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Quick-takes: November's trends in a glance.

30 November 2006

Another great month for the economy. Gas prices still going down; the price of crude oil closed the month under $60, almost $20 lower than its high point in July; interest rates are stable and the DOW moved over 12,000 for the first time ever. Retail sales should be up based on Halloween sales; Halloween sales were the largest ever, nearly double last years. There are some weak spots in the economy, but in general it is tailor made for an election, whether it helps incumbents is another issue entirely. The economy does not seem to be among the top issues in this election.

The healthy economy is certainly reflected in gaming revenues, and with Hurricane Katrina factored into last year's results, even Mississippi is up for the first time in a year. Four states even recorded double digit growth; Delaware, Indiana, Iowa and Michigan.

Atlantic City: September gaming revenue rose 9.2% to $468.8 million. Alan R. Woinski, Gaming Industry Weekly Report, 10-16-06

Colorado: July casino revenue increased to $74.3 million, up 6 percent from 2005. Denver Post, 8-18-06

Delaware: July gaming revenue rose 10.4% with Delaware Park up 15.9%, Dover Downs up 7.5% and Midway Slots at Harrington Raceway up 1.9%. Alan R. Woinski, Gaming Industry Weekly Report, 8-22-06

Detroit: September gaming revenue rose 16.1% to $109.8 million. Alan R. Woinski, Gaming Industry Weekly Report, 10-16-06

Connecticut: September slot win rose 2% to $ 147.1 million. New London Day, 10-17-06

Illinois: September gaming revenue rose 8.3% to $109 million. Alan R. Woinski, Gaming Industry Weekly Report, 10-16-06

Indiana: September gaming revenue rose 10% to $213.5 million. Alan R. Woinski, Gaming Industry Weekly Report, 10-16-06

Iowa: September revenue rose 25.2% to $112.7 million with Racetrack revenue up 29% and riverboat revenue up 23.3%. Alan R. Woinski, Gaming Industry Weekly Report, 10-16-06

Louisiana's casinos won $209.1 million in September. Associated Press, 10-17-06

Mississippi: September gaming revenues increased to $241 compared to $237.6 million in 2005. Biloxi Herald, 10-18-06

Missouri: September gaming revenue rose 7.7% to $133 million. Alan R. Woinski, Gaming Industry Weekly Report, 10-16-06

Nevada: August gaming revenue rose 7.5% to $1.06 billion. Alan R. Woinski, Gaming Industry Weekly Report, 10-16-06

Gaming stocks did well in October, driven, according to analyst Brian Gordon, by the buy-out offer for Harrah's. In the month just before the election, except for the majority of the earnings reports and the installation of slot machines in Pennsylvania and Florida, there wasn't much other industry news to drive stock prices.

A proposed $15.5 billion buyout offer by two private equity groups for Harrah's Entertainment helped to escalate the company's average daily stock price in October. Other gambling stocks and a gaming index compiled by Las Vegas-based financial consulting firm Applied Analysis benefited, too. The index, which charts the average daily stock prices for six casino companies and three slot machine manufacturers, rose 32.4 points or 9.3 percent in October to close the month at 381.5, an all-time high. "The new valuations within the gaming sector were primarily driven by the leveraged buyout offer for Harrah's," Applied Analysis partner Brian Gordon said…added the takeover attempt overshadowed all other gaming industry news during October. "Earnings season is really not reflected in October's values," Gordon said. Howard Stutz, Gaming Wire, Las Vegas Review-Journal, 11-1-06

Gordon was right about the importance of the buy-out offer; but there are actually two very big stories floating around the gaming world this month. The first has to do with Harrah's. Two groups of private equity investors made an offer for Harrah's; that offer has sparked a great deal of speculation about the consequences.

Harrah's Entertainment Inc., the world's largest casino operator, said Monday it has received a $15.05 billion offer for the company from private-equity firms Apollo Management and Texas Pacific Group. The private-equity firms are offering $81 per share in cash, a 22 percent premium to Harrah's closing stock price on Friday on the New York Stock Exchange. Ryan Nakashima, Associated Press, Las Vegas Review-Journal, 10-2-06

Much of the speculation was about the fate of a local property, the employees, projects in the planning or construction phase, and the impact of competition.

If it goes through, the deal would affect more than 4,600 Harrah's employees in Northern Nevada. Ryan Randazzo, Reno Gazette-Journal, 10-3-06

The leader of the Narragansett Indian tribe says he's been told by Harrah's Entertainment that it remains, quote, "100 percent committed" to building a casino in Rhode Island. Associated Press, WPRI, 10-3-06

The first casualty stemming from this week's massive buyout offer for Harrah's Entertainment may be the company's proposal to build a casino in Singapore. In a brief statement Wednesday, Harrah's said the casino operator would examine its bid to build a hotel-casino in the city-state's Sentosa Island region. Howard Stutz, Gaming Wire, Las Vegas Review-Journal, 10-5-06

…several projects could be in jeopardy. Those include multibillion-dollar redevelopment projects planned for Las Vegas and Atlantic City as well as other expansion deals in Europe, where the company hopes to build casinos under the luxury Caesars brand…Analysts say growth plans could be put on hold or among many short-term sacrifices made to pump up profit - a prospect that wouldn't be welcomed by the employees or government tax collectors who stand to benefit from growth. The potential deal also would throw into question the future of the company's broad-based casino empire. Liz Benston, Las Vegas Sun, 10-9-06

Other speculation dealt with the possibility of other private equity offers for other public gaming companies; some even created lists of targets and prices. Just as when the major mergers started years ago, the Wall Street analysts can see a trend and imagine all of the possibilities it might include. A bigger question might have to do with strategies and goals. The nature of Wall Street and the pressures of a public market have created business models for the major gaming companies built on quarter over quarter growth and expansion. A private company might have different goals; it might want to sell off a great part of the company and require higher margins on the remaining properties. The first and only, truly national casino brand could be fated to follow the dodo bird into oblivion.

The second major story dominated the news for the entire month of October. On the last day of September Congress passed the Unlawful Internet Gambling Enforcement Act of 2006; and on October 13th President George W. Bush signed Security and Accountability for Every (SAFE) Port Act, which included the Internet bill.

The bill started a rush to exit the United States by the major Internet gaming companies, abandoning their American players and retreating to safer shores. Two companies sold the American operations to unnamed private operators for a dollar each. Most simply declared they would no longer take bets from Americans, while they talked of selling all of their gaming operations to private investors – investors who presumably are willing to ignore the American justice system, avoid traveling to the United States and find third party methods of collecting and paying wagers. Betcorp got the best price, $11 million, not much for a business that was producing that much a month.

Betcorp agreed to sell its gaming operations in Antigua and Toronto for an implied enterprise value of $US11 million. The Australian internet gaming operator agreed to sell the gaming operations to Bodog Entertainment Group SA. Australian Age, 10-23-06

Up to this point this is a major story for the gaming industry, but an interesting thing happened on the way to the casino -- the entire country took notice of the bill. There are very few federal laws that directly legislate gaming, the National Indian Gaming Regulatory Act and the Unlawful Internet Gambling Enforcement Act of 2006 are the latest major exceptions. The rest of gaming legislation is specific to each state, and while it occasionally gets some national coverage, gaming legislation isn't terribly important to anyone outside of the industry and its major opponents. The Internet gaming act is an exception. Nothing in my memory compares to this bill and the attention it has received.

And it is not only the American press that has taken notice. The entire world has been covering this bill. The perspective of coverage varies according to the country. All of the countries that have passed legislation permitting Internet gaming have been very critical. Those that have taken the opposite position are supportive. Cynics in Europe are saying the American law is a conspiracy intended to drive the publicly traded British companies out of the market and create an opportunity for American companies in partnership with American states to come in and take over.

The coverage that really got my attention and startled me came from two national publications, the New York Times and Newsweek. Both publications carried opinion pieces that took issue with the act and predicting unfavorable and presumably unintended consequences. Charles Murray in the New York Times predicted a political backlash for the Republican Party. George Will in Newsweek compared the act to the federal law prohibiting the sale of alcohol in the aftermath of the First World War.

Last week President Bush signed a law that will try to impede online gambling by prohibiting American banks from transferring money to gambling sites. Most Americans probably didn't notice or care, but it may do significant political damage to the Republicans this fall and long-term damage to Americans' respect for the law. So, a month before a major election, the Republicans have allied themselves with a scattering of voters who are upset by online gambling and have outraged the millions who love it. Furthermore, judging from many hours of online chat with Internet poker players, I am willing to bet (if you'll pardon the expression) that the outraged millions are disproportionately electricians, insurance agents, police officers, mid-level managers, truck drivers, small-business owners — that is, disproportionately Republicans and Reagan Democrats. In the short term, this law all by itself could add a few more Democratic Congressional seats in the fall elections. Charles Murray, New York Times, 10-20-06

Perhaps Prohibition II is being launched because Prohibition I worked so well at getting rid of gin. Or maybe the point is to reassure social conservatives that Republicans remain resolved to purify Americans' behavior. Incorrigible cynics will say Prohibition II is being undertaken because someone stands to make money from interfering with other people making money. For whatever reason, last Friday the president signed into law Prohibition II. You almost have to admire the government's plucky refusal to heed history's warnings about the probable futility of this adventure…Prohibition I was a porous wall between Americans and their martinis, giving rise to bad gin supplied by bad people. Prohibition II will provoke imaginative evasions as the market supplies what gamblers will demand—payment methods beyond the reach of Congress…And now, by banning a particular behavior—the entertainment some people choose, using their own money—government has advanced its mother-hen agenda of putting a saddle and bridle on the Internet. George F. Will, Newsweek, 10-23-06

Will and Murray are not the only ones predicting dire consequences of the Unlawful Internet Gambling Enforcement Act. A good many of the others are connected in one way or another to the industry. That fact makes their predictions a little less weighty than two writers known for their sophisticated understanding of the American culture. Still the other warnings bear mentioning. It is a certainty with $15 billion at stake this year and estimates of $50 billion in another ten years, there will be many attempts to by-pass American efforts to strangle Internet gaming.

It was getting late on Oct. 12, the night before a sweeping anti-Internet gambling bill would be signed into law. Paul McGuire was at his computer, enjoying one last hurrah on PartyPoker, a site that had pledged to kick off all U.S. users as soon as the law left President Bush's desk. "It was kind of like that last party before summer ends when you've got to go back to school," says McGuire, a 34-year-old New Yorker and author of the popular "Tao of Poker" blog. "They were playing loose because it was the last night." Maybe for some. Not McGuire, whose online handle is "Dr. Pauly." At 11 p.m., he simply closed down his PartyPoker account, withdrawing thousands of dollars in winnings accumulated in recent weeks. He later wired the funds to an offshore account with NETeller, an Internet bank registered in the Isle of Man, and opened new accounts with two other poker sites -- both of them privately owned. Catherine Holahan, Yahoo News, 10-19-06

The US is encouraging the creation of a black market. "Following the significant fall in total customers now able to play at Paradise Poker, this revenue may potentially be at risk if significant numbers of these customers now seek larger, more liquid "black market" poker rooms." Announcing its annual results this morning, the UK-based firm said its profits had risen by 75% to £71.5m, but that next year's conditions will be very different following the legislation's approval by president Bush last week. Of the £303.3m in gross profit Sportingbet generated in the year to the end of July, £196.7m came from US-based users, which the firm said made up 56% of its customer base…Beyond the exceptional costs of £200m associated with its exit from the US, Sportingbet said it would have to pay out £10m for restructuring, including possible redundancies among its workforce of 350 staff. It previously had 850 employees. E-consultancy, 10-20-06

It is much too early to play taps for Internet gaming. It is also too early to say for certain what the impact of this legislation will be. It is even too early to even guarantee that the act will survive the next Congress or the one after that. That is, after all, how the act finally passed, because the same two people introduced it every year, year after year after year. And at least one of them may not be back in Congress as a result. There is a major move to unseat Senator Kyl in Arizona, driven by opponents of the act.

Everyone wants to be Steve's partner, or so it seems. Most of us are content to buy some stock in Wynn Resorts, although we may have some nagging regrets that we didn't buy the stock at $13 and find the current $72 or so stiff. However, the gaming elite may covet a closer, and of course, more lucrative partnership with Wynn. Jack Binion has moved from just a board member with a couple of billion dollars in his pocket from the merger to ruling Wynn's eastern empire. And now Donald Trump and James Packer are looking to make deals, joint ventures and other transactions to pick up a bit of Steve Wynn's magic dust. In the meantime, Wynn is the one richer for his friendship with the Packer family (James' father was a legendary gambler who often played at one of Steve's casinos). As of this quarter his company will record an additional $900 million that Packer's company paid for part of Wynn's concession to operate a casino in Macau.

It seems Steve Wynn wasn't interested in just the Mets when he visited Donald Trump last week…people with knowledge of the negotiations said Wynn wants to build a casino on the boardwalk, and his preferred site includes 12 acres where the Trump Plaza sits…Wynn would tear down Trump's casino and build his own…Trump is interested in building a residential tower in front of the Trump Taj Mahal. Judy DeHaven/ Josh Margolin, Star-Ledger, 10-24-06

Despite the talk about a tie-up between James Packer and Las Vegas casino tycoon Stephen Wynn..."They don't have a specific project in mind or anything", but if the right opportunity came up "we wouldn't rule out being with James Packer," said Jack Binion, who was recently appointed to head Wynn's expansion into Asia…Mr Wynn has cited Thailand and Japan as potential opportunities. Colin Kruger, Sidney Morning Herald, 10-24-06

So we end the month of October and head to the annual gaming show in Las Vegas with two major stories still floating around creating a great deal of speculation about their impact, but no concrete answers. Neither story is going to go away soon.

A story that may just go away is the Wynn and Trump story. The Donald may be over-playing his hand (if you can believe that) and may fade back into his usual anonymity. Over-played his hand? Well, lets look at one two-week period. First, Trump attended one baseball game with Steve Wynn. Within a week, he called a press conference and threatened a woman who had refused to sell her property to Penthouse years ago. She still lives there in what would be part of any planned casino project. Trump hopes Wynn will use that land to make him richer – so he threatened (on behalf of himself and Wynn) to build the building around her. And finally, he co-opted his own company's earnings press conference. Trump, always the star of the show, acted as if he was responsible for 80 percent of the growth in profit in the company's Atlantic City casinos. It was enough to frighten investors and make them think he was making operational decisions - the price of his stock started to fall immediately.

Ken Adams

Ken Adams is the principal in the gaming consulting firm, Ken Adams and Associates. Formed in 1990, Ken Adams and Associates specializes in information, analysis, and strategic planning for Indian tribes, casino operations and gaming manufacturers.

Ken spent over 20 years in the hotel-casino industry, prior to founding Ken Adams and Associates. He held the positions of: Director of Casino Operations, Casino Manager, and Keno Department Manager. During this time, he developed numerous innovative marketing and customer development programs and systems for evaluating casino performance. Some of those programs, such as slot clubs and tournaments, have become industry standards.

Ken is also actively involved in gathering and disseminating information that is important to the gaming industry. He is editor and publisher of and the Adams' Report, a monthly newsletter specializing in identifying trends in casino gaming, regulation and manufacturing, the Adams Daily Report, an electronic newsletter that provides electronic links to the key gaming stories of the day, and the Adams Review, a special report distributed by Compton Dancer Consulting that provides editorial commentary on gaming trends.
Ken Adams
Ken Adams is the principal in the gaming consulting firm, Ken Adams and Associates. Formed in 1990, Ken Adams and Associates specializes in information, analysis, and strategic planning for Indian tribes, casino operations and gaming manufacturers.

Ken spent over 20 years in the hotel-casino industry, prior to founding Ken Adams and Associates. He held the positions of: Director of Casino Operations, Casino Manager, and Keno Department Manager. During this time, he developed numerous innovative marketing and customer development programs and systems for evaluating casino performance. Some of those programs, such as slot clubs and tournaments, have become industry standards.

Ken is also actively involved in gathering and disseminating information that is important to the gaming industry. He is editor and publisher of and the Adams' Report, a monthly newsletter specializing in identifying trends in casino gaming, regulation and manufacturing, the Adams Daily Report, an electronic newsletter that provides electronic links to the key gaming stories of the day, and the Adams Review, a special report distributed by Compton Dancer Consulting that provides editorial commentary on gaming trends.