nevada, supermarkets and bars, too -- by inventing video poker. Then, in 1996, it introduced the first themed slot machine, based on the TV game show Wheel of Fortune.

Still, Wheel of Fortune -- and later slots based on Elvis, Lifestyles of the Rich and Famous and Frank Sinatra -- are popular because they remain firmly within the comfort zones of the older, established slot players. They're also perceived as boring themes for the younger demographics.

That's why IGT executive Joe Kaminkow became so animated when he spotted a Spam booth at a New York trade fair for brand licensing in 2000. The Spam folks thought he was kidding when he insisted that a gambling game based on the venerable canned luncheon meat would be a kick.

Instead, Kaminkow made a licensing deal, then brought the concept back to IGT's lab, where an atmosphere of creativity is fostered by free Slurpees in the break room and pinball machines parked in the hallways. The game makes its debut this fall, complete with a bonus round that asks players to choose between a turkey, regular and smoke-flavored Spam dish to prepare for a cook-off. They'll place first, second or third and receive varying bonus winnings.

"Hopefully, these machines will intrigue our current consumers enough to pick up an additional can of Spam on their next shopping trip and potentially even some new brand users," says Julie Craven, spokeswoman for Hormel, Spam's parent company.

Spam probably will work, casino executives say, but Austin Powers could be less of a sure bet in the long run because younger audiences get bored quickly with their pop icons. Case in point: A Survivor slot machine rolling off IGT's assembly line already seems dated.

"Slot machines cost between $ 12,000 and $ 15,000 each, so you're looking for it to pay itself off in about five years," says Don Marrandino, president of music-themed Hard Rock Hotel & Casino, which is unusual among Las Vegas resorts because its average customer is under 40. "You have to be able to look at it and say this game is going to do that."

Another concern: The hard-core slot players might be confused and upset by graphics and bonus gimmicks. They're used to rooting for three cherries or red, white and blue 7's, not praying for an alignment of the ingredients to a s'more.

"There is a delicate balance to strike between the old and new," Marz says. "There is a group of serious slot players who play the traditional slot machines because they are familiar with them, they know how they play and they're not as gimmicky as the others."

Older players also don't like rubbing elbows with gamblers in their 20s and 30s, observers say.

"You can jolt an audience by marketing to a much different new audience," says slot expert Jeffrey Compton, vice president of Compton Dancer Consulting in Las Vegas. "The older and younger audiences do not get along with each other. Both of those audiences get turned off by the presence of one another."

Casino executives say they're open to the new ideas but typically hedge their bets by buying only a half-dozen of any one theme. That's a mere handful considering that the average Las Vegas Strip resort has more than 1,600 machines on the floor.

The key to success in the slot industry is to build a game that looks interesting enough to get the customer there, Ader says. "And once you get them in front of machines, it's got to be easy for them to play. That's the balance they're trying to find."

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