20_25-wyld

Over the past decade, gambling has moved from a subject of taboo and vice to become a major,

mainstream industry in the United States. As can be seen in Figure 1, according to the most recent annual statistics from the American Gaming Association, American casinos had gross gambling revenues (GGR) of over $27 billion. GGR represents the amount wagered minus the winnings paid-out to gamblers. As such, it is the equivalent of sales for a casino. As the graphic shows, gross gambling revenues have more than doubled over

20

Casinos are betting big on RFID to improve their abilities to track table play and deliver

better customer service

byDavid C. Wyld,

Southeastern Louisiana

University

Global IDentification - May 2005 www.global-identification.com

Focus on

Transactions Playing with the house’s money

21

the past ten years in the United States. Casino gambling is the leading player in the overall American gambling scene, comprising a significant part of the over $72 billion in revenue for the legal gambling industry. To put the size of the casino industry in perspective, the $27 billion in gross revenue means that Americans spent more – meaning they wagered and lost – at casinos than was spent both buying and renting DVDs and VHS programmed entertainment. Further, the $27 billion figure is more than double the amount spent at theme parks and movie theaters in the U.S.

Today, gambling in America is truly a national affair – and perhaps, the new “national pastime.” As Table 1 shows, while Las Vegas is the leading gambling market, it is by no means alone. In fact, as shown in Figure 2, there are eleven states that have casinos with at least one million dollars in gaming revenue, totaling 443 in all. According to the American Gaming Association, over 350,000 people are currently directly employed by these casino operations, with probably twice as many jobs being generated by the ancillary and support operations, including hotels, restaurants, and gaming technology companies.

A smarter “one-armed bandit” The Institute for the Future, a Palo Alto, California-based think tank, has characterized casinos as being fascinating places to see vanguard technologies being employed, even if they do not have a clock on the wall. In fact, leaders of the U.S. Department of Homeland Security have openly credited casino operators as best practice models for unobtrusive means of profiling and monitoring suspect individuals.

Today, gaming companies are spending a great deal of time and money to study their customer base to better serve their patrons needs and to yes, keep them loyal to their casino. In fact, many of the technological innovations of recent years, most notably the “frequent player” clubs initiated by almost all casino operators, have been geared to improving the gaming companies’ abilities to better track, reward, and serve their slot machine customers. The “one-armed bandit” slot machine of the past has now been transformed into a multifunctional data center. According to Alorie Gilbert, “with slots, casinos have made a science over the last decade of monitoring players and keeping them interested in the machines with a constant stream of rewards and freebies.” This investment in slot machine technology has produced significant returns for casino operators, who today see slot machines account for the majority of floor traffic and between 80 and 90% of a typical casino’s gaming revenue. Now, from the perspective of Bart Pestrichello, Vice President of Casino Operations at the Hard Rock Hotel and Casino in Las Vegas, “We’re trying to bring that same kind of thinking to table games.”


RFID is set to explode in the gaming industry. In fact, some experts predict that the market for RFID in the casino industry will reach $100 million by 2010

22

The RFID gambit The table area for casinos includes games such as Blackjack, Let It Ride, Baccarat, Poker, and Craps. While this area does not generally have as high a “house advantage” – on a percentage basis - for the casino as do slot machines, table games draw in far more “high rollers” – those who bet more per hand, spin of the wheel, or roll of the dice. These high rollers are, in truth, the most valuable customers for any casino operator, as they are the players who bet - and lose - the most over time. As such, casinos are often in an “arms race” to lavish their best “comps” – free rooms, food, show tickets, and other incentives – to retain these players’ loyalty to their facilities, in spite of their likely losing relationship with the casino property.

At present, pit bosses and casino managers can only hope to track their most valued table game players through observation and hand-written logs of their play. As such, industry statistics show that casinos are actually lavishing these players with too many comps, overshooting the level of perks necessary to retain high rollers by approximately 20 to 30 percent. This is because, from the perspective of Shuffle Master CEO Mark Yoseloff: “Right now, casinos are doing the same thing they’ve done over the

past 50 years. A casino floor person glances at wagers and fills out a player rating slip, trying to surmise the average bet. Nothing has changed.”Gaming companies and the suppliers of equipment for

casino table games now see RFID as the “magic bullet” to give them the type of visibility and control that they have leveraged customers in the slots area, for the benefit of both casino operators and their customers. In late 2004, Las Vegas-based Shuffle Master, one of the leading suppliers of casino technology, paid $12.5 million for two key RFID-related patents for RFID-enabled casino chips and table monitoring systems, both of which were originally filed by inventors in 1995. When embedded with a RFID chip, the innocent casino chip – which until now has acted as an internal piece of currency for the casino and a holder of value for the gambler – becomes individually trackable. When combined with an intelligent gaming table, equipped with a tablet PC for the dealer to use, card readers for each of the seven seats at a table, and RFID readers, this investment can make table games as visible for casinos as the slots area is presently.

The two market leaders are Shuffle Master and its prime competitor for gaming equipment, Progressive Gaming International. Both market similar table game management systems. According to John Kendall, President of Chipco, a Maine-based company that is one of the first vendors of RFID-inlayed gaming chips, the present intelligent table systems can read each of the seven betting stations at a gaming table, with up to 20 chips at each seat, in less than a second. Because of the speed of play and the number of chips and players in any one session, the first applications of smart tables are being made in the area of card games. Once read speeds increase, perhaps with the introduction of Gen 2 compliant chips and readers, operators can look to add RFID-equipped chips and intelligent monitoring systems to roulette and craps.


Figure 1 - Gross Gaming Revenue for casinos in the United States, 1993-2003

According to Tim Richards, Vice President of Marketing for Progressive Gaming International, while the gambling industry has been quite progressive historically in adopting new technologies: “Vegas has a little bit of a wait-and-see attitude. They want to make sure the product is bulletproof.” However, the first large-scale implementations of RFID-enabled chips and table game management systems are occurring right now. The just opened, $2.7 billion Wynn Hotel and casino is the first in Las Vegas to have the entire casino operation outfitted with RFID-enabled chips, intelligent tables, and readers throughout the property. It is spending $2 million on the “smart” casino chips alone. Likewise, the Hard Rock Hotel and Casino in Las Vegas is beginning to retrofit its operations with RFID-equipped gaming chips and intelligent table systems.

The accurate monitoring of table game play will enable casinos to accurately monitor individual player activities and be far more accurate in targeting their comp awards. Bart Pestrichello, Vice President of Hard Rock’s Casino Operations, stated that this was a major motivation behind his company’s decision to be an early mover with RFID technology, due to the fact that more precise monitoring of play will enable his casino “to reward players based on their actual bets and decisions,” rather than guesses and estimates from dealers and pit bosses. According to Michael Angelastro, Director of Table Game Operations at the soon-to-open L’auberge du Lac Casino in Lake Charles, Louisiana, RFID-enabled “smart” tables provide benefits both to the players and casino management. “They know the casino is accurately recording their bets, and that they will get the comped meals and rooms they deserve. And we know we are distributing those comps equitably.” “It will allow casinos to be more aggressive from a marketing standpoint,”

23

said Tim Richards of Progressive Gaming International.

Beyond buffets - the benefits for casino operators

The benefits to casino companies extend beyond giving out too many free dinner buffets or tickets to see Barry Manilow or Celine Dion. These paybacks center on three critical areas - better monitoring of play, prevention of counterfeit and theft, and promotion of responsible gaming.

Monitoring of play

Cheating is one of the prime motivations that casinos invest so much to visually monitor, both with electronic and human assets, table game play. Video cameras routinely record every hand dealt, every dice thrown, and every spin of the roulette wheel. However, casinos can take major financial hits from successful cheaters. This is one of the principal benefits of RFID-based table monitoring systems. From the perspective of L’auberge du Lac’s Michael Angelastro, RFID-monitoring “allows us, via real-time betting patterns, to see whether a player might be counting cards, for example.” RFID-enabled table monitoring systems can also catch gamblers who try to sneak chips on or off the table for their benefit during a game.


At present, pit bosses and casino managers can only hope to track their most valued table game players through observation and hand-written logs of their play

24 Global IDentification - May 2005 www.global-identification.com

casinos and unpopular for gamblers, who face the prospect of losing thousands of dollars of value in gaming chips if they do not comply with the casino’s mandate. Of course, internal theft can be problematic as well. However, with systems of readers throughout the casino and at exits, RFID-equipped chips can virtually eliminate the prospect of chip theft by casino employees.

Finally, casinos extend lines of credit – often into the hundreds of thousands of dollars or more range - to select patrons. Thus, managing their credit risk is vitally important to a large casino’s operations. By being able to track the individual casino chips lent on credit to an individual customer, the gaming company can not only better track that person’s play and – in essence – creditworthiness, but also ensure that the person to whom credit has been extended is not loaning or giving the chips to another player, something that is frowned upon in casino operations.

Responsible gaming

In the view of Ben Gaucherin, Chief Technology Officer for Sapient: “RFID has the ability to help casinos track their VIP clientele within the hotel and implement responsible gaming initiatives to help monitor those with gambling problems.” While the latter may not be a revenue-enhancer for gaming companies, the issue of how casinos should responsibly deal with problem gamblers is rapidly becoming an important public health issue in the United States, as well as an area for potential legal liability for casino operators. With the growth of the gaming industry and the proliferation of casinos across the country, public and governmental pressure is being exerted on casino proprietors to deal with gambling addicts on a more proactive basis. Certainly, with better intelligence to isolate who is playing and

Counterfeit and theft

Is a casino chip genuine? Until now, security systems across the casino industry have generally relied upon dealers, cashiers and supervisors being able to visually verify that a casino chip presented by a patron was genuine. The only backup are special inks that casinos routinely use to mark their companies’ chips, which can only be viewed in infrared or ultraviolet light. Thus, counterfeit chips have been a continuing problem for casino operators. According to Keith Copher, Chief of Enforcement for the Nevada Gaming Commission, his agency receives approximately a dozen complaints annually from casino operators regarding counterfeit chips. For instance, in just a few hours, a casino in Reno, Nevada lost $26,000 in a counterfeit chip scheme. Anecdotally, far larger counterfeit chip cases have occurred internationally in Europe and Asia.

Theft of chips is also a concern for casino management. If a casino has a large stash of chips go unaccounted for, say following a theft or a table being overturned in an argument, then casinos have had to change their entire stock of chips. When this occurs, casinos give gamblers a set window of time to exchange their old chips for new chips, after which the former chips would be considered worthless. Needless to say, this is a time and labor intensive process for

The accurate monitoring of table game play will enable casinos to accurately monitor individual player activities and be far more accurate in targeting their comp awards

Figure 2 - Casinos across the U.S.

25Global IDentification - May 2005 www.global-identification.com

how much they are gambling – and losing – at table games, casino companies will be much better able to target problem gamblers for intervention than today’s methods, which are largely reliant upon the observations of pit bosses, dealers, cashiers, and even cocktail waitresses, none of whose main responsibility is to intervene when they perceive a patron has a gambling problem. Thus, in the end, the targeting of problem gamblers may be one of the most valuable reasons for gaming companies to invest in automatic identification technologies.

Market prospects for smart casino chips and intelligent tables

According to Shuffle Master’s President and Chief Operating Officer, Paul Meyer, the market for such intelligent table game systems worldwide is large, as there are presently over 42,000 gaming tables in use today. That number will continue to grow with global growth. In fact, John Kendall of Chipco predicts that some of the biggest markets for RFID-based table gaming systems will be in new gambling markets, such as the island of Macau, off the Chinese coast. In such fast-growing markets, gaming operators can start with a blank sheet of paper with RFID-enabled chips and intelligent table game systems, rather than having to retrofit or replace their chip stocks and old table game equipment, at a cost of $5,000 or more per table. In fact, in late 2004, Gambling Magazine estimated that the average cost for a casino to completely change over its gaming chip inventory to RFID-enabled chips would be approximately $250,000. At present, RFID-enabled chips cost between forty cents and a dollar more than the average ninety cents casinos presently spend on each chip, customized for their property. However, as RFID chip prices decline in the future, the cost differential

for a “smart” chip over a standard chip may fall to as little as ten cents within a year.

Is RFID a sure thing for casinos? Most industry analysts predict that full-scale implementation of RFID in casino operations will take between five and ten years. However, they agree that the age of smart gaming chips and tables is coming, due to the demonstrable benefits for casinos and their customers. Also, unlike in other venues, individual privacy considerations are not as operative in the casino environment, as casino patrons already rightly assume that gaming facilities are among the most monitored and highly secured public places on the planet. Yet, from the perspective of David Lopez, Vice President for Product Management at Shuffle Master, casino companies are “just scratching the surface” in terms of the application of RFID technology in their operations. Thus, we are likely to see a flurry of implementations, both in the U.S. and abroad, over the next 12 to 24 months. In the end, it is likely that history will indeed repeat itself, and some of the early best practices in the use of RFID technology on the customer level will emerge from the gambling industry.

Table 1 - Rankings of American casino gambling markets

20_25-wyld

Documents