Pulse

Scientific Games EMEA Summit: the key takeaway points

By Lewis - 8 April 2021

On March 17-18, Scientific Games held its EMEA Summit + Virtual Experience, an opportunity for customers deprived of the chance to experience the latest gaming products first-hand at gaming expos such as ICE London, to hear directly from game developers in a safe, virtual and interactive online space.

Extensive panel discussions staged across the two-day period shared details of Scientific Games’ upcoming slots, including 88 Fortunes – Lucky Gong, Ultra Hot Mega Link and Lobster Bay Kraken Unleashed alongside proprietary table games such as Three Card Poker and Ultimate Texas Hold’em. Overall, the topics discussed ranged from iGaming, sports betting, slots, systems and table solutions.

G3 took the opportunity to discuss the Summit and the recent restructure of Scientific Games’ EMEA business unit with Simon Johnson, SVP and Managing Director EMEA, Scientific Games and Jon Lancaster, Vice President of Sales, EMEA.

What’s been the feedback from the Scientific Games’ EMEA Summit and what are the benefits of a virtual event for SG and your customers?

Simon – We’ve received great feedback from the Summit. Our customers love to learn about the products and services from Scientific Games and how they’re evolving, and it’s also useful as a practical measure as they plan their recovery.

I think the second point, which underlines our pandemic response, is that as well as providing financial assistance and relief around commercial structures, we’ve sought to be a truly engaged partner to our customers.

Revenues are under pressure and the situation is tough, but the circumstances do not dictate that Scientific Games has less engagement with our customers, quite the opposite. Our driver is to be a recovery partner walking step-by-step through this experience with our customers.

Operators are really appreciative of this engagement and the consistent theme we’ve adopted to understand and respond to the needs of our customers.

Jon – We’ve received a lot of very positive comments about the content, execution and professionalism of the Summit. From the very start of the pandemic, Scientific Games has proactively engaged with our customers; we discussed the outcomes and timescales, what they needed at the outset, during the lockdowns and fitful openings and reopenings.

We discussed existing product on their floors, the opportunity to refresh those products and what we can do to help them prepare for reopening. Despite the false starts we’ve continued to work with our customers throughout the pandemic.

Every customer is saying the same thing: ‘All bets are off.’ All strategies have been revised. They know that they need to open with the best performing products and get their best players back into their venues.

What we saw during the previous openings is that the top players came back – and they came back with a vengeance. The pent-up demand returned, but the quantity of players was much less, which has made customers rethink the type of products they have on their floors.

Pre-Covid the trend skewed towards refreshing floors with more time-on- device games and initiatives to attract new players and grow the install base. While those objectives remain in place for the long-term, in the short-term operators understand that they need to go back to basics.

Operators need their best performing products on the floor and their best players playing those games. Thankfully, that dovetails with our product range.

Scientific Games has the best performing slots and table games, and the latter is especially important due to reduced capacity upon reopening. Customers need to squeeze as much revenue as possible from their available floor space – and we have the products to achieve those goals.

How robust is the commercial environment for operators and suppliers looking ahead into 2021 and what are your expectations?

Jon – I think operators would like to invest in new products, but the brutal reality is that they don’t have the capital. Operators have endured a prolonged period of zero revenues and the majority are still waiting to open. The message we’re getting from customers is that they’ll ‘wait and see.’

In the case of mainland Europe, everything’s still very uncertain. Our view is that operators are not going to invest before they open, they will want to operate for the summer months and then assess the situation.

Another consideration is that a whole year has elapsed without the ability to utilise their existing products. It’s not the case that we’ve lost a year – more the fact that we’re still in the same year. As a result, operators are planning to postpone their investment until next year, and that’s where Scientific Games can help.

We are looking for ways to partner with customers as we know they need the latest products on their floors, but they’re potentially lacking the resources to invest at this point in time. We are in discussions with customers to identify their needs and see how Scientific Games can satisfy them, since they will be different for every customer.

Simon, could you explain your new role and what this means for customers as part of the overall restructuring of Scientific Games’ EMEA business?

Simon – For some time, Scientific Games has been appraising the way our structure aligns with our customers and their businesses to ensure that we are delivering the best possible focus. The closure of the market during the pandemic has given us time to consider the way in which we can best orientate ourselves to create the most productive and effective structure.

To this end, we have combined what has historically been two standalone UK and European business units as part of a wider business reorganisation that aligns the global and regional functions within Scientific Games.

Product management, for example, is now a globally led function, which enables us to much more effectively utilise our resources, share best learnings and create a coordinated response and strategy for the market. I led the project to merge the two units and was offered the opportunity, in January, to lead the new business unit going forward.

My focus internally is twofold; to take a business unit with different heritages, multiple teams, split between the UK, Europe and Africa, and create a single team that operates effectively across this region and which has a sense of place and belonging to a single unit.

And secondly, my job is to take this unit and build a comprehensive roadmap back to reality as we emerge from this Covid situation.

For our customers, we need to be supportive and understand their business aims as they manage their own return to normality. Scientific Games is uniquely positioned to help our customers on that road to recovery. If you look at our core markets, we are the leading provider of gaming solutions.

Our games, our experience and our products are the ones customers are most comfortable with, engaged with and enjoy the most. We are really well positioned to build on this confidence as players return as we continue to provide the best experiences for our customers and their players.

Another important aspect of the combination of Scientific Games’ EMEA divisions into a single business unit is that by aligning our non-US businesses, we are creating a single unit with a really powerful presence within Scientific Games. It means that the needs of the international business are being heard and we can champion our customers’ needs very effectively.

We have maintained the same operational coverage as before and can serve our customer needs to the same capacity. We have followed the market and have evolved with our customers, leveraging the capability of the entire Scientific Games’ group.

As such, we are not seeking to compete as a medium-sized business unit from the UK, but as a multi-billion global organisation. Aligning our product management function into the group, for example, means that we are able to be much more far-reaching than we were as a standalone business.

Do you see the relationship changing between Scientific Games and its customers due to the disruptive effect of Covid?

Simon – If you look at the power of our portfolio, we have a unique presence in the business due to the breadth and strength of the offering across all aspects of the business, from gaming to digital and sports betting.

If you combine the loyalty and affection of players for our products, it is a real possibility that we can become a sole provider for our customers, and we can set out our stall to explain how this is in the interests of our customers.

Jon – The casino market is very diverse and under normal circumstances we would never have the arrogance to suggest we become a sole provider. However, at this time we genuinely believe that we have the range of products to cover all lines of the business. We have table solutions, slots, systems and sports betting – we can provide an end-to-end solution.

If you buy three different products from three different suppliers, customers will pay more for each of those products than if they collectively buy from a single source. And in my mind, there is no compromise because Scientific Games provides leading products in all categories. It makes sense for customers to buy from one source and enjoy savings across the board.

The games showcased at the EMEA Summit are the ones operators need right now. Every title in the list is product with the DNA of a proven performer. Each product has a track record. 88 Fortunes Lucky Gong, for example, is the next chapter in a winning journey. After three iterations of this product we’ve built a track record that inspired confidence that the next is going to be another banker.

How are the effects of Covid going to play out in the short and long-term within the EMEA?

Simon – One of Covid’s many effects on the gaming sector is that it’s a point of disruption in the marketplace. Operators are looking again at how they conduct their business – fundamentally – how they operate.

If you look across the gaming market, Scientific Games is strong capitalised business with incredible depth and breadth of best-performing products, combined with an ambitious and experienced leadership team. We are uniquely well-positioned to help customers through this period of uncertainty.

Jon – I think we’re possibly looking at a fundamental shift in the business model in the short-term. If operators don’t have the CapEx to spend then the obvious alternative is rental and participation models. The players are not concerned with the financial constraints of the operators.

For players, it’s a simple exercise – they walk into a property looking for something new and fresh. If they can’t find what they’re looking for they either play less or they’ll leave. Just as when you visit the cinema – if they’re always showing the same movie – you’ll stop going to the cinema. Operators know they have to refresh their products.

Several years ago, Holland Casino changed tack, taking the decision to switch their business model completely from purchase to rental, putting several thousand new machines on their floors on long-term rentals.

The result was phenomenal due to the fact that they could refresh their offering so thoroughly and frequently. I see this repeating itself and we are already having these discussions with operators. In the short- term this is a very practical solution, which may or may not become permanent.

Extending your cinema analogy, is it the case that operators want the blockbusters right now, rather than the indie titles?

Jon – We had pre-Covid discussions with operators about their floor mix in which the trend was to diversify away from high volatile gambler-style products, as they were heavily reliant on just a small number of players.

However, as Covid struck those conversations immediately switched to the delivery not only of high performing products, but games that practically guaranteed that level of performance. Our track record in this area certainly helped, because when we bring the next iteration of our high performing titles to market, they know they’ll perform to expectations.

I’m sure that in five years from now, discussions will shift again. The perennial discussion within casinos is how do we attract new players, younger players? Pre- Covid, that’s where the discussion was heading, but now it’s about survival and without the luxury of forward-thinking investments in products that don’t guarantee success, the kinds of products that attract new players do not generate the same level of revenue.

Historically, engagement with participation games in the EMEA is universally low. Is Covid about to change this stance?

Jon – Based on the discussions we’ve had with customers, this is going to be a trend for the next few years. European customers have traditionally been reticent about sharing the revenue of their slot machines. It is not a model that is readily accepted in the EMEA, though Scientific Games has built a solid footprint on the power of the brands that we don’t sell outright.

In the US, the full lease and participation model is a partnership. If the games don’t deliver the promised levels of performance, they are returned. In Europe, participation and lease products have been viewed as a financial business model, as opposed to a partnership with the supplier. What we see is a shift to a partnership driven approach in the EMEA.

Yes, in the short-term it’s a financial model driven out of necessity, but it’s also a strategic model that guarantees performance on the gaming floor. Operators partner with Scientific Games to place product on their floor, and we take responsibility for its performance, with the customer solely operating that product.

The operator doesn’t have to worry about investing and taking risk – they give us the space on their floor and we manage the rest.

Covid has sparked a lot of attention around ETGs and the role they can play in social distancing and player convenience. Do you see a resurgence of interest in ETGs in the EMEA?

Jon – I think there’s a perfect storm for ETGs at the moment. The market for ETGs in Europe is well established and mature, but the lack of tables and reduction in capacity due to Covid is all leading in an ETG direction. That said, content is key.

Eighty per cent of the revenue passing through ETGs is roulette, which is the same for everyone. What we are doing on the back of this renewed interest in ETGs in EMEA, the growth in the US and the market-leading position we hold in Asia, is drive the content side of the business.

Some of the world’s top performing proprietary table games, such as Ultimate Texas Hold’em and Three Card Poker, Roulette X were on display at the EMEA Summit. We are bringing these games, and others like Roulette X, to our ETGs with innovative financial models that will allow customers to operate this diverse content.

How big an impact will the shift towards cashless have upon the recovery of casinos in the EMEA?

Jon – In society as a whole, cashless and contactless has become the norm in the last 12 months. Cashless has been around in the casino industry for over 20 years.

South Africa started with cashless and is 100 percent cashless, but the European market has been very reluctant to adopt cashless entirely. However, the consequences of the pandemic, the acceptance of cashless and the advances in technology mean that the shift towards cashless gaming has accelerated.

It’s a fact that operators want cashless. All the advantages this brings for player tracking are well documented. However, the conundrum is that EMEA players don’t want to be tracked. It makes sense from an operator standpoint, but there is a resistance on the part of the players.

And don’t forget that most operators view systems as a cost. We’ve already said that operators have a lack of CapEx to invest in revenue generating products, so investing in cashless solutions is a low priority right now.