I’d like to take this opportunity to welcome all of you to Racino. While this is the third annual Racino conference, it marks the first as a Global Gaming Expo event. As many of you know, Roger Gros and Paul Dworin of Global Gaming Business started this conference — along with Casino Design — because they saw that there was an unmet need in these two growth areas in our business. And so did we. So we are now working together to replicate what we’ve accomplished in our flagship event, Global Gaming Expo.
What I mean by that is that this event, like G2E, will be a reflection of our industry. The AGA represents many of the companies that make up this industry — both the operators and manufacturers — so we are able to tap into the best experts available — the people who are involved in this business day-in and day-out, not just those looking from the outside in. Our primary goal is to put together an event that meets your business goals and educational needs. And when you attend our events, it’s important to remember that you are also investing in the long-term viability of your industry.
As I said, we recognized an unmet need in this sector of our business. In the U.S., the number of racinos has grown from six in 1994 to 23 today — that’s a 283 percent increase in just 10 years! — and they now operate in seven — but soon to be nine — states. The industry now employs more than 11,000 people, generates over $2 billion in revenue and distributes in excess of $765 million to state and local governments. Here in Canada, you have 28 racinos, 16 of which are here in Ontario, generating in excess of $1.5 billion in revenues for the province and employing more than 3,000 people. With this kind of impact, it’s critical for this sector — whether you do business in the U.S. or in Canada — to work together to not only learn how to improve your business but also to address some of the common challenges we face as an industry.
So, just what are these issues that draw us together? This morning, you already heard about alternative ways (besides slots) to revive your racetrack business, how to compete against other forms of gaming, how racinos have helped to revive the racing industry here in Canada and how cutting-edge technology could change your business. Later, you’ll hear experts debate the involvement of the public sector versus the private sector, government regulation, the joint marketing of machines and racetracks, and the renovation of racetracks.
You’ll also look at the growth prospects in New York and Pennsylvania — two jurisdictions that not only face a lot of competition but also severe tax constraints, with effective tax rates of just over 50 percent in Pennsylvania and in the neighborhood of 80 percent in New York. This is an important issue for every company that wants to do business in the U.S., because it sets a precedent based on bad economics. Tax rates that discourage investment are not good for our host communities, our customers, our companies, or even the states themselves. We need to do a better job conveying that message, and that work can start here at Racino.
But what’s not on the agenda but needs to be discussed here is responsible gaming. As some of you know, it’s a top of mind issue for the commercial casino segment of the industry, and if it isn’t already it should be top of mind for all of you as well. Whether it’s valid or not, casinos come under greater scrutiny for problem gambling than our counterparts in the racing industry. So as you add slot machines to your racetracks, you need to recognize that this is an issue that will require your attention.
I’d like to briefly describe what I see as the commercial casino industry’s major initiatives in this area, and explain how I think racinos can play a critical role in our collective success in addressing this issue.
One of the first initiatives undertaken by the AGA when it was founded in 1995 was to create an independent organization that would fund peer-reviewed research to help expand our knowledge and understanding of gambling disorders. The National Center for Responsible Gaming was established in 1996 and since then has awarded $8 million in research grants to more than 20 prestigious academic institutions and research organizations in the United States and Canada. To date, the organization has received $13 million in funding commitments, primarily from commercial casino companies but also from some Indian casinos and the union that represents thousands of casino workers in the United States. Even so, we know that we have only tapped a small fraction of the gaming industry in the U.S. and abroad.
Thanks to the NCRG, we now have promising drug and behavioral treatment options; a new understanding of the brain’s reward system and of how dysfunction in this area can contribute to pathological gambling; further evidence of the genetic factor in pathological gambling; and a clearer picture of how and why some adolescents develop gambling disorders. Now before your eyes start glazing over, let me stop and tell you that one of the NCRG’s priorities today is to take the results of the research we have funded and see if it can be applied in the workplace to help guide our companies in developing effective responsible gaming programs.
We will be exploring that very topic at the NCRG’s annual conference next month in Las Vegas. The conference will include a track specifically geared toward the gaming industry, gaming regulators, attorneys and elected officials. It will include sessions on gambling and its potential health consequences, health risks for casino employees, the challenges of putting into practice the AGA Code of Conduct for Responsible Gaming — which I will be discussing in a few moments — regulating gambling and its potential health consequences in a global economy, and much more. I would encourage all of you to attend and become better informed — and involved — on this very important topic.
Another resource being developed as a result of NCRG funding is an online employee-training program. In the coming months, the Institute for Research on Pathological Gambling and Related Disorders at Harvard Medical School will launch the first-ever online employee-training program incorporating the latest in scientific research. The program, which will be certified by an independent body with expertise in the addictive disorders, will be a cost-effective tool for casinos around the world to use to help ensure that those who are on the front line in this industry — our employees — fully understand the appropriate actions to take to address potential gambling problems.
As you can see, NCRG’s work benefits every segment of the gaming industry, and I hope you will join with us to help support — and even expand — the mission of this organization.
We believe the work of the NCRG is so important that we included a provision in our Code of Conduct for Responsible Gaming calling for companies to continue funding this type of research. This code — which, as I mentioned earlier, will be the subject of one of many educational sessions at the NCRG’s annual conference next month — is the second major industry initiative I’d like to discuss with you today and show you why your involvement in this area also can make a difference.
The AGA, in its role promoting industry best practices, led an effort recently to create a comprehensive set of guidelines governing nearly every operational aspect of the U.S. casino, from employee training to alcohol service to advertising. The effort began with a small group made up primarily of representatives from legal, public relations and government affairs departments. You can imagine the challenge of balancing the varying needs of a diverse group of operators and manufacturers, while creating a code that would pass the ha-ha test. After nearly a year of meetings and drafts too numerous to count, we were able to create a single document that eventually would become the AGA Code of Conduct for Responsible Gaming. The final code was adopted by our board a year ago and took effect this past September.
The code does what its name implies — it “codifies” a broad range of practices throughout our industry. For some companies, it simply reinforced existing practices. Others have needed to bring their practices up to the standards spelled out in the code.
For employees, our companies have all pledged to provide responsible gaming training and refresher training, share informational materials and post signage that will increase their understanding of this issue as well as the company’s relevant policies and procedures.
For patrons, our companies have all pledged to promote responsible gaming by prominently displaying on the gaming floor and on company Web sites educational materials, help line numbers, and information about the odds of winning or losing at various games offered by the casino. We also have formalized our commitment to provide patrons with the opportunity to request that they be excluded from casino privileges such as casino-issued markers, players clubs and check cashing, as well as from the casino itself. It’s noteworthy that our companies also have pledged to serve alcoholic beverages responsibly, helping to ensure that nobody who is visibly intoxicated is served alcoholic beverages or allowed to gamble, and alcohol is not served to anybody under the age of 21.
In addition to renewing our commitment to prevention of underage gambling and unattended minors in casinos, the code establishes a standard for casino advertising that goes beyond the standards set by federal and state laws. Our companies also have committed to include responsible gaming messages and/or toll-free help lines and not allow the ads to appeal to anyone under the legal gambling age or contain claims or representations that gambling will guarantee financial or personal success.
The AGA is not charged with monitoring our members’ implementation of this code, but within the code there is a provision that specifically calls for each company to conduct annual reviews of its compliance. Although the code doesn’t have the force of statutes or regulations, our industry has taken it very seriously. Every company and every state has an approach that’s appropriate for its own unique set of circumstances.
By adhering to a universal set of guidelines, the industry as a whole benefits because it not only standardizes our practices but also sets the bar high. Just as this applies among commercial casinos, it also applies to every other segment of the gaming industry. If even one company fails to maintain high standards, it can have a negative impact on our entire industry. In the public mind there is not much of a distinction between a commercial casino, a racino, an Indian casino or sometimes even an online casino. I think the “Arthur Andersen” example is a good analogy — although other accounting firms were not implicated in the Enron scandal, all accounting firms got a black eye for their general practices as a result of that incident.
So, my hope is that all of you will join the AGA so we can make available to you all the resources we have to help you fulfill the provisions in the code. Failing that, I hope you will look to our code as a set of minimum standards for responsible gaming that should become an integral part of your daily operations.
Racino is an excellent opportunity to network with your colleagues about what they’re doing to promote responsible gaming at their facilities and to begin to take a leadership role on this issue within your organization. I don’t think it’s an overstatement to say that this is as critical to the bottom line as any marketing initiatives you may learn about here.
With the patchwork of structures and regulations in this sector from country to country and even state to state, it would be easy to stress our differences. However, the bottom line is that we are more similar than we are different, and it is those similarities that we need to concentrate on to advance this industry as a whole.
Thank you, and enjoy the conference.