Focus on Aristocrat: Talking Slots with Aristocrat’s Jon Hanlin Buddy Frank, CDC Gaming Reports · November 20, 2020 at 5:00 am It’s an understatement that 2020 has been a strange year in the casino world. Another one is that Aristocrat’s games are doing pretty well. They occupy almost every top spot in nearly all video slot categories. Here’s another understatement. There is no one who wouldn’t trade their number one spot in any other category for the ratings Aristocrat has achieved in video slots. Not only do they have the #1 product in each video category, but they also dominate the Top 10 and Top 25 rankings in every area. Jon Hanlin, Senior Vice President of Commercial Strategy & Business Analytics of Aristocrat With that in mind, CDC’s Buddy Frank recently spoke with Aristocrat’s Jon Hanlin whose length and impressive title is: Senior Vice President of Commercial Strategy & Business Analytics. Hanlin is one of the rare senior executives in slot manufacturing whose background was in operations and analytics on the slot floor, in his case with the Caesars organization. They began with the now-standard 2020 query: BF: How are you doing these days at Aristocrat? JH: Things are as good as they can be. We have a lot of positivity around our business, our products, and our people. We feel confident that we’re doing the right thing in keeping our D&D (Design & Development) function whole throughout the shutdown and into this recovery period. We are focused on making sure that our products are meeting the market’s needs. We know that as a manufacturer, we’re only as good as our products perform. Fortunately, we have been on an unparalleled streak over the last five years, maybe even longer. We also believe that when slot players start coming back to the casino floors, they are going to want to play the games they know and love, and want to have new experiences in those similar math models. So, we’ve focused on providing our casino partners (and the players who play our games) those great experiences. It’s like any entertainment, when you take something away from someone, and then give it back, they’ll really appreciate it. So, we want to take advantage of that appreciation and put our best foot forward. BF: A recent ReelMetrics report on Market Share since 2014 showed that of the “Big Four” suppliers only Aristocrat grew in each of the last six years with the others either down or flat. That’s pretty impressive. JH: It’s a testament to our D&D partners at our great game studios. Using a baseball analogy, they each have the ability to hit at a high rate. We have all these different players who swing the bat well, and we have a great batting average. When you look at these reports like Eilers year-over-year in a category like Premium Games, we went from having hits on 52% of the Top 25 list up to 56%. It’s similar with the Overall Performance in the Top 25 going from 30% to 36%. While we appreciate and respect how well our products are doing, for us it’s about keeping the train on the tracks. We’re making sure we are feeding the engine with a lot of new great games and making sure that we get them out there for players. BF: Some manufacturers have told me that their Pre-G2E efforts were better for product sales, while G2E was for re-establishing relationships and getting more hands on. How did you rate the G2E experience this year in the virtual environment? JH: If we base it on my not losing my voice and having sore feet, it’s been fantastic. I agree with you that Pre-G2E is valuable time with the customer, because it is focused and locked in. G2E is designed to really show off what we bring to the table. For me, G2E season is about giving customers the opportunity to see the portfolio of products that are for sale or lease in the coming year and allowing them to plan their budgets for the year and beyond. The core of G2E is that. We called this year’s virtual presentations “The Aristocrat Upfronts.” We broadcast directly from our showroom floor in real-time and presented our strategy just as we normally would. We had a comprehensive presentation and our key strategy representatives on the call who walked them through our roadmap, while answering questions in real time. Our product people would then go into the showroom and walk the customers through the games just as if you were standing in the room yourself. We had a full production crew set-up through our marketing team to achieve this. It was like being in our showroom for Pre-G2E. I honestly don’t feel like we missed a beat. Would we love our customers to be able to touch, feel and play the games? Yes, absolutely. But did they get the essence of what G2E is, which is giving them the ability to plan their year and their budgets and to see and judge which manufacturer they want to spend their dollars with? I believe we accomplished that. For the last couple of weeks, we’ve had some limited and safely executed showroom tours with very limited audiences that allowed them to play and see the products. Our showroom is the equivalent of our G2E booth this year. That gives us the opportunity to show our customers that show-stopping experience. And it will be there. So, in March, April, May and beyond, we’ll be able to present a similar experience. BF -Will G2E be forever changed based on what happened in 2020, or will it go back to normal once the pandemic is behind us. JH – If I were a betting man, I think G2E will go back to normal. I think there is still a lot of value there. We accomplished our main goal of showing our product and helping customers plan their budget. But G2E is so much more with conferences, networking, info sharing, and the diversity of vendors not just focused on slot products. Personally, I think it may be scaled down on some of those extra things for maybe a year, maybe two, until everyone gets their bearings back, but then we’ll see how it goes. But I hope we have the ability to get back to focusing on slot product at the show. BF – How many game design studios do you have now? JH –There are nine that provide us with product in the U.S. Two in Las Vegas; three in Sydney; one in Austin, two in Atlanta and one in Reno. It’s a global effort for us. What I love about our system is it creates a diversity of products. We’re not single-threaded through one voice on what our products should be. Our studios are very independent. They can explore and innovate in their own ways. We as a commercial team give them direction on what we think sells and what mechanics are working. But in the end, it’s their talent and their ability at being the best at what they do that drives that performance you’re seeing in the reports today. BF – With the pandemic restrictions, most operators were forced to reduce their floor game counts. Yet, Aristocrat was a leader in the percentage of games that have remained on the floor. JH – In all humility, when you think about who the audience is going into a casino these days, you understand it’s players who love to play slot machines. We know, that as the creators of the popular high-volatility low-denomination video machines, that those core players are our players. Others may have a good base in video poker or mechanical reels, but we’re strong in the math that drives penny videos. And that’s the “bread and butter” of the industry today. We’re in a very strong position during this recovery period. But we’re also focused on broadening that base. We are branching into other areas like steppers, bar tops, VLTs in new markets and trying to expose more people to our great products. That’s really our focus now, showing more people our games. BF – Since you mentioned steppers, one area where you are not dominating is mechanical reels. How is the Relm doing? JH – I’m excited to talk about the Relm. Steppers are an interesting segment. You must find your niche. We have had some fits and starts. We’ve had some good games and some that faded away. But we’re finding that converting some of our video hits to steppers is starting to work well for us. Traditionally that hasn’t been the case. In the past, bringing video mechanics to steppers didn’t work. But now, we’re really starting to see growth in our “hold and spin” steppers. The latest Eilers reports showed two of our Asian “Hold & Spin” titles for the Relm in the Top 25. I have a ton of optimism about our steppers now. The real question is whether customers will be buying mechanical reels during the recovery. In a capital-constrained market they can become a luxury buy, rather than an essential buy. BF – What new trends do you see in the future? Cashless or anything else? JH – We are working on a pilot program on cashless with Boyd Gaming. As an ex-operator myself, I believe that cashless is an inevitability, just like when coin had to go. There’s just too much labor and too many things that can go wrong with having that much cash in the building. Once the technology is there, it will change. However, I am concerned with the prospect of having too many wallets, so we want to ensure our solutions make are a convenience and not a hindrance for the slot player to play the game. BF – How about ETGs? That’s an interesting segment for us, and we monitor that space; however, right now our brands wouldn’t have as much impact there. I could bring a Lightning Link or a Buffalo to the table, but it doesn’t mean anything to those table games players. We are looking at the space and asking what we can do in terms of innovation. We haven’t found anything yet that we think will move the market. But if we do, you may see it some day at a future G2E. But, again, we will not enter that market unless we feel we can add value. BF – How about video poker? JH – That’s a tough hill to climb. But what we’re focused on is that we feel that our slot content and our slot brands should be in front of players wherever they want to play, be it on the floor, or at the bar. We are obsessed with getting our slot content in front of players and our bar top cabinet is another one of those opportunities. BF – What haven’t we hit? JH – For us at Aristocrat we are focused on delivering the best slot content and the best hardware to drive the best value for our customers. I think the launch of the MarsX Portrait this December signals that we haven’t taken our foot off the gas, and we’re still pushing forward. We are not holding back content, cabinets or slowing the development of content. What wins the day is who takes care of the customers and who gives them the product that helps recover this industry. We want to be a major part of that recovery.