In Slot Analytics, We Can Do Better Buddy Frank, CDC Gaming Reports · November 29, 2018 at 6:00 pm “We can do better.” That seems to be the underlying theme of the resolutions that we make at the beginning of each year. While most of our annual New Year’s pledges for 2019 will be for personal improvement (weight loss, fitness, relationships, time allocation, etc.), I want you to consider a professional resolution regarding slot analytics. Not just the science or software that that name implies, but a resolution to do better analytics – and then, most importantly, to put that knowledge into timely practice. We can do a lot better. In a recent SAS White Paper entitled Marketing Analytics Meets Artificial Intelligence, the SAS made the following observation: “Marketing is often one of the first departments in an organization to utilize advanced analytics, such as next best action recommendations or churn analytics. Vendors are helping them along by providing tools and solutions that often include sophisticated analytics under the hood.” That line really bothers me, because I’ve come to realize it’s true, despite my deeply held beliefs to the contrary. The professional slot world is not keeping up with marketing in these areas. I spent my first three years in college studying Electrical Engineering. After a stint in the Navy, I returned to school, switched majors, and graduated with a BA in Journalism. While the majority of my classmates in J-School were very bright and articulate, I discovered that many of them had chosen their field of study based on which degree required the lowest number of math courses. There’s nothing wrong with that: some folks like math, some don’t. It worked out very well for me, as I supplemented my undergrad income by tutoring my colleagues in the one required math course for both Journalism and Marketing: Statistics (aka Stats 101). When I entered the casino world, my early efforts were in marketing. And nothing I saw then changed my opinion that, other than having a good background in stats, most of my fellow marketing practitioners were math adverse. They didn’t really like computers much, either, except for the art and graphics folks who lived and breathed Mac and Adobe. When I moved to slots after almost a decade in marketing, I was able to draw on those early EE-required math skills to calculate progressives, massage PAR sheets, and crudely analyze performance. Today, I doubt you can be a good slot pro without at least some advanced skills in spreadsheets and pivot tables. And the best practitioners have either learned, or hired people that have, skills in SQL and other analytical tools like Tableau. So why do I think marketing is ahead of us in “utilizing advanced analytics” and “next best action recommendations?” The big change for them came with the decline of gaming print and broadcast advertising and the corresponding rise of direct mail and social media. All of a sudden, marketers had tons of actionable data from response rates, and their vendors created great analytical services to refine their targets and messages. There’s no shortage of stories about the success that operators like Caesars and other have achieved with these methods. But wouldn’t one assume that slots are doing pretty good, too? The analytic solutions available to them today have never been better. And, importantly, slot revenues are booming, setting new records virtually every day. The only exceptions are individual operators facing new, or increased, competition. Nationwide, gaming revenues are far north of $70B when considering both commercial and tribal casinos, and, with the exception of Las Vegas, 60% to 80% of those revenues are generated by slots. So why do I think we can do better? One of the problems in a booming economy is that shortcomings can be hidden. Making money is good. Making more money is even better. While I couldn’t get a single systems vendor to go on the record, in private conversations they have all told me that a shockingly high percentage of their customers utilize only a fraction of the power of their slot system software. The tales are even worse among vendors who provide slot analytic solutions. There isn’t a lot of data to support my case, but there is some. Last month, I mentioned that ReelMetrics, an analytics firm, was supplying CDC Gaming Reports with some sample reports from their nationwide database of 160,000+ slots, 104 casinos and 75 markets. You’re probably a CDC subscriber already if you’re reading this, but you don’t have to be; just head to www.cdcgamingreports.com. These ReelMetrics reports are only a sampling of the firm’s work, but nonetheless, they are gems worth exploring. The fact that it’s presented for free is in no way reflective of the incredible quality of this sampling of information. This month, in the right-hand column labeled ReelMetrics, you’ll see “Findings – Game Conversions.” The topic of this report concerns our ability to spot weak performers and then do something about it. The “something” in this case is game/theme conversions. In talking with ReelMetric’s CEO Nick Hogan, he told me they’ve defined underperformers on Core games as anything below an index of 1.0 and below 1.8 for premium or shared-revenue games. From their Trailing Three-Month database, the actual numbers triggering conversions for their participating operators are 0.8 and 1.57 for Core and Premium respectively. The report also shows that this group converts about 10% of their Core games and 20% of their Premium games. So far, these numbers are pretty much in line with everywhere I’ve worked in the past. Here’s the shocker: data in the Pre-Conversion Subpar DOF chart shows 193 days for Core and 156 days for Premium. In other words, Core games were under performing for nearly six and a half months before a conversion was made. That’s crazy, and it’s wasted revenue. And it’s the point of this piece. Look, I used to dream up excuses myself. Therefore, I know that most of them were, and are, bogus. With today’s good analytics, we can much more easily spot weak games that, nonetheless, have potential and deserve to stay on the floor for longer periods. But who has seen a future good game stay weak for over six months? Another justification often floated is that the conversion contract took too long because of delays due to (and here you can fill in the blank: the vendor, the CEO, the COO, the CFO, the attorneys, the Purchasing Department, the budget, the regulators.) There are proactive solutions for each of these. Master contracts can cancel out issues with Legal and Purchasing. It’s rare that a vendor is slow, but if it happens, a call to his or her superior can usually fix the issue permanently. And if you’ve made generic conversions a line item in your annual capital budget, is there really a practical reason to require all the folks in the C-suite to sign off again? While these concerns can be fixed, the real culprit is our focus, or the lack thereof, on analytics. Despite the critical financial impacts of good slot decisions, they often don’t receive full-time attention. A department theft can suck up countless slot-executive hours. So can complaining guests. Union avoidance and negotiation issues can delay many projects. How about when your slot supervisor gets a cocktail waitress pregnant, and his cashier wife is pretty upset (yes, that happens)? Keeping up with mandatory training is critical, but also a distraction. It all adds up to time spent away from the prime objective of being more profitable. Why do we get away with it? The truth is that, in good times, slots do well, even if they’re done poorly. It’s not often that management will demand improvements in a department that keeps exceeding budget and doing better than last year. But they should. Along the same lines, familiarity can mask significant problems. How often do you look at profitable products in the 1.25 to 1.75 range? I’ll bet the answer is close to never. Yet repricing, moving or changing denominations on these games can often exceed the gains from purchasing new products. Certainly, we should focus on losers, but we should also spend more time looking closely at all products. I was a victim of this mental block, too, until I was prodded by some artificial intelligence (AI) reports that suggested changing some long-term above-house machines to different configurations. Once these possibilities were exposed, the changes seemed obvious. The resulting conversions resulted in big gains. It was embarrassing in hindsight that those machines had been left untouched for years. I have three solutions: 1. Dedicate more resources; 2. Increase training; 3. Seek some outside help. It always amazed me that departments like Finance and F&B have multiple layers of senior management, while slots operations has one or two at the most. The same goes for analytics staffing; the higher numbers are always in Finance, Marketing and IT. You don’t need to reduce their numbers; just hire more analytics staff for slots. Why wouldn’t you assign more resources to those areas that have the potential to generate the most revenue? Training is always a great solution. Those off-the-record comments from vendors about the low utilization of their software is almost always a training issue. Yes, training costs money. However, I’ll argue that more training on your system or analytics package can generate significantly more revenue. In the long run, you’ll increase your profits if you invest in training now. Seeking outside help has always been a touchy issue for some operators. Many feel that what an outside vendor learns at their property will be shared with their competitors. Well, so what? Making a positive difference in productivity and efficiency has always been due to your quality of execution, not the data or the advice. When you begin to think you are the absolute best in the business, I can almost assure you that you’re not. Many vendors are acutely aware of these issues and are beginning to make some changes. ReelMetrics has structured their company as a service, rather than just a software provider; their full-time focus is on your slots and the analytics of contrasting them to their national database. The Eilers-Fantini Game Performance Database is launching a similar service for operators. Will Dunn at Slot Focus does much of the analytical work for you, and he also does comparisons among his participating users. Kiran Brahmandam has created Gaming Analytics.AI to use machine language and artificial intelligence to provide simple Google-like answers to questions without the high training threshold normally required. And each of the major vendors, such as Viz Explorer, Bally BI, Synkros, Oasis 360 and IGT, have told me they are now offering, or are in the process of developing, analytical services for operators. (Each one of them also offers great training). And some of those folks who are leaders in marketing analytics, like SAS and Agilysys, are also making strong inroads into slots. So hopefully your resolution for the New Year is to focus more on analytics and, regardless of the methodology you select, to do something with the results. Now, not later.