CMA Finance ConferenceLong Term Gaming Trend Analysis

Michael Alexander

Sales Operations Manager

Industry Data Online

Long Term Gaming Trend Analysis What’s the future of gaming revenue?

How long will the gaming income stream continue? What are the long-term risks associated with

Government legislation changes, ageing and technology?

Research based analysis of current and future trends help you plan, organise, lead and control your club’s financial future.

Current Trends

Club Gaming in NSW has been growing at slightly above the CPI

CPI Increase Sydney Australia2005-06 3.00 3.202006-07 2.70 2.902007-08 3.00 3.402008-09 3.00 3.10

* Source: ABS Consumer Price Index

Club/Hotel Performancesince Smoking Ban introduction

Decline in number of people playing Poker Machines

Trends and Benchmarks are changing rapidlyGame Type Analysis

Feb-10 Feb-082yr

Comparison Standard

Install % 41.28% 51.07% -9.79%Turnover % 32.41% 40.64% -8.23%

Profit % 35.60% 44.74% -9.14% SAP

Install % 18.07% 10.83% 7.24%Turnover % 20.74% 12.40% 8.33%

Profit % 20.26% 11.83% 8.43% Ante/Extra Bet

Install % 10.51% 8.16% 2.36%Turnover % 14.56% 10.63% 3.93%

Profit % 13.66% 9.63% 4.03% Ante/Extra Bet-SAP

Install % 4.52% 3.46% 1.07%Turnover % 5.04% 4.01% 1.03%

Profit % 4.09% 3.26% 0.83% Manufacture's Link

Install % 23.51% 25.14% -1.64%Turnover % 24.57% 30.27% -5.70%

Profit % 23.94% 28.94% -5.00% Multi-Game

Install % 2.07% 1.34% 0.73%Turnover % 2.65% 2.03% 0.62%

Profit % 2.43% 1.61% 0.83%

Clubs have decreased standard games to increase SAP and Ante/extra Bet product

Players have moved away from Links and towards SAP and Ante/Extra Bet product

The Goal Posts have movedChanges in the NSW Club Financial Model

Financial Modelling – NSW Clubs

Previous Model

New Financial Model

Difference %

Revenue 100,000 141,243 41%  

Business GP% 55.0% 49.7% -10%

- Overheads 30.0% 32.0% 7%  

= EBITDARD % 25.0% 17.70% -29%

= EBITDARD $ 25,000 25,000 0%

Future Trends

Where does our Financial model need to be?

Needs Improvement KPIs Excellent

12% EBITDARD 25%24% Wages 18%12% AEMP 6%

$120 Daily Profit / EGM $180

6% Gaming Promo 4%6% Gaming Wages 4%

55% Bar GP 64%24% Bar Wages 20%55% Catering GP 62%50% Catering Wages 42%35% Overheads 25%

Source: DWS / PKF LCA Presentation May 2010

Ageing PopulationCan you capitalise on a larger older generation?

Age Groups% of NSW Residents

that visit Clubs18-24 46.30%25-34 39.60%35-49 43.10%50+ 50.00%

TOTAL 18+ 45.70%

ABS “By 2056 Australia's population is projected to increase to between 31 and 43 million people, with around 23% to 25% being 65 years or older.

In 2007 Australia's population was 21 million people, with 13% being 65 years or older.

Source: 2004-2009 CDOL/Roy Morgan Research 2010

Technology – Short Term

Smaller – Medium Clubs– Analysis tools on gaming purchasing and business efficiency– There are cheaper alternatives

Staff Systems

Medium to Larger Clubs– Increased skills in using gaming purchasing and business efficiency

tools– Increased use of CRM systems and reporting tools

Invest wisely though

CDOL Gaming

What are the latest trends in the Gaming Industry?

How do my Gaming KPIs compare to Industry Benchmarks?

Armed with knowledge of the latest trends and your own gaming benchmarks, what is the most suitable product to buy for your gaming floor

NSW

Regular News articles• Performance trends

• Gaming Machine replacement rate

• Retail trade trends

• Case Studies

• Other relevant articles

How do my Gaming KPIs compare to Industry Benchmarks?

What are the levels of product on the gaming floor of others?

NSW

March 2010NSW

March 2010

NSW

March 2010

1. New Game report2. Game Ranking3. Linked Game Report

What is the most suitable Game/ Manufacturer for my Gaming Floor

Dynamic ReportsFilters are: State Performance Tier

- Top 25%- Mid 50%- Low 25%

Region-Metro-Coastal-Country

Location-Sydney (West, Nth West, South, North, East)-Central Coast-Central West-Newcastle/Hunter-Sth Coast/Highlands-Riverina-Far Nth Coast

Machine Size-0-50 - 51-100-101-200 - 201-300-301-400 - 401+

I look for flexibility with my purchase. What is my next step if this game doesn't work?

Future – Gaming AnalysisFinding out more about our your gaming floor

Mar-10 Average Turnover/Day/EGM ($) Trend Mar-10 Machine Distribution (%)

Trend

Denom Machine Numbers

Average Turnover

/ Day/EGM

($)

Average Profit/ Day/

EGM ($)

Average Return/ EGM (%)

Feb-10 Mar-09

Mar-08

Previous Year Install % Turnover

% Profit % Feb-10 Mar-09 Mar-08 Previous Year

1c 121 $1,255 $113 9.02% $1,251 $1,243 $1,129 1.0% 80.60% 73.19% 78.21% 79.50% 81.09% 82.96% -0.5%2c 6 $1,520 $134 8.82% $1,550 $1,467 $1,323 3.6% 3.70% 4.07% 4.26% 3.59% 3.37% 2.71% 0.3%5c 4 $1,583 $130 8.23% $1,620 $1,191 $1,170 32.9% 2.78% 3.25% 3.17% 2.97% 1.92% 1.72% 0.9%

10c 3 $1,685 $140 8.32% $1,654 $1,564 $1,278 7.7% 2.15% 2.62% 2.58% 2.16% 2.41% 2.88% -0.3%20c 2 $1,655 $135 8.17% $1,566 $1,734 $1,436 -4.6% 1.25% 1.51% 1.46% 1.18% 1.14% 1.13% 0.1%50c 2 $2,031 $149 7.32% $4,225 $3,142 $1,055 -35.4% 1.03% 1.49% 1.29% 1.35% 0.52% 0.25% 0.5%$1 13 $2,226 $122 5.50% $2,246 $2,456 $1,962 -9.4% 8.49% 13.85% 9.02% 9.21% 9.52% 8.32% -1.0%

Also applies to Manufacturers Product Type Game Type (SAP, Link, Standard, Ante Bet) Patrons (Overall, Beverage, Catering, Gaming)

Future – Patron AnalysisFinding out more about our patrons

Mar-10 Trending....

Denom Patron #'sPatron

Split% of

RevenueGaming Spend

Catering Spend

Beverage Spend

Total Spend Feb-10 Mar-09 Mar-08

Males 3,193 44.70% 47.15% $24 $20 $13 $56Females 3,950 55.30% 52.85% $30 $14 $8 $51

18-30 30-50 50- 65

65+

Gaming

Non- Gaming

TAB Punters

Bowlers

Total 7,143 100% $382,043 $ 27 $ 16 $ 10 $ 53      

Future – Catchment AnalysisFind out more about the player by linking the Gaming, POS and loyalty data

Understand the games manufacturers are making?Changes in the maths of the games

“The games don’t pay like they used too..”– They don’t!!... The maths structure of games is

different– To give a $1,000 pay means the machine has

to generate $1,100 in turnover with no wins.

Understand the games manufacturers are making?Example of 3 x 90% return games

Game #1 Game #2 Game #3

Dribbler Average Game Chasing the big pays

Prize Symbol

Ave Prize Amount # of

PrizesPrize Pool # of

PrizesPrize Pool # of

PrizesPrize Pool

Jack 10c 700,000 70,000 450,000 45,000 200,000 20,000 Queen $10 2,400 24,000 3,500 35,000 1,000 10,000

King $100 50 5,000 100 10,000 300 30,000 Ace $1,000 1 1,000 10 10,000 40 40,000

Hits / Total Prize pool 702,451 100,000 453,610 100,000 201,340 100,000 Line Hit Rate 15.82 24.49 55.19 Average Pay 0.14 0.22 0.50

Are volatile games good or bad?That depends on your customer

Player Type Driver Game Type Spend

Small PunterTimewasters

/Entertainment

Looking for games with low volatility, entertaining features $20

Average BetterFeature /

Prize /Entartainment

Looking for ok run on machine, occasional $100 win $50 - $100

Good Punter Link / Feature Looking for volatile games $300+ wins $100 - $200

Big Hitters Status / big prize

Looking for games with Very high volatility, big paying features $300+

What Type of players do you have? Do you have the Games that meet that market? What are the games the Manufacturers are releasing? Have we trained our staff in the latest gaming trends? Future Benchmarking in this area may produce a game/player profile

You will need to know the right number of games for your gaming floor

You should be looking at minimum $120 per day, ideally $150 or more– You will have better control over your Hold %– This applies to 80% of your gaming floor, fine to have overflow machines

You need to know the right level– What is your usage of all machines during key periods– What is your future need– QLD have started a leasing scheme

Daily Turnover Guide

> $2001$1001 - $2000 < $1000

27% 60% 13%

Source: Club Data Online – March 2010 NSW Gaming Benchmarks

CateringDoes your food draw people into the club?

Catering is still a good way to draw people to the club– Doesn’t currently work as well as previously but is still the key long

term– Get staff to upsell, especially receptionists – Diverse but efficient menu

Older clientele Rissole / Roast (Lower Quality) Younger Quick / Trendy / Healthy (Higher quality) Price Good range

You need to know your market... Spicy Portuguese chicken? Cafe style food/coffee has been a massive craze Pull ideas, especially marketing ideas from wherever you can It can be as simple as the best chips

Get Chefs and Contractors working for you

Out there future trends Social Media

- Posting feature and game prize + Casino logo to Facebook- Promoting your venue through blogs + photos of the great time they had

last Friday night. - Listening to other managers it may not be your marketing manager

controlling this

GPS Technology- “Michael, I have you favourite table/seat available tomorrow night. Would

you like me to place a booking and send Sarah a nice invitation for you??”

- “Your mates, Steve + Tom have just walked in, do you want me to put a Corona on Ice for you?”

Download a Schooner?? Not sure about this one

Society ChangesFrom

Materialistic

To

Post-MaterialisticIndividuals Community

Progress + Growth SustainabilityProcessed Natural

Global LocalImports Aussie Made

Possessions ExperiencesFormal InformalProfits People

Independent Co-operative

Source: Steve Tighe, www.chasingsunrises.com.au

How long will the gaming income stream continue?

It is here for the long haul – it will just be harder to sustain and grow gaming income levels.

This wont be for all clubs.... Why are they growing more or less?

Gaming still represents a minimum 60% net contribution.

To maintain strong income from gaming play will get down to the overall ‘club product’ – strong visitation levels, stick ahead of the competition, good staff, full service offering (good food, beverage, entertainment), invest in your venue (fresh & modern) etc

Engage your customers.

Build stronger relationships with gaming manufacturers – finance staff should be more involved in gaming purchasing decisions – look at ROI

Keep up with gaming replacement programs – maintain investment.

Forecasting and strong economic modelling required.

Long Term Gaming Trend Analysis – What's the future of gaming revenue?

What are the long-term risks associated with Government legislation changes, ageing and technology.

Biggest risk is that clubs put their head in the sand and hope the challenges pass by – the challenges will always be there as gaming is an easy target just like the resources sector.

Lack of planning and slow responsiveness.

Increased license fees, taxes, insurance costs

Restrictions on trading hours, drinking age, ATMs – may need to do more with less

Need to ensure you have strong associations and a strong board

Boards need to become more commercial and professional with strong governance discipline to deal with the future direction.

Training and education needs to be maintained.

Risk that clubs will make poor diversification decisions to make up for possible revenue shortfalls

Another risk is that clubs don’t embrace, understand or invest in new technologies.

Costs of new technologies may be high so long term budget planning is necessary

High aged population with baby boomers leaving the workforce possibly with less disposable income

Ensuring clubs appeal to the Gen X and Gen Y market

Long Term Gaming Trend Analysis – What's the future of gaming revenue?

Michael Alexander Ben Thomas Greg Hurley

Sales Operations Manager

Business Development Manger

General Manager

Mobile 0421 212 551  Mobile 0428 778 931 Mobile 0419 026 483

michaela@clubdataonline.com benth@clubdataonline.com gregh@clubdataonline.com

www.clubdataonline.com

Further Information

• www.ClubDataOnLine.com

• Club Data Online – Financial + Gaming Benchmarks

• CDOL WebReporter – Gaming Market Research and Consumer Trends

• CDOL Earthcheck – CO2 Measurement and Sustainability Benchmarking