Making the News

Pittsburgh Post Gazette

Originally Published:Sunday, January 3, 2010
http://www.post-gazette.com/pg/10003/1025433-454.stm

Some think live table games are a bad hand
Benefits of staying electronic debated

By Mark Belko
Pittsburgh Post Gazette

For Rich Orlando, the dawn of table games in Pennsylvania would be no winning hand.

As the largest supplier of electronic table games to the state's nine casinos, Mr. Orlando sees the legalization of live poker, blackjack and roulette as a losing proposition for his business, TDN Money Systems of Aston, near Philadelphia.

Mr. Orlando, TDN president, expects most casinos to fold their electronic table games like a bad hand once their live counterparts show up on gambling floors throughout the state.

"In our little world, it certainly is going to hurt us and we have to change with the times," he said.

But Mr. Orlando also believes the demise of electronic table games could end up costing the state money. He argues that the games in essence slot machines produce on average more revenue than will the live versions, which are more labor intensive and will have a far lower tax rate.

By his own analysis, he estimates the state could lose out on tens of millions of dollars a year in making the switch. But critics say his numbers fail to take into account the full economic impact of adding table games in Pennsylvania.

Mr. Orlando, who acknowledges that he has a vested interest in the outcome, has sent his analysis to some legislators, suggesting that they not legalize live blackjack and three-card poker in a bid to keep the electronic versions on the floor.

He estimates that an electronic table game with five seats, on average, generates about $2,500 in revenue a day, with $1,375 of that going to the state at the 55 percent tax rate. The $2,500 averages out to $500 a seat, far higher than the average win per day of most slot machines.

He projects that a live blackjack game would produce, on the high end, about $4,000 a day in revenue, with $640 of that going to the state at the proposed 16 percent tax rate.

"Once they go off the floor and real blackjack tables come in at the lower tax rate, it's going to be good for the casino but the state is going to come up short on some money," he said.

But state Rep. Dante Santoni Jr., chairman of the House gaming oversight committee, said he does not see the General Assembly restricting the types of table games allowed in Pennsylvania casinos.

The General Assembly has talked for months about legalizing live table games but has yet to pass legislation. A vote on Senate Bill 711, which would allow table games, could come this week.

He said live blackjack and poker are very popular table games.

"I think we're allowing the casino and ultimately the consumer to make the decision on what games they want to play," he said.

Critics say that Mr. Orlando's analysis is too narrowly focused and doesn't take into account the employment and wage tax revenue table games would generate or the additional traffic casinos would see once they are introduced.

Proponents of legalizing table games say they could spawn at least another 10,000 casino-related jobs in the state.

Frank Legato, editor of Global Gaming Business, a gambling industry trade journal, said table games not only would produce additional employment but "extra money in the economy, extra wage tax. I think those benefits pretty much outweigh the lower tax [on table games]."

Once such factors are considered, the state "is not losing a lot and may in fact be gaining" revenue, he said.

"Employment pumps money into the economy. That's an intangible benefit, a secondary benefit, but I think it's more important. People pay for things, pay their own income tax to the state. That really should be taken into account when talking about table games," he said.

He also took issue with Mr. Orlando's estimate on the daily revenue produced by a live table game. He said such numbers can vary depending on the minimum bet allowed. It is not unusual, he noted, for casinos to raise the minimum bet allowed for blackjack, for instance, to $10 or more on crowded days.

"A $100 blackjack table is going to earn a lot more than a $5 blackjack table," he said.

In Atlantic City, the average win per table game per day, excluding poker, ranged from $2,842 in 2007 to $2,424 through November 2009, according to the New Jersey Casino Control Commission.

Harvey Perkins, senior vice president of Spectrum Gaming Group, an industry consultant, believes the introduction of table games also will prompt casinos to add hotels, fine dining and other amenities to serve a larger customer base.

Overall, he sees live table games as an economic plus, allowing casinos in the state to stay competitive with those in West Virginia, Atlantic City and other jurisdictions.

"You can play with the math all you want. At the end of the day, you're providing a competitive gaming supply," he said.

Mr. Orlando readily admits that his analysis did not factor in the additional employment or increased revenue from new players that table games could provide.

But he thinks there's potential for the state to have the revenue equivalent of a royal flush by banning certain live games such as blackjack in favor of electronic versions currently available.

"Why mess with a blackjack game that is making you more money than any real blackjack table will give you?" he asked. Mr. Orlando estimates that at least 80 percent of the Shuffle Master electronic table games he distributes probably will be removed once the live versions hit the floors.

That's probably no bluff.

"They'll ride out their leases and ship them back because they need the floor space. Yeah, I think most of them will disappear," Mr. Legato said. "It's been demonstrated in casinos already that where live tables and electronic tables are both available, players will pick the live table because they like to play cards. Playing cards is what it's all about, the interaction with other players."

In fact, in Atlantic City, there are no electronic games such as those in Pennsylvania on casino floors, the New Jersey Casino Control Commission said. An electronic poker game tried at a Trump casino was removed last year because of low popularity, a spokesman said.

Mr. Perkins said he sees "significantly" fewer electronic games in Pennsylvania over time. But he does believe there's some potential for a mix, adding that may depend on whether table game dealers are unionized. Unions, he noted, may see the electronic games as a threat.

Neither Rivers Casino on the North Shore nor The Meadows Racetrack and Casino in Washington County have decided how many electronic games will remain if the state permits live ones.

David Patent, Rivers acting general manager, said he expects that a "reasonably good chunk would come off the floor, but we definitely want to keep a good amount as well.

"There's a niche for these products that would be maintained even if we have live table games," he said, adding how many are kept ultimately will be determined by the customer.

Rivers currently has 104 electronic table game seats, 70 for blackjack, 10 for three-card poker and 24 for roulette.

The Meadows has been asked repeatedly when it will get table games "so there's clearly a desire by our guests to play the real thing," spokesman David La Torre said.

"The presence of table games will undoubtedly also increase slots revenues. We've talked with so many people who say they love the Meadows and its ideal location, but they spend a great deal of time in West Virginia casinos because a spouse or friend prefers table games. If table games are legalized, we're not only going to attract table games players but slots players as well," he said.

The Meadows currently has 40 electronic blackjack seats, 10 three-card poker seats and 10 roulette seats.

Mr. Orlando's business has been supplying Shuffle Master electronic games in Pennsylvania for the past three years. The machines are leased monthly by the casinos, and TDN Money Systems gets a percentage of the lease amount to install and service the games.

While the business will take a big hit if electronic games disappear from casino floors, Mr. Orlando said the company and its 16 employees will survive. He is now negotiating with an Italian company to supply table game equipment in the state. TDN also distributes ticket redemption machines to casinos.

"We would be OK. We've been planning for it. We know the storm is coming. We're picking up other lines to supplement our business," he said.

"I'm not afraid of closing the doors because of this. We'll change with the times."

By Mark Belko

For Rich Orlando, the dawn of table games in Pennsylvania would be no winning hand.

As the largest supplier of electronic table games to the state's nine casinos, Mr. Orlando sees the legalization of live poker, blackjack and roulette as a losing proposition for his business, TDN Money Systems of Aston, near Philadelphia.

Mr. Orlando, TDN president, expects most casinos to fold their electronic table games like a bad hand once their live counterparts show up on gambling floors throughout the state.

"In our little world, it certainly is going to hurt us and we have to change with the times," he said.

But Mr. Orlando also believes the demise of electronic table games could end up costing the state money. He argues that the games in essence slot machines produce on average more revenue than will the live versions, which are more labor intensive and will have a far lower tax rate.

By his own analysis, he estimates the state could lose out on tens of millions of dollars a year in making the switch. But critics say his numbers fail to take into account the full economic impact of adding table games in Pennsylvania.

Mr. Orlando, who acknowledges that he has a vested interest in the outcome, has sent his analysis to some legislators, suggesting that they not legalize live blackjack and three-card poker in a bid to keep the electronic versions on the floor.

He estimates that an electronic table game with five seats, on average, generates about $2,500 in revenue a day, with $1,375 of that going to the state at the 55 percent tax rate. The $2,500 averages out to $500 a seat, far higher than the average win per day of most slot machines.

He projects that a live blackjack game would produce, on the high end, about $4,000 a day in revenue, with $640 of that going to the state at the proposed 16 percent tax rate.

"Once they go off the floor and real blackjack tables come in at the lower tax rate, it's going to be good for the casino but the state is going to come up short on some money," he said.

But state Rep. Dante Santoni Jr., chairman of the House gaming oversight committee, said he does not see the General Assembly restricting the types of table games allowed in Pennsylvania casinos.

The General Assembly has talked for months about legalizing live table games but has yet to pass legislation. A vote on Senate Bill 711, which would allow table games, could come this week.

He said live blackjack and poker are very popular table games.

"I think we're allowing the casino and ultimately the consumer to make the decision on what games they want to play," he said.

Critics say that Mr. Orlando's analysis is too narrowly focused and doesn't take into account the employment and wage tax revenue table games would generate or the additional traffic casinos would see once they are introduced.

Proponents of legalizing table games say they could spawn at least another 10,000 casino-related jobs in the state.

Frank Legato, editor of Global Gaming Business, a gambling industry trade journal, said table games not only would produce additional employment but "extra money in the economy, extra wage tax. I think those benefits pretty much outweigh the lower tax [on table games]."

Once such factors are considered, the state "is not losing a lot and may in fact be gaining" revenue, he said.

"Employment pumps money into the economy. That's an intangible benefit, a secondary benefit, but I think it's more important. People pay for things, pay their own income tax to the state. That really should be taken into account when talking about table games," he said.

He also took issue with Mr. Orlando's estimate on the daily revenue produced by a live table game. He said such numbers can vary depending on the minimum bet allowed. It is not unusual, he noted, for casinos to raise the minimum bet allowed for blackjack, for instance, to $10 or more on crowded days.

"A $100 blackjack table is going to earn a lot more than a $5 blackjack table," he said.

In Atlantic City, the average win per table game per day, excluding poker, ranged from $2,842 in 2007 to $2,424 through November 2009, according to the New Jersey Casino Control Commission.

Harvey Perkins, senior vice president of Spectrum Gaming Group, an industry consultant, believes the introduction of table games also will prompt casinos to add hotels, fine dining and other amenities to serve a larger customer base.

Overall, he sees live table games as an economic plus, allowing casinos in the state to stay competitive with those in West Virginia, Atlantic City and other jurisdictions.

"You can play with the math all you want. At the end of the day, you're providing a competitive gaming supply," he said.

Mr. Orlando readily admits that his analysis did not factor in the additional employment or increased revenue from new players that table games could provide.

But he thinks there's potential for the state to have the revenue equivalent of a royal flush by banning certain live games such as blackjack in favor of electronic versions currently available.

"Why mess with a blackjack game that is making you more money than any real blackjack table will give you?" he asked. Mr. Orlando estimates that at least 80 percent of the Shuffle Master electronic table games he distributes probably will be removed once the live versions hit the floors.

That's probably no bluff.

"They'll ride out their leases and ship them back because they need the floor space. Yeah, I think most of them will disappear," Mr. Legato said. "It's been demonstrated in casinos already that where live tables and electronic tables are both available, players will pick the live table because they like to play cards. Playing cards is what it's all about, the interaction with other players."

In fact, in Atlantic City, there are no electronic games such as those in Pennsylvania on casino floors, the New Jersey Casino Control Commission said. An electronic poker game tried at a Trump casino was removed last year because of low popularity, a spokesman said.

Mr. Perkins said he sees "significantly" fewer electronic games in Pennsylvania over time. But he does believe there's some potential for a mix, adding that may depend on whether table game dealers are unionized. Unions, he noted, may see the electronic games as a threat.

Neither Rivers Casino on the North Shore nor The Meadows Racetrack and Casino in Washington County have decided how many electronic games will remain if the state permits live ones.

David Patent, Rivers acting general manager, said he expects that a "reasonably good chunk would come off the floor, but we definitely want to keep a good amount as well."

"There's a niche for these products that would be maintained even if we have live table games," he said, adding how many are kept ultimately will be determined by the customer.

Rivers currently has 104 electronic table game seats, 70 for blackjack, 10 for three-card poker and 24 for roulette.

The Meadows has been asked repeatedly when it will get table games "so there's clearly a desire by our guests to play the real thing," spokesman David La Torre said.

"The presence of table games will undoubtedly also increase slots revenues. We've talked with so many people who say they love the Meadows and its ideal location, but they spend a great deal of time in West Virginia casinos because a spouse or friend prefers table games. If table games are legalized, we're not only going to attract table games players but slots players as well," he said.

The Meadows currently has 40 electronic blackjack seats, 10 three-card poker seats and 10 roulette seats.

Mr. Orlando's business has been supplying Shuffle Master electronic games in Pennsylvania for the past three years. The machines are leased monthly by the casinos, and TDN Money Systems gets a percentage of the lease amount to install and service the games.

While the business will take a big hit if electronic games disappear from casino floors, Mr. Orlando said the company and its 16 employees will survive. He is now negotiating with an Italian company to supply table game equipment in the state. TDN also distributes ticket redemption machines to casinos.

"We would be OK. We've been planning for it. We know the storm is coming. We're picking up other lines to supplement our business," he said.

"I'm not afraid of closing the doors because of this. We'll change with the times."

Mark Belko can be reached at mbelko@post-gazette.com or 412-263-1262.


 

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