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How Technology Kills Technology

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October 01, 2010
Gaming | Technology
Bill Geoghegan - Bill@LGTConsulting.com.

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tech·nol·o·gy [tek-nol-uh-jee] –noun
The branch of knowledge that deals with the creation and use of technical means and their interrelation with life, society and the environment, drawing upon such subjects as industrial arts, engineering, applied science and pure science.

Ralph Waldo Emerson is credited with the often quoted remark about technological innovation: “Build a better mousetrap, and the world will beat a path to your door.”  While he may have been a great poet, the belief in that philosophy has cost many their fortunes.

Bear with me while I make an analogy between a popular consumer technology and changing slot machine technology.

Prior to 1975, the only way to record home movies was on film. The process required exposing the film through a camera, then turning the exposed film over to a processor, who would develop the film.  After some period of time, the film was returned, when it could be viewed using a home movie projector. There was very little instant gratification in the process.

In May of 1975, Sony introduced a home videocassette tape recording format known as Betamax based on the design of its professional U-matic format. This represented the first generally available home video recording system.  The two-piece camera and VCR system quickly began replacing Super 8mm film as the medium of choice for shooting home movies, but the market demanded a single unit recording system that was as compact as the Super 8 cameras.  Sony developed the Betamovie camera in response to that demand, but the miniaturization necessary to create the single-unit camera/recorder resulted in a device that was only able to record, and required a home Betamax player to view the tape.

The Beta format was licensed to other electronics companies, such as Toshiba, Pioneer, Zenith and Radio Shack, but JVC introduced its Video Home System (VHS) in October of 1979 with a much lower licensing fee, and a major format war ensued. VHS offered a more compact video camera due to its design, and that camera could play back as well as record. By 1980, VHS controlled 70 percent of the North American market.  By 1988, Sony finally conceded defeat, and it, too, began producing VHS recorders.  Although it continued to build Betamax units until 2002, the format was effectively killed.  Even though many would argue that Beta was a better format, and that Betamax was superior to VHS in many ways, the better marketing and lower license fees of VHS effectively ended the reign of Sony’s proprietary format.

Even with the widespread acceptance of VHS, the laser disk (which never really caught hold) and later the digital versatile disk (DVD) replaced the video tape as the medium of choice. The last prerecorded VHS tape was delivered on December 31, 2008. While blank tapes can still be purchased, the medium has essentially been replaced by the prerecorded and recordable DVD.

Many people have a graveyard of antiquated, unsupported devices that are kept simply to view the tape of their wedding or their daughter’s first birthday. While there are still holdouts who continue to use the Beta format (not unlike those audiophiles who still swear by vinyl records), for all intents and purposes, advances in technology have killed the video tape.

While a tech-savvy person may well be able to afford replacing their video recording mechanism every few years, the same is not true when it comes to technological advances in a casino or hotel, where the purchase price of a single component is multiplied by 3,000 slot machines or 4,000 rooms. 

In the casino, the current state of the art is server supported games. Many refer to these as server-based games, but that is a misnomer. In a server-based game, all the logic and decisions take place on the server, with the slot machine being a dumb terminal.  In a server supported game, the logic and decisions still take place on the game machine, but the game theme and pay table is served to the machine by the server.  The primary benefit for this method is that the game on the machine can be changed either at the discretion of the casino management or at the request of the player.  Games and payout percentages can be changed based on day of week and time of day, or the player can request a specific game on the machine at which they are playing.

But changing the technology of the slot floor is not a small decision.  When a single slot machine could cost anywhere from $15,000 to $20,000, not including labor and IT costs, making the decision to replace even a portion of a casino’s existing devices could amount to a multimillion dollar investment. 

Making that technology purchase decision even more difficult is the fact that the major slot machine suppliers, such as IGT, Aristocrat, WMS, etc., will not sell the hottest themed machines.  Themes like Sex in the City cannot be purchased, but rather require a lease/participation arrangement, wherein the slot supplier gets a significant portion of the win from each machine. While that mitigates the risk for the casino owner, these lease/participation machines also compete with those devices which the casino has purchased. 

Older legacy machines, such as those with spinning reels, become difficult if not impossible to maintain as parts become unavailable. As technology advances, there is little if any incentive for a slot manufacturer to support older devices.  The primary focus of these companies is to sell new machines, so in some ways it makes sense for them to abandon the older ones. Making the wrong decision can leave the casino owner with a legacy that may not be supported, or may be rejected by customers because of a newer technology that comes along a year later. Slot machines have gone from spinning reels to touch-enabled cathode ray tube displays to touch-sensitive flat panel screens in a matter of 10 years. Each new technology has killed the previous one in short order.

Today, 3-D television and video games look like the next killer technology.  Toshiba and Microsoft Applied Sciences Group have both recently announced 3-D displays that do not require any special glasses. It is not hard to predict that we will soon see 3-D slot displays, rendering this year’s technological innovations obsolete.

What Ralph Waldo Emerson should have said is, “Build a better mousetrap, market it well because someone will build a better one soon!”

Bill Geoghegan is a consultant in Las Vegas. He can be reached for comment at Bill@LGTConsulting.com.

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