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Quick-takes: The month's trends in a glance - July 2003

31 July 2003

Another month removed from war, the evil sons have been eliminated, only daddy left to find, electricity and oil almost equal the guns in the nightly news coverage, and the economy seems to finally be on a serious mending trend.  The Dow Jones Industrial Average has been over the 9,000 level for two months.  And except for California, most states have solved their budget problems for this year.  It is time to get on with the rest of the year and start adapting to the changes that legislatures have wrought.

The strongest wave of federal defense spending since the Korean War helped fuel U.S. economic growth at a stronger-than-expected 2.4 percent annual rate in the second quarter, the Commerce Department said on Thursday.  U.S. gross domestic product increased at a 2.4 percent annual rate…a separate report showing a third straight weekly fall in new claims for jobless benefits, sent stock prices and the dollar soaring.  …Economist Joel Naroff of Naroff Economic Advisors in Holland, Pennsylvania noted especially the solid pickup in business investment, which had lagged noticeably since a tepid recovery from the 2001 recession began.  Glenn Somerville, Reuters, Yahoo Finance, 7-31-03

July was a Powerball month.  Powerball is a clear example of a phenomenon long known to slot operators: when a progressive jackpot gets to a certain level, it triggers a dramatic change in the behavior of players.  The amount that triggers the change depends on the game.  On a quarter video poker machine, $2,500 seems to be the number.  In Powerball, $200 million appears to be the trigger, which brings in many more players.  Players play more and in the case of Powerball, traffic jams and long lines ensue.  And then there is the competitive response, the other casinos, or in the case of Powerball, states watching the feeding frenzy, stand drooling and searching for an opportunity to share in the rewards; at that point individuals and institutions act pretty much in the same way, fighting for the winning ticket.

Powerball players have been anxiously awaiting Wednesday's drawing for a $250 million jackpot. It's the fourth largest Powerball purse ever.  The numbers drawn Wednesday night were: 19, 26, 21, 31, 51 and the Powerball was 40.   KARE TV, St. Paul, Minneapolis, 7-10-03

The smell in the air wasn't fuel at a Rock Hill truck stop, or french fries at a nearby restaurant on Carowinds Boulevard, or even peaches north of Clover. York County reeked of money Wednesday,  about $261.3 million.  The near-record jackpot available in Wednesday night's Powerball lottery drawing caused such a huge sale of tickets it pushed the S.C. Highway Patrol to help with traffic near the North Carolina borderAndrew Dys, Rock Hill (SC) The Herald, 7-10-03

Two tickets, one in Missouri and the other in Pennsylvania, matched the numbers drawn in the Powerball lottery, splitting the estimated $261.3 million jackpot, lottery officials said.  The winning Missouri ticket was sold at Hermann Fuel Mart in Hermann.  (The) Pennsylvania ticket was sold in Cranberry Township.  Miranda Leitsinger, Associated Press, Manchester Guardian, 7-10-03

The state's interim lottery director says North Dakota plans to enter the multi-state Powerball lottery game in the first quarter of next year.  Chuck Keller says he knows there's a lot of pent-up public demand to join Powerball. ...23 states, including Minnesota, Montana and South Dakota, currently offer Powerball.  KXMA TV, Rapid City, South Dakota, 7-10-03

July was also dividend month.  In June, Congress passed the Bush tax bill, reducing the tax on dividends.  By the end of July five gaming companies, Boyd, Harrah's, Mandalay, GTECH and IGT, declared a dividend policy; MGM reserved the right to add to stockholder value in other ways.  In light of the history of prices since the turn of the 21st century, the low interest rates available from most conventional investments and the less-than-exciting revenue figures from most gaming jurisdictions, dividends are appealing to gaming investors.  Congress in June passed President Bush's $350 billion tax cut plan, reducing taxes on capital gains and dividends to levels not seen since the Great Depression.  Rod Smith, Gaming Wire, 7-31-03

Deutsche Bank analyst Marc Falcone said the change in tax policy has been the major catalyst for all the companies initiating dividend programs.  "For gaming companies, dividends are a great way to return value to shareholders. We'll probably see less share repurchase programs," he said.  Rod Smith, Gaming Wire, 7-31-03

Driven by investor demands, many major gaming companies have launched dividend policies in recent months, with most paying yields higher than the S&P 500 average.  As the gaming industry has matured, investors have expressed increasing interest in dividend programs to return shareholder value as opposed to new development projects that could generate questionable levels of returns, Fulcrum Global Partners gaming analyst Joe Greff said.  Rod Smith, Gaming Wire, 7-31-03

In addition, the Board of Directors [IGT] has declared a quarterly cash dividend on post-split shares of seven and one half cents ($.075) per share, payable on July 28, 2003 to shareholders of record on July 14, 2003.  PRNewswire-FirstCall, Yahoo Finance, 6-4-03

Station Casinos, Inc. today announced that its Board of Directors has declared a quarterly cash dividend of $0.125 per share. The dividend is payable on September 4, 2003 to shareholders of record on August 14, 2003. PRNewswire-FirstCall, Yahoo Finance, 7-23-03

Harrah's Entertainment on Thursday joined a growing bandwagon of gaming companies initiating quarterly dividend policies.  The company declared a quarterly cash dividend of 30 cents per share, payable Aug. 27 to shareholders of record on Aug. 13.  Rod Smith, Gaming Wire, Las Vegas Review-Journal, 7-25-03

Boyd Gaming bosses announced plans Wednesday to begin paying dividends to shareholders at the same time they reported a 28 percent drop in earnings for the company's second quarter, which ended June 30.  Boyd executives announced plans to begin paying a 7 1/2 cent quarterly dividend in September, a 30-cent annual clip. Jeff Simpson, Gaming Wire, Las Vegas Review-Journal, 7-31-03

MGM Mirage said it won't declare a regular dividend at this time, despite recent tax changes, saying there are better uses of its capital to go along with its business plans.  "We generally believe that share repurchases are a more attractive way to return capital to shareholders," said Chairman Terry Lanni, adding better uses of the entertainment, hotel and gaming company's capital would include debt reduction, continued reinvestment in proven resorts that that will generate high returns such as the Bellagio casino-hotel in Vegas, and investment opportunities overseas.  Dow Jones, Yahoo Finance, 7-17-03

The tax and budget wars for 2003 may be over, that may be the good news, but the tax increases are not good news for the gaming industry, investors, employees, and, in many cases, customers.  Gaming taxes increased in Illinois, New Jersey and Nevada.  Illinois passed the largest increase, to a maximum of 70 percent.  Comparatively, Nevada increases were minor, but to operators already struggling, that is not much consolation.  In the next few months, the focus of the story is going to change from the budget crisis of the states to the financial crisis of the operators.  In Illinois, New Jersey and Nevada changes are going to take place in the market place.  Casinos in Illinois are going to try to keep below the ceiling rate by whatever means; in New Jersey there already has been an impact on investment; and in Northern Nevada the real impact will start to become obvious by the first snowfall.  Reduced operating hours and amenities, lost investment and closed casinos may ultimately lead to less tax revenue, but will certainly lead to lower employment and reduced casino spending which will impact an entire community.  We will all, including the governors and legislators, wait to see the final result of the 2003 gaming tax wars.

…As a combination of severely reduced table games, lower marketing expenses, a lack of on-site amenities and higher taxes take their toll on the market, we think Illinois could experience a 25 percent decline in revenues over the next 12 months. …We expect Illinois' actual tax revenues could decline by approximately $100 million, to around $600 million from the current $700 million.  Marc Falcone, Casino Journal, Vol. 16, No. 7, July 2003, p. 6 & 37

Despite improved second-quarter results in Atlantic City, Park Place Entertainment is still balking at major expansion plans because of New Jersey's unstable tax environment, the company's chief executive said Thursday. ...Plans for a 1,000-room Caesars hotel tower and a 3,200-space parking garage that were first suspended when the tax talk began in February are no closer to reality now.  Joe Weinert, Press of Atlantic City, 7-25-03

There will be no 62-story, $1.5 billion casino hotel on the old World's Fair site, nor will there be a 4,000-room, $750 million casino hotel there.  Donald Trump is giving up on his troubled Boardwalk site.  "Because of the politics in Atlantic City, probably we're not going to develop that site," Trump said.   Joe Weinert, Press of Atlantic City, 7-24-03

 'The Governor's Got Your Money' Casino-Parking-Fee Hike Cuts Valet Tips To Half, Even A Third. Then there are the valets. They are paying for the fee increase, too -- in the form of lower tips as customers figure they have to save money somewhere…As part of Gov. James McGreevey's attempt to balance the state budget, the casino parking fee was increased from $2 to $3. But many properties charge $4 for the privilege of parking there, even for established players. Elaine Rose, Press of Atlantic City, 7-27-03

The levies, at $836 million – the biggest tax package ever in the Silver State, will phase in during the next year with the lynchpin  – a 0.7 percent tax on payroll for every business – starting Oct. 1.  …The new half-point addition puts the maximum [gaming tax] rate at 6.75 percent for the largest properties.  Throw in the payroll tax and a 75 percent hike in liquor levies, and casino operators believe they've taken an unfair hit.  "We feel like, as an industry, we not only stood up and took our share, but we've been piled on," said Ferenc Szony, CEO of the Sands Regency.  Bill O'Driscoll, Reno Gazette-Journal, 7-26-03

Sports and gaming have a natural affinity or as the song says, they go together 'like love and marriage'; but they have been kept as far apart as possible by the amateur and professional leagues. As a lobbying force, organized sports are powerful, very often much more powerful and influential with legislators than gaming.  When an individual crosses the line (such as baseball great Pete Rose, Rick Neuheisel, former coach at the University of Washington or Florida State player Adrian McPherson) and is caught gambling, the penalties are severe.  Las Vegas is denied a major sport professional team and not even allowed to advertise at the Superbowl.  Every Congressional session gaming officials can expect Senator McCain to press for anti-sports wagering legislation.  Still there is a dynamic tension between sports and gambling.  Throughout history a gambler's favorite wager was a contest of skill between men or animals.  In Nevada, at least, sports and gambling fit snuggly together in a casino with big screen television sets with every imaginable game, cuddled up to the sports book counter, boxers strutting manfully past crap tables and cars racing around the edges of the parking lot.  In the last couple of years there has been some momentum for a partnership between teams and casinos.  In July, Manchester United (the world's most famous and successful sports franchise) and MGM made news.  Sheldon Adelson, of the Venetian, went in search of his own franchise and an NBA franchise player went looking for a casino for his hometown. Can a Steinbrenner and Wynn union be far away?

The Desert Diamond Casino, quickly becoming Arizona's leading boxing venue, is partnering with legendary 6-time World Champion and Olympic Gold Medalist Sugar Ray Leonard and Sugar Ray Leonard Boxing to host three upcoming world-class nationally televised boxing events. Sugar Ray Leonard, SRL Boxing and the Desert Diamond Casino management unveiled the new partnership at a press conference at the Desert Diamond Casino.  Boxing News, 7-29-03

Casino Omaha, owned and operated by the Omaha Tribe...opened the Blackbird Bend Motorsports Speedway in July 2002. The 5/16-mile dirt track, grandstands and pit areas were built on pasture land.  "It's changed our demographics in way that we couldn't have done, I don't think, with some other type of marketing scheme," said Mike Cummings, the casino's general manager. "It's brought a ton of people here that never knew where this place was located."  Races have drawn an average of 900 to 1,000 fans a night, said Brad Appleton, the speedway's general manager.  Associated Press, Las Vegas Sun, 7-28-03

Manchester United may have lost out in the sporting glamour stakes when it sold David Beckham to Real Madrid. But the soccer club could be about to gain some Las Vegas sparkle through a tie-up with MGM Mirage, the world's largest gaming group.  The two companies have held detailed talks on a Man Utd-themed casino venture, with the proposals predicated on forthcoming reforms of UK gaming legislation.  Mathew Garrahan, Manchester Guardian, 7-28-03

Isle of Capri, which owns riverboat casinos in Mississippi, is to build its first UK casino in Coventry, together with a new stadium for Coventry City soccer club.  Mathew Garrahan, Manchester Guardian, 7-28-03

Gaming magnate Sheldon G. Adelson has already approached several top clubs, including Chelsea and Arsenal, to discuss the idea.  The casinos would be huge, taking up around 30,000 square feet, and could make clubs as much as £15million a year through a profit-share.  …Arsenal has already rejected the idea because the casino will take up too much room at their new Ashburton Grove stadium, but other clubs are more interested.  Raoul Simons, Evening Standard, 7-30-03

Now that he's back in Indiana as an executive with the Pacers, Larry Bird says he wants to help bring a riverboat casino to his economically depressed hometown.  In a statement released Friday through his agent, Bird said he is assessing how he can play a part in a riverboat project, particularly in ways that might benefit French Lick.  "My hometown is very excited about the prospect of a new business bringing more jobs and economic support at a time when they really need it," Bird's statement said.  Orange County voters are expected to decide in November whether to authorize a casino, the state's 11th, to boost the county's economy. By Sept. 19, interested casino companies and investors are required to file applications with the Indiana Gaming Commission and pay a $50,000 application fee.  Associated Press, Indianapolis Star, 7-28-03

So that is the opportunity.  If things are going sour for you in Nevada, New Jersey, and Illinois because of taxes, or in Colorado, Mississippi or Indiana because of the threat of slots in the streets, take your dividends and go to England and buy a soccer team and build a casino.  But be careful, not all teams or all locations are the same.  Oh, and the Premiership is not the only league, nor are the teams always in the best locations.

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.