Insight US SLOTS ASSESSMENT - AGEM
revenues in markets throughout the US. With that in mind, AGEM is committed to the idea of business development for its members, who in turn are committed to ensuring casino operators have the games and technology to attract and entertain their players.”
Based on primary research conducted in selected markets (independent from the AGEM report), a review of publicly reported consumer spending data and AA’s understanding of the gaming sector, it appears broader economic conditions have played a meaningful role in the overall performance of the slot industry. During periods of notable economic expansions (mid-2000s), the gaming sector reported similar trends (in handle and win). On the other hand, the point at which the economic climate shifted from expansion to contraction, the slot industry followed suit. More specifically, total slot handle and win contracted for the first time in 2008 (the first full year of the Great Recession). This appears to be the inflection point for slot operators overall.
Overall, the data assembled and analysed suggests consumers’ share of income spent on gaming activities began to plateau in the 2000s, which was also the time in which slot hold percentages began to report their most significant rate of increase. By 2008, the onset of the Great Recession appeared to be a triggering event shifting the spend profile of consumers.
While it would not be unreasonable for slot win to decline during this timeframe (regardless of slot hold changes), it would have been equally reasonable to believe that slot win would have reported recovery in the 2010 to 2014 timeframe more consistent with broader consumer spending patterns. This recent shift in slot win has also been timed with a period when slot hold percentages have reached their all-time highs. While statistical correlations on a state-by-state basis vary due to any number of factors, the broader, aggregate trends would suggest a rising hold percentage has not translated into incremental gaming revenue for operators during the post-recession era. In fact, they very well may be contributing to its decline.
While economic conditions appear to be a material factor in slot performance trends, there may be other factors impacting the industry’s overall performance, most notably following the conclusion of the most recent recession. Consumer spending has improved in most major gaming markets throughout the United States in recent years, while gaming volumes continue to contract. These divergent trends, along with consumers spending a smaller share of their personal income on gaming activities in the post-recession period (July 2009 to present), suggest other factors may be impacting slot play.
“While economic conditions appear to be a material factor in slot performance trends, there may be other factors impacting the industry’s overall performance, most notably following the conclusion of the most recent recession. Consumer spending has improved in most major gaming markets throughout the United States in recent years, while gaming volumes continue to contract.”
SUMMARY OF FINDINGS There is no question that the gaming sector has evolved
significantly over the past several decades as a number of states welcomed commercial forms of casino gaming. Two key factors that are certain as a result of the expansion of gaming: (1) more people have been exposed to gaming activities than may have been otherwise (broadening the potential demand pool); and (2) the competitive landscape evolved significantly during the better part of the past 30 years (increasing the supply-side of the equation). The net result is that gaming operators have been required to operate with more efficiency and creativity.
SLOT HANDLE SUMMARY Slot handle reflects the gross amount of money
wagered on slot machines across the jurisdictions
“While statistical correlations on a state-by-state basis vary due to any number of factors, the broader, aggregate trends would suggest a rising hold percentage has not translated into incremental gaming revenue for operators during the post-recession era. In fact, they very well may be contributing to its decline.”
analysed. Since the early 1990s, slot handle continued on a consistent trend line, increasing from approximately $76bn in 1990 to a peak value of approximately $355bn in 2007, representing a compound annual growth rate (CAGR) of 9.4 per cent. From the peak of the market (2007), total slot handle declined at a CAGR of 2.8 per cent to $291bn in 2014.
The shift in the total amount wagered is largely attributed to a change in the economic climate following 2007. From December 2007 to June 2009, the United States economy reported the longest recession (18 months), known as the Great Recession, since the Great Depression spanning from August 1929 to March 1933. The economic downturn played a significant role in the operational performance of gaming operators and overall consumer behavior. A total of 8.7 million jobs were lost during the Great Recession, causing personal income and overall consumer spending to contract during that period. This event likely impacted how the public viewed their spending priorities post- recession as well.
SLOT WIN SUMMARY Slot win reflects the amount wagered by slot patrons,
less the amount paid out. Total slot win across the US reported similar directional trends as slot handle reported above. In 1990, aggregate slot win totaled approximately $5bn and increased steadily to approximately $26bn by 2007, equating to a CAGR of 10.2 per cent during that timeframe. Consistent with slot handle, the trend shifted to one of contraction in 2008, and generally continued through 2014 when total win reached $22bn (-2.0 percent CAGR).
In addition to the trend in gaming win, it is important to 3 9
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