Montana VGM's, statute and rule need upgrades
Pub Date: 8/1/2008
Editorial
By Cole Boehler
The recently concluded Gaming Advisory Council-sponsored video gaming machine technology conference in Billings June 25 was long on explanation, exploration and education, but was short on solutions, as was completely expected.
The complex pieces of the puzzle, and their inter-relationships, need to be thoroughly examined and considered before the big picture begins to come into focus, let alone before the puzzle is worked out" before solutions are identified and implemented.
Hopefully, the Montana Tavern Times can provide some context regarding what these puzzle pieces look like now and how they fit together. We haven't , however, the technological or business acumen to even pretend we could predict how the industry picture will ultimately emerge, especially considering the shapes of the puzzle pieces continue to change as technology, with It's every increasing velocity, continues to advance.
Just how much impact is changing technology and business economics having on Montana's video gaming machine marketplace?
On the economics side of the equation, gaming machines are becoming more expensive. New machines now cost between $10,000 and $20,000 with most priced in the $12,000-$13,000 range.
A small bar in a rural setting rarely realizes the machine play and income to make a $10,000, $30,000 or $50,000 investment in new equipment pencil out. Many such locations routinely employ inventive remodels to keep the old gear humming. Others have subsequently turned to machine route vendors to supply updated equipment.
But machine vendors also feel the price squeeze and may be reluctant to make the investment for upgraded and expensive equipment installations in marginal venues.
Meanwhile some machine manufacturers understandably may be focused on the big national or international markets where tens of thousands of machines can be sold every year.
A market the size of Montana, with its Montana-specific game limitations and requirements, may represent a minute fraction of a manufacturer's potential volume. So, designing and manufacturing equipment specifically for a tiny jurisdiction with limited potential can present bottom line challenges.
Some have suggested that if Montana's video gaming machine (VGM) requirements, codified in statute, were more in line with more of the big jurisdictions, some manufacturing efficiencies could be realized, machine prices may be more affordable, and Montana could perhaps see a more aggressive VGM replacement cycle, retiring many of the machines here that are 15- to 20-years-old.
VGM manufacturers agree that Montana's machine inventory is among the oldest of any jurisdiction. VGM manufacturers say machine life in most jurisdictions is about five years, whereas Montana has substantial equipment stocks that are 10, 15 and 20 years old.
Then there is the advancing technology factor.
As in any modern machine manufacturing endeavor, at some point a given piece of equipment will surpass an age where it is economically impractical for the original manufacturer to continue to produce parts and upgrades to keep it operating. Sometimes then small-scale manufacturers step into the breach to produce small batches of parts for these obsolete machines. Just as Ford Motor Co. no longer produces parts for Model Ts, there are a few specialty shops that do.
But in the case of VGMs, those independent-source peripheral components bill acceptors or tickets printers, for example may need to "talk" to the main machine operating system to be properly integrated with the overall system.
That underlying computer code or "communications protocol" originally cost millions of dollars to develop and is considered highly proprietary...at least in the case of currently supported machines (but not necessarily so with obsolete machines "abandoned" by manufacturers). So It's not like bolting up a water pump to an old Model T four-cylinder.
The U.S. Treasury is introducing new currency with extremely high-tech features meant to thwart those who would produce bogus bills.
More sophisticated currency means more sophisticated bill recognition scanners and much larger memories are now required in bill validators. Some older, obsolete gaming machines will not work with the latest high-tech bill acceptors, leaving machine owners the option of hoarding old bills for player use, accepting lower play volumes or finding the wherewithal to upgrade the VGM.
There is another option though: find an independent source to build kits that would allow new bill acceptors to communicate with old "obsolete" machines that are no longer supported by the original manufacturer. For example, Charlie Mears of Mears Music out of Malta has found a way to make the new bill validators work with obsolete, unsupported VLC machines. But there are impediments to that scenario.
First, under current Montana statute and rule, some peripheral components cannot be replaced by anything other than original spec and original manufacture components. Even if an independent component supplier could be found, they face this statutory hurdle. But this can be changed by the Legislature or by amending rules.
Some have also speculated that the Gambling Control Division would prefer that hurdle not be removed as moving more equipment more rapidly into modern-spec status could facilitate an industry shift toward "Tier I" electronic reporting the old, pure "dial-up" scenario that has yet to be embraced by anyone in the business.
econd, that outside component source may not be able to furnish a device that can communicate with the machine unless they have access to the underlying operating code, something no manufacturer grants lightly, yet IGT has indicated it has no problem with peripheral devices being tied into machines it no longer supports. That's progress.
And then there is the case of impact printers.
Montana law requires VGMs to produce win tickets and internal machine audit tapes with impact printers that function much like the old "dot-matrix" printers that have mostly gone the way of the eight-track tape player.
While manufacturers acknowledge that the printers remain available today, their declining use means smaller manufacturing volumes and higher unit costs. Some even question the long-term availability of the devices.
In addition, these printers are relatively large and cumbersome compared to the more modern thermal printers now in use in almost all other gaming jurisdictions. This means Montana-specific VGMs must employ Montana-specific cabinet and door designs that drive up the cost, estimated at an additional $400 to $800 per unit by one manufacturer.
Finally, current statute prescribes that audit roll records be produced with "no carbon required" duplicating paper (one copy for storage by machine owners, the other submitted to the state with tax reports for verification purposes) and that means impact printers. These audit rolls are required to be kept for two to three years, depending upon compliance reporting methods in use at a given location (reporting on-line reduces the time requirement from three to two years).
But laws are routinely amended to reflect social or technological changes and the time may be near for this regulation to be amended. In fact, the Gambling Control Division is evaluating that idea now.
If printed audit rolls which record every machine event were produced with thermal printers, their longevity could be questionable as they deteriorate much faster than impact-printed records and are especially susceptible to destruction by heat.
So as the state regulatory apparatus moves well into the age of automated electronic machine reporting and compliance, can new technology be brought to bear to assure records are stored and backed up reliably, accurately and securely? Some think so and have suggested "thumb drives" could practically be used to securely, quickly and cheaply download and later store data.
But the potential use of thermal printers opens wide another Pandora's Box: should Montana move toward "cashless gaming" as have most other gaming jurisdictions, where bar-coded win-tickets are simply inserted into another machine for additional play, much like currency works in Montana?
Does Montana allow a player or venue to issue a card where purchased credits are stored, then to swipe the card through a reader on the machine to initiate play?
Does cashless gaming inevitably lead to player tracking, which leads to more aggressive (and expensive) marketing and a competitive advantage to large operations that can link many locations into a single "players club" leaving small independents the foundation of the industry and its public policy influence even further behind the competitive curve?
Are machine owners and manufacturers willing to absorb the extra costs associated with "cashless gaming" which requires ongoing license fees paid to the system developer, IGT?
Rising equipment costs, more vended locations, a growing gap between the "have" and "have-not" operations, equipment becoming obsolete with no further support from manufacturers, difficulty finding components for the oldest machines, forced upgrades to bill acceptors that may or may not work with your equipment, a potential shift to thermal printers and the impact that has on Montana's record keeping requirements, cashless gaming and player tracking...
With so much bearing down on the Montana VGM market, It's no wonder Gene Huntington, Gambling Control Division administrator, asked the Gaming Advisory Council to sponsor the forum on technological change and It's effect on the business in this jurisdiction.
Readers need to keep their eye on this ball in order to assure that technology does not drive the industry players onto a decidedly uneven playing field where the large operators prosper at the expense of the small.
We hope large operators in Montana are finally getting it: It is the 1,400 or 1,500 small and medium sized locations the independents who keep this industry and its tax rates viable for all.
Source: The Montana Tavern Times, August, 2008, published monthly by Continental Communications, 125 W. Granite St., Suite 102, Butte, MT 59701.