Hit the Jackpot? You Won't Need a Bucket

You don't have to ask Dot Houseman twice if she thinks the new coinless slot machines that spit out paper vouchers are a good thing. "I love them," said the Carson City (Nev.) retiree as she sat in front of a Triple Play Poker machine at the Atlantis Casino Resort in Reno one recent afternoon. "You don't have to handle coins, so your hands don't get dirty. It's no pain, no strain. They should have them in all the casinos."

Soon, they will. Slot machines are making an evolutionary jump on the order of the early 1980s, when computer chips allowed one-armed bandits to be played by pressing a button instead of pulling a handle. New coinless technology already has found its way into roughly 10% of the nation's 600,000 slot machines. G. Thomas Baker, chief executive of slotmaker International Game Technology (IGT), figures coinless will make up the majority of the installed base in the next few years. "We're selling record numbers of replacement machines," he says.

The new technology works like this: Players feed coins or paper bills into the machine, which credits them for the amount they put in. As a player wins or loses, money is added or subtracted from her account. When the customer presses the cashout button, she can elect to get a certain percentage in coins or receive it all in a paper voucher that's a little larger than a credit-card receipt. The voucher can then be inserted into other slot machines or cashed in at the coin-redemption windows.

Casinos love the coinless technology because it can cut the cost of labor and equipment by 30% or more. Traditional slot machines are forever running out of coins when customers hit the jackpot. Such events require a "hand pay," which often involves slot attendants, machine technicians, and security guards. Coinless machines require far less attention on the casino floor and fewer employees in the coin-counting and storage areas. Casinos even save money on the buckets, wrappers, and other gear for coin handling. "It gives you a nice return on your investment," says Wallace R. Barr, chief executive of Park Place Entertainment Corp. (PPE), which operates casinos under the Caesars, Bally's, and Hilton brands.

Coinless machines offer another benefit for casinos: They speed playing time to an average of 15%. Fewer breaks to refill the coin hoppers mean less downtime per machine. Also, because the paper vouchers can be inserted into slot machines of any denomination, customers don't have to waste time getting change. In fact, the coinless technology has sparked a return of penny slots, which were phased out years ago due to the high cost of handling the coins. Penny and nickel slots are growing in popularity because customers often feel better about playing low-denomination machines, even though the amount wagered per spin can be 100 or more times the minimum bet.

Does all of this mean that casinos are getting less noisy? Hardly. The new machines play high-fidelity recordings of coins clattering and jingling when customers hit the jackpot. "A lot of traditionalists said, 'I want to hear those coins,"' explains Virginia McDowell, senior vice-president of sales and marketing at Argosy Gaming Co. (AGY), a major operator of riverboat casinos.

While slot-machine makers such as Alliance Gaming (AGI), WMS Industries (WMS), and Aristocrat Leisure (ALL) all make coinless models, the big winner is Reno-based IGT, which has a better than 60% share of the U.S. slot market. Under the direction of William "Si" Redd, a former slot salesman, IGT came to dominate the industry by harnessing new technologies. The company was among the first to offer video poker machines in the 1970s. In the mid-'80s, it introduced the idea of linking several slot machines in networks that entice gamblers with larger jackpots. Those innovations allowed IGT in 1989 to surpass longtime industry leader Bally Manufacturing Co., which became less of an innovator after it diversified into health clubs and casino ownership.

Last year, IGT spent $80 million of its $1.8 billion in revenues on research and development, more than twice that of its nearest competitor in dollar terms. Video images of television hosts Pat Sajak and Vanna White now prompt players on IGT's latest Wheel of Fortune slot machines, while a prototype I Love Lucy slot emits a chocolate odor harking back to the famous episode where Lucy works at a chocolate factory.

IGT's Baker sees coinless technology as a stepping stone to more electronic commerce in casinos. In January, the company rolled out a new computer protocol that allows machines to interact with a casino's player-tracking, marketing, and accounting systems. Interactive television screens on slot machines can alert customers when their room is ready or allow them to order a free drink. Rather than handing out rolls of quarters on tour buses, casinos will be able to give customers credit that will be good only at a particular machine.

Baker believes it's just a matter of time before state regulators allow slot machines to accept bank debit cards. Opposition to credit cards, though, will probably be much stronger. "Not in my lifetime," Baker says. It's nice to think there may be limits to how technology will be used to separate gamblers from their money. By Christopher Palmeri in Reno, Nev.

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