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Quicktakes - The month's trends in a glance - July 2004

16 September 2004

The economy is not simple to describe or understand some days; if fact, without a candidate's agenda, the economy hardly seems like one single thing and more like a complex mix of different elements that may or may not be related. The stock market is still hovering at the same level it was a month ago, down slightly from the beginning of the year, but not dramatically. Interest rates are up slightly, but again not significantly; consumer spending was down (in June), but even Guru Greenspan thinks there is no cause for concern. The one area that is bothersome across the board, affecting stock prices, business planning and political rhetoric, is energy. Though even that is not simple; the price of crude continues to go up (blame it on the Russian justice system) and even OPEC claims to be mystified and helpless. But the price at the pump has declined. Go figure.

In the world of gaming there were two big stories in July: the pending merger of Harrah's and Caesars and the passage of slot legislation in Pennsylvania. No one expected the Harrah's merger, most of us were still trying to understand the MGM-Mirage and Mandalay Bay merger (and the last Harrah's merger with Horseshoe Gaming) when the news hit.

Move creates world's largest casino company; The boards of Harrah's Entertainment Inc. and Caesars Entertainment Inc. agreed to a mega-deal Wednesday night in which Harrah's would buy Caesars for about $9.4 billion, including the assumption of about $4.2 billion in debt. Liz Benston, Las Vegas Sun, 7-15-04

The biggest of the big get bigger; the combined company would have over 50 casinos (depending on how many are sold to a horde of drooling suitors), revenues of $8.8 billion, 95,000 employees, 70,000 plus slot machines, and just for good measure, 46 million names in a data base. That is a big company, and while pundits argue about the synergies and benefits of a mega-company, there is a simpler way to understand the Loveland logic: money. Loveland's Harrah's is not the first company to buy into the logic that owning a larger piece of the Las Vegas Strip is a ticket to great wealth.

Casino operator Caesars Entertainment Inc. Thursday said second-quarter earnings more than tripled, helped by a hefty gain from a hotel sale. For the first half of the year, Caesars had net income of $219 million, or 70 cents a share, compared with $82 million, or 27 cents a share, a year ago. Six-month revenue came to $2.36 billion, up from $2.22 billion a year earlier. Associated Press, 7-22-04

Las Vegas was still red-hot in the second quarter as free-spending visitors to the gambling capital helped MGM Mirage double its profits while insulating Harrah's Entertainment from a slowdown in Atlantic City. MGM Mirage reported that it earned $104.7 million, or 72 cents per share, up from $53.8 million and 35 cents in the year-ago period. Adjusted to exclude discontinued operations, the casino giant earned 70 cents per share -- still handily atop the 58-cent average estimate of analysts polled by Thomson First Call. Revenue climbed 10 percent to $1.07 billion, reflecting strong growth in visitation and customer spending throughout its operations. Casino revenue was up 8 percent while hotel revenue jumped 9 percent. William Spain, CBS.MarketWatch.com, 7-21-04

…Meanwhile, Harrah's said that it earned $90.2 million, or 79 cents per share, in the quarter. That is up from the $76.7 million, or 69 cents a share, of the year-ago period and in line with Street expectations. Harrah's revenue edged up 4.5 percent to a record $1.13 billion as a better than 23 percent increase in revenue from its Southern Nevada operations offset a nearly 6 percent slump in Atlantic City. William Spain, CBS.MarketWatch.com, 7-21-04

As the story of the merger developed, newspapers across the country did a local version; "What will this merger mean to us?" Generally the story included a discussion of the properties locally that might be sold off by the new company. The reasons varied; in some jurisdictions the new Harrah's would have more than the allowed number of casinos or licenses, in others simply too many properties competing against each other, or as in Reno, properties in a market that may not be viable for the new mega-company. However, the unique take on the merger comes from long time gaming adversary, Tom Grey. Grey thinks the merger will help his cause and make campaigns against gaming easier.

Selling off assets beforehand could help Harrah's maintain its investment-grade bond rating by appeasing rating agencies that will be scrutinizing the company's debt in the months to come, analysts say. It could also give Harrah's more leverage in a transaction than if the company was forced by regulators to sell off particular assets, they say. …Jefferies & Co. analyst Ray Cheesman said Harrah's may unload casinos in many states while keeping properties in three core markets: Las Vegas, Atlantic City and Mississippi. Harrah's has identified these three areas as stable regulatory environments that have the greatest growth potential, he said. Antitrust concerns may lead regulators to force the sale of assets in Tunica, Miss., where the company would eventually own five of 10 casinos in the region, he added. Cheesman said the company might also sell off casinos in Lake Tahoe as well as unload the Reno Hilton and Harrah's Reno properties, which have been hurt by competition from California casinos. Liz Benston, Las Vegas Sun, 9-3-04

At least one opponent of gambling proliferation expects to get some new ammunition from an unlikely quarter: the planned merger of Harrah's Entertainment and Caesars Entertainment. The $9.4 billion mega-merger will not only create the largest and most geographically diverse gaming company in the world with operations in 16 states and plans to expand elsewhere, it should be a powerful catalyst for gaming foes, said Tom Grey, Executive Director of the National Coalition Against Legalized Gambling. "Competition between Harrah's and MGM will be fierce," he said. "They'll push growth for profits and the profits will come from problem gamblers, avid gamblers. That's going to simplify the job of fighting expanding gaming in the U.S.," he said. "Attracting more gamblers -- and more problem gamblers will be part of the mix -- will raise public health issues about addictive gambling, and that will be their downfall," Grey said. "Politically, the higher visibility and the likelihood they'll push their product harder will create bigger problems (for expansion)," he said. Rod Smith, Gaming Wire, Las Vegas Review-Journal, 7-27-04

Pennsylvania's story, too, had its implications for others. Unlike the Harrah's merger, the Pennsylvania story did not see opportunity, but loss. The legislation allows for over 60,000 slot machines, and that many slot machines threatens Atlantic City and any other state that gets some of its slot players from Pennsylvania. In New Jersey, Rhode Island, Maryland and others, there is a renewed interest in expanding or in some way protecting local gaming revenues.

The mayor of Cincinnati, Ohio thought a riverboat would be a great thing for the city, the state, for everyone in fact; too many citizens of Ohio wander across state lines to spend their gaming dollars. All that money would be better spent at home. Not a new thought to state legislators, governors and mayors in Maryland, Maine, Rhode Island, Pennsylvania, West Virginia and even Washington, D. C. who are among others to have had the same thoughts of late. However in Ohio, the story takes an odd twist, like an NFL running back trying to escape monster defensive linemen; before Cincinnati can have a casino it must escape the Bengals gambling defense.

State Rep. Tyrone K. Yates heard the Mayor's call for casino gambling on the riverfront Wednesday, and responded within hours by introducing a State Constitutional Amendment to make it happen. Yates' proposal would add a single sentence to the State's Constitution: "The General Assembly may authorize and regulate the operation of one riverboat gambling franchise in each of the cities of Cincinnati and Cleveland." He was responding to Cincinnati Mayor Charlie Luken's call for the State Legislature to revisit casino gambling as Ohioans spend $3 billion a year at out-of-state casinos. Luken hopes the tourism draw of a casino - not to mention tax revenues it would bring - can boost Cincinnati's downtown economy. Gregory Korte, Cincinnati Enquirer, 7-1-04

A lease between the Cincinnati Bengals and Hamilton County that bans gambling operations along the city's central riverfront could be a problem for the mayor and others who want to bring riverboat gambling to the city. Mayor Charlie Luken has been a strong proponent of casino gambling for Cincinnati as a way of helping revitalize the city's economy, but a stadium lease agreement negotiated in 1998 prohibits gambling in the central riverfront area that includes Paul Brown Stadium. Luken has said that he is aware of the gambling clause in the lease, but thinks it's a problem that could be solved. Tim Mara, an attorney who led the unsuccessful 1996 campaign opposing the sales tax increase to build the new Bengals and Reds stadiums, said the gambling provision again underscores how bad the lease deal is for county taxpayers. Ohio News Network, 7-2-04

The Bengals are not the only NFL team with a link to gaming expansion. The Pittsburgh Steelers have no clause in the contract to stop gaming in town, but the NFL thinks a former player has no right to try to profit from it.

NFL officials will talk with Pittsburgh Steelers running back Jerome Bettis to determine whether he has violated league rules by being involved in a proposed real estate development that could include slot machines. Bettis, the sixth-leading rusher in NFL history, was in Harrisburg this week to speak with lawmakers about minority interests in proposed gambling legislation. The 32-year-old running back appeared with C.J. Betters, a developer who has proposed a $500 million facility that could include a horse track, hotel, townhouses, retail stores and slot machines; if the state passes legislation legalizing slots. The NFL policy on gambling prohibits players from advertising or promoting activities "that can reasonably be perceived as constituting affiliation with or endorsement of gambling." Sports Line, 7-1-04

There is a trend this year that was more difficult to predict then the mega-mergers, the passage of new slot legislation, or even the price of crude oil: casino reality TV. Donald Trump certainly did not invent reality TV, nor did he invent celebrity TV, but he did throw out the first pitch in celebrity casino casting. He has proven to be much better at being a celebrity that he ever has at being a casino operator.

While Donald Trump created a frenzy among fans Friday at auditions for "The Apprentice 3," the most recent financial statements from his casino company portray a business struggling to keep its head above water. Michael P. Regan, Associated Press, 7-30-04

On Wednesday, Trump reported a second quarter net loss that ballooned 76 percent to $17.6 million, or 59 cents a share, compared to a loss of $10 million, or 46 cents a share, in the same period last year. Revenue slipped from $306.9 million to $293.2 million in the quarter ended June 30. …The company, which ended the quarter with just $81.1 million in cash on hand, is facing a $73 million payment in November on its $1.8 billion debt. Michael P. Regan, Associated Press, 7-30-04

The Donald has been followed into reality television by the new owners of the Golden Nugget, Tom Breitling and Tim Poster; the Maloof brothers; Fertitta brothers; Caesars Palace; and would you believe my first gaming client, the Tulalip Tribes of Washington, and it was not my idea. The concept seems to be a combination of ego and competition. A national or even local television program is a great way to get your casino's name out into the world of casino players. People interested enough in casinos to watch the program are certain to want to tour the "set" afterwards, and it is a great way to feed an ego.

Maloof Television - a venture of a billionaire family with an National Basketball Association team and a Las Vegas casino - will announce debut projects this week, including a reality show, the Albuquerque Journal reported Monday. The Maloof family, who started with a New Mexico beer distributorship, recently signed agreements with MGM Television Entertainment and Interscope Records, a division of Universal Music. "It's really true what they say," said Gavin Maloof, who along with brother Joe owns the Sacramento Kings…"The show will revolve on the Maloof way of doing business, and the core business they utilize in building their success." Associated Press, Las Vegas Review-Journal, 7-20-04

Two new TV shows follow the action at the Golden Nugget and the Green Valley Ranch. Heated competition in the Las Vegas casino industry is nothing new. For decades resorts have tried to top each other with unique attractions, new gimmicks, new themes. But the Golden Nugget downtown and Green Valley Ranch in Henderson are competing in a new arena when the reality series "The Casino" and "American Casino" premiere this month. The first of 13 episodes of "American Casino"…Both shows take a behind-the-scenes look at the casino business, focusing on the owners and workers, gamblers and tourists at the resorts. The focal point of both is the owners, Tom Breitling and Tim Poster of the Golden Nugget and Lorenzo and Frank Fertitta of Station Casinos, which includes Green Valley Ranch. Ken White, Las Vegas Review-Journal, 6-3-04

Las Vegas' reality-TV winning streak continues as the A&E cable network checks into Caesars Palace this week for an extended stay with "Caesars." Three "Caesars" camera crews will focus on the Strip resort for 17 weeks, following visitors and employees alike, from newlyweds to chefs, odds-makers to high-rollers. It's yet another confirmation of Neon Nirvana's status as a sure thing when it comes to TV ratings. "Vegas is on fire," notes Tracy Green of LMNO Productions, which plans an Americanized version of the Brit hit "Double or Nothing" for NBC later this year. Carol Cling, Las Vegas Review-Journal, 7-26-04

Can a local casino reality TV program hit the jackpot? KIRO-TV certainly hopes so. "Tulalip Casino Night" begins a six-episode run that kicks off at 10 p.m. Friday and airs in that time slot through Aug. 27 on Channel 7. The show runs 10 pairs of players through a gamut of casino games, such as blackjack, roulette, Baccarat, slot machines and Texas hold'em poker. At the end of each episode, the pair with the least amount of money left is eliminated. The team that outlasts the rest gets to spin a wheel for the chance to win $1 million. "We think it can be successful at a local level because people can really relate to it, and hopefully they've already heard of us," said Cara Althoff, a Tulalip Casino spokeswoman. Victor Balta, Everett Herald, 7-22-04

One more Vegas story, which if someone plays their cards right, would certainly make for great reality TV -- a Las Vegas theme park for women: the "Ultimate Girls' Night Out." That is a show I might stay up to watch.

The Rio hotel-casino expects to build a $7 million "theme park for women" that will cater to bachelorette parties, high school and college reunions, 21st birthday celebrations, office parties and other "girls' night out" functions. Billed as the "Ultimate Girls' Night Out," the 21,000-square-foot center will feature a 400-seat Chippendales theater with sky boxes, a 1,500-square-foot "ultra lounge," 2,100-square-foot retail area featuring lingerie and party gear and a restroom with a plush "gossip pit." Las Vegas Sun, 7-29-04

July of 2004 is not a month that will be remembered for all time; nor one that 100 years from now children will study its impacts on their world. But it certainly was interesting for two stories, Pennsylvania and Harrah's. The icing on the cake, and maybe the trend with the longest-term impact on gaming and society in general, is gaming on television. Poker has given gaming a competitive presence on television, and now with the reality shows, gaming has a social and entertainment presence and with it, a move deeper into the American psyche. Casino gaming has truly become mainstream, regardless of Reverend Grey's wishes or opinion.

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.