【SG总裁访谈】创新的重点在吸纳新生代客户
We Need to Create Content that Can Expand the Player

Mike Chambrello, President and CEO of Scientific Games

 

U.S. retail sales appear to have improved in this last quarter. Is this a sign the economy is turning the corner toward brighter days or do you believe the numbers are attributable to some other factor or factors?

 

We see more positive signs and more traction than can be attributable to what the experts are calling “a very weak recovery” and others are calling “we never got out of the recession.” I think what we’re seeing, more than the macro-economic picture, is a lot of the hard work that’s been put into expanding products and promotions by both lotteries and vendors to help improve the value proposition of the product. Some of that may be related to macroeconomic conditions but I think it’s much more related to proactive steps that were taken probably this time last year or six months ago. It takes some time to develop and execute and implement and then see results.

 

You mentioned on your second quarter earnings call that you have begun an exhaustive marketing study to give Scientific Games greater insight into de-commoditizing the instant product. What does that entail and what have you learned so far?

 

One thing we have to keep in mind is that this is a product that needs to reinvent itself from time to time. In fact, this is the third or fourth time we’ve had to reinvent the product either to reinvigorate sales or to take them to new and higher levels. In our business we find the environment where we sell our products and the technology that supports these sales change continuously but the adoption of solutions change at fl ex points driven by the economic needs of the lotteries. We are at another one of these historic fl ex points currently. And so we continue to invest to ensure alignment with the current needs of the consumers and distribution partners. We see a lot of opportunity for growth.

 

One of the key findings from our research is a recognition that we need to create content that can expand the player base by exciting a new generation of consumers, as opposed to focusing most of our efforts on trying to get existing players to play more.

 

We also must continue with ongoing initiatives to expand the number of distribution channels through which the product can be delivered, as well as identify new and creative ways to market and sell the product at retail.

 

This is a wide-reaching study. We’ve included outside consumer product experts who have worked with some of the best blue chip consumer companies. We’re eager to get an outsider’s view of our consumer product. While premature to discuss what those results are, so far they’ve been quite interesting and enlightening. We look forward to beginning the execution phase in 2011.

 

As our industry looks to capitalize, to a greater degree, on the Internet as a marketing tool, what is SGI doing as a company to help customers deliver the right products at the right time to the players of tomorrow?

 

We alluded earlier to the exhaustive market research we’re doing, as it relates to de-commoditizing the lottery product. We’re talking not just instant tickets and not just the systems portion. I think as we look at the last fi ve years of this business, we’ve been successful because of the fi ve years of planning and execution before that.

 

We have so much data and so much opportunity to quantify what it is that our current players want and how we can attract new players. Every day, our research team is in the fi eld doing research in an effort to uncover the products and solutions that have the capability to keep our current players playing and can capture the fascination of a new generation of players.

 

Anything we do on the traditional lottery side also helps us understand the demographics, as well as the needs and wants of players on the Internet side. By and large there’s some overlap, but that’s a new segment for us, which is exciting because it goes to expanding the player base. In our view of Scientifi c Games, expanding the player base, regardless of the product, will be a key to sustainable and responsible growth in the immediate years ahead.

 

Across the U.S., lotteries are increasingly asking the supplier community to provide an even higher level of product/service support than ever before. Illinois, for one, is now seeking a private manager for operational services and performance management. Could you share your thoughts on Illinois’ innovative and progressive structure?

 

This new model represents the next phase in the evolution of the U.S. lottery industry, which began with a straight fee-for-product/service model and has increasingly transitioned to a percentage-of-sales, performance-based model in the past 15 or so years.

 

The emerging model, if you will, is essentially the private management of a wider array of lottery activities. Make no mistake: this is the Illinois Lottery and it will remain the Illinois Lottery. They will continue to have regulatory and oversight authority but will give to the private sector a freer hand within the regulatory environment to enact responsible best practices that heretofore have not always been implemented at a pace aligned with the speed of today’s evolving consumer wants and needs.

 

We’re certainly excited to see how this new model unfolds over the next weeks, months, and perhaps years to come.

 

 In response to the Illinois bid, Scientifi c Games partnered with GTECH. Can you please explain how and why you envision this will work?

 

I wouldn’t focus just on Illinois. We look at each opportunity as a unique opportunity and we look at it individually. We’ve been very consistent in taking this approach for a number of years. We’re certainly cognizant of what our strengths are and where we can add value. In some cases, adding value means being a participant as opposed to the sole provider. We think we’ve been very successful with Lottomatica, GTECH’s parent company, in Italy. We’ve had successful partnerships with virtually every other major supplier in the industry, including many viewed as our competitors. I don’t look at the Illinois partnering as unique or anything other than Scientifi c Games’ overall strategic view of expanding our customer and product portfolio.

 

Today’s gaming consumers want the ability to play any games, anytime, anywhere. They want to engage in multiple play styles – whether they involve casino, lottery or casual games – and they want to access these games through distribution channels other than just traditional retail. This emerging and transformative gaming trend has come to be known as convergence. How is Scientifi c Games working to support convergence?

 

One of the things we need to recognize is that our industry used to be relatively cut-and-dry: A lottery player/provider was a lottery player/ provider; a video lottery player/provider was a video lottery player/provider; and a tote provider was a tote provider. The Internet was something that we all thought would happen someday. The reality is that in order to take advantage of each of those vehicles, we need to enhance the network and broaden the distribution channels.

 

I think we’re well down the road to convergence and we’re positioned very well whether it’s through our new product development, some of the joint ventures we’ve established, some of the partners we’ve engaged, or just some of the products we’ve put in place. We recognize that fl exibility in the product and an expanded distribution network – not the platform – are what are important. Whatever goes on in the backend to bring it all together should be transparent to the player, the customer and the people operating the contracts.

 

You recently acquired substantially all of the assets of GameLogic, including the company’s Internet loyalty software platform as well as a portfolio of engaging free-to-play games.

 

What does this acquisition add to your company’s loyalty program offering?

 

The Internet, as a vehicle for introducing lottery products to a broader audience, is still somewhat in its infancy, relatively speaking, due to regulatory restrictions. It may surprise you to know that we actually delivered our fi rst Internet-based second-chance drawing solution nearly a decade ago. We recently extended this offering by implementing

 

Internet-based loyalty programs and points-for- prizes promotions in Arkansas, Minnesota and Tennessee.

 

GameLogic now gives us the capability to offer lotteries an even stronger platform, a more robust loyalty program, and will enable us to bring new content to market quicker to meet what we believe will be strong customer demand for these products going forward.

 

One of the things GameLogic brings is a terrifi c casual games portfolio that numbers somewhere between 90 and 100.

 

At this time, our recommendation to our U.S. lottery customers is to lay the foundation now for softer gaming so that they are ready for whatever the future may hold in terms of Internet play. By investing now in their promotional infrastructure, lotteries will be creating broader awareness of their offerings by leveraging into new, non-traditional channels. In the process, they’ll also be collecting real- world information on the best ways to promote their products via web technologies, as well as understanding how to use this medium in the most socially responsible manner possible. It is also a vehicle for driving traffi c from the loyalty site to our traditional bricks and mortar retailers.

 

The Barney Frank bill recently passed the House subcommittee.

 

What are your thoughts on Scientifi c Games’ Internet positioning within the Frank bill?

 

What the bill will look like at the end of the day is anyone’s guess at this point.

 

What I do know is that lotteries, the racing industry and Indian casinos are all constituencies with considerable vested interest in the Internet Gaming Act. In one way or another, we provide products and services to each of these industries. That certainly bodes well for us, given we’re now aggressively building our portfolio to accommodate this consumer of tomorrow. Regardless of which way the legislation is set up, Scientifi c Games has nearly 40 years of experience operating in a highly regulated gaming environment and this experience will serve us and our interactive customers well in a future that will likely include more, not less, government oversight.

 

Are there areas of the Frank bill you would like to see revisited?

 

In the Frank bill as it stands now, the Peters’ Amendment was added in an attempt to clarify that lotteries are able to conduct Internet sales by saying that wagering activities conducted by a State or its vendors over the Internet are legal so long as the electronic transmission is initiated within the State authorizing such wagering. Unfortunately, this amendment may not sufficiently reflect the Congressional intent for state lotteries to be allowed to responsibly utilize the Internet without the risk of action by federal enforcement officials.

 

Do you see the US online gaming market opening primarily through state lotteries, or through intrastate or federal legislation?

 

 We feel strongly that the existing regulation and infrastructure already in place for lotteries are sound, responsible and proven, and, in fact, have been quite successful in serving and protecting the public’s interest since the start of the modern-day lottery era in 1964.

 

States generate $25 billion, roughly 4% of general funds, from gaming taxes today. These funds will be jeopardized if lotteries are forced to compete with federal Internet Gaming providers, yet are prohibited from offering their own Internet games.

 

Poker initiatives in Iowa, Florida and California have failed, thus far, at the state level, but have drawn considerable attention.

 

If expansive federal legislation is enacted, it would not only cannibalize the states’ revenue from play, it would add both a layer of tax and administrative redundancy to the fi eld of gaming regulation, which has traditionally been the province of state and local governments.