The world's largest gaming machine manufacturer has announced it will withdraw production from the Australian market.
IGT are relocating their manufacturing facilities back to the US after a 13 year presence in Australia. Subsequently, they will have an office staffed by a small sales team, together with R&D support to adapt games to the local market. In the process, around 100 jobs will be lost and they will reduce the product lines available.
"IGT's experience in Australia has been disastrous in recent years," says tourism and leisure analyst Jennifer Owen in her latest Macquarie Equities report on Aristocrat, who will no doubt increase their stronghold position in Australia. Macquarie believes that market share has fallen from 40% in 1996 to around 10% in 1999.
"IGT's move into video is the reasoning behind the relocation in that it makes more sense for them to have production centralized in one place."
Accordingly, they also think that the only critical aspect of the Australian market that adds value to them is the game development presence - given the Australian market shows the trends first.
"Industry sources fear there is a risk in separating software and hardware development - as both have to work together," says Ms Owen.
Gary Garton, Executive Chairman of IGT has resigned, and several other senior IGT executives have also left the company.

Next Generation start-up

Two executives amicably departed from IGT a few months back to establish a games design studio, independent of any one gaming machine manufacturer or operator.
Next Generation Gaming Pty Ltd, headed by Mr Tony McAuslan and Mr Mario Castellari, have already secured start-up funding to concentrate on the design and production of pokie-style games featuring state-of-the-art graphics, sound and adventure-based play.
The company is still in the games development phase, employing designers and mathematicians to refine their products.
It's primary target market will be internet gaming operators and media organisations, and as such is working with organisations from the sporting, film and television arena to transfer their products into games.
In addition, the company is focused on supplying third-party games to European gaming machine manufacturers and will have an office in London to service this market.

Aristocrat ups the ante

Back on the home front, Aristocrat claims market share over 70% for the local Australian market.
According to Ms Owen, Aristocrat's games are outperforming the competition, and in some instances, their games are generating revenues at the rate of three times compared to their competitor games.
"Some Aristocrat games are generating over $2000 net machine revenue per day," she explains in the report. "The national average daily machine net revenue is $92."
Despite their outperformance and profitability, venue operators are nevertheless resistant to move 100% to Aristocrat games, preferring to keep a mix of other manufacturers products to retain competitive pressure on Aristocrat.
At this point in time, the largest competitive threat to Aristocrat is Konami. According to Ms Owen, Aristocrat claims that they Konami may have achieved 10% of the installed base of gaming machines in the Australian markets where they are licensed.

Side-bar

Lengthy battle ends for Aristocrat founder

Mr Len Ainsworth, the Australian visionary who started manufacturing poker machines some forty years ago, has come to the end of a lengthy defamation action brought against him by a member of the police force.
Back in 1980, NSW police officer Mr Bob Clark effectively alleged that Mr Ainsworth was involved with criminal behaviour, which was subsequently circulated to gaming authorities in Australia and throughout the world.
Now, nineteen years later and after numerous investigations costing taxpayers millions of dollars, the long-running legal action has now been settled in the NSW Supreme Court.
No doubt, it's been a long and unfair haul for Mr Ainsworth, the former dental manufacturer who is credited with establishing Australia's most successful poker machine manufacturing company.
"My integrity has been re-confirmed, and I can now get on with my business," said Mr Ainsworth, whose new company Ainsworth Game Technology Pty Ltd will soon hit the market with a range of innovative poker machines.
Mr Ainsworth resigned from Aristocrat in 1995 and subsequently has had no involvement with the company since its listing on the Australian Stock Exchange in 1997. Apart from the fact that their games are the most popular and profitable in Australia, the successful foundation that he built back in 1953 has reaped enormous returns for shareholders. Shares have risen from their initial listing of $2.75 to $19.75 (at at mid-November), and are expected to hit at least $25 prior to their impending Nevada license.
Aristocrat's claim to fame are its unique technical innovations, including the development of video-based games, which have been taken up in a number of overseas jurisdictions including the world's largest gaming capital of Nevada.
"We realised that there was a huge opportunity to offer players more than mechanical stepper-style machines with apples and pears or stars and stripes," said Mr Ainsworth, who also pioneered the change from traditional three-reelers to multi-line multiplier games.
"Players are intelligent, and want a bit more stimulation than just pressing a button. Apart from offering state-of-the-art technology for the operator, we developed computer-based games with second-screen features so that players can make their own decisions."
These Aristocrat games, complete with advanced sound and 3D graphics, are now known globally as Aussie slots; meaning sophisticated games returning good profits for the operator - and entertainment for the player.