Gaming insights Gaming

Back from the brink

Written by Andrew W Scott

This article first appeared in the Sep/Oct 2015 issue of WGM.

Since his appointment as Aristocrat’s new CEO in 2009, Jamie Odell has overseen a dramatic turnaround in the company’s fortunes with the famous slot machine manufacturer once again a dominant force on the global gaming scene. WGM was granted a rare opportunity to sit down with Mr Odell to discuss Aristocrat’s resurgence and where it fits into a rapidly changing Macau market.

Andrew W Scott: Thanks for sitting down with us Jamie. We’d like to start by stepping back in time to 2009 when you first came on board at Aristocrat with the company having experienced a significant slump since its glory years. What was that like for you and how did you go about turning it all around?
Jamie Odell: Well I came from outside the industry and that’s something they only do when things need to change. Very early on I was out at Rooty Hill RSL in Sydney’s west (one of Australia’s largest clubs with around 800 slot machines) meeting with its CEO and he was talking about how Aristocrat used to be the best in the business but now there were others doing it better. When I thought about Aristocrat in those days – Aristocrat was the first great innovator of video games. It had enjoyed great success in New South Wales (NSW) but when new jurisdictions such as other Australian states started opening up the company’s way of thinking changed from “innovating, innovating” to “new market, new market”.

That had a couple of impacts. Firstly, it meant that with these new states opening up we were more focused on launching the same product into these states rather than creating new products, and the second thing was that our competitors caught up which always happens when you slow down on the innovation. So when I was at Rooty Hill, it was a real eye opener when they said they didn’t need to buy any new products from us – which is a terrible thing to hear. That’s when I stopped and said, “We need to become the best in the world at content”.

What I love about this industry and what keeps it so alive is that it is right in the middle of creativity and technology, so our games are made in creative studios and we have software guys and mathematicians but also musicians, artists and animators. They’re putting together a story and it all has to work. It’s like a movie. You watch a movie that has a bad lead actor and it doesn’t work.

With the great games, all the elements work together so we went back to that with a focus on creativity. We also changed the technology platform so we basically moved the technology to two places. We moved a lot of the architecture to Austin, Texas, which is close to the Austin Independent School District. They have some great software architects. And we put a lot of the software support into India where we now have about 400 people.

Going back to what I was told at Rooty Hill RSL, we ended up with a strategy that has been through a number of iterations since but at the heart of it was having content focused on what players wanted through listening to our customers. That’s a really important part of our mantra. The second was culture – people. We just realised that the old Aristocrat had a number of people who had been through the great years and kind of became a bit arrogant. There is no other way of saying it. We had to become more humble and listen to the customers telling us they didn’t like our games anymore.

I remember coming back to the office after that and writing on the white board “content”, then “people”. We had to look at “Where have we gone wrong with content? How do we build content? How do we support it with great technology?” If you look at where we are now in Australia, it is one of our greatest success stories because we’ve had great growth in a number of places but to actually turn around a business which was successful then had fallen out of favor – to turn that around is incredible. We’ve come back to being a powerhouse in Australia and that’s a credit to everyone involved.

AWS: So it was basically a case of going back to the future.
JO: Yes and Rooty Hill was an eye opener to me too, having not come from that part of the industry – it’s enormous but it’s also the heart of the community. You’ve got a hotel there, a fitness centre and I think it has one of the biggest gymnasium halls in Southeast Asia. It’s an amazing property so you’ve got to listen to these people. There are a lot of big clubs in Sydney but the further west you go the more they become the heart of the community. There are all sorts of activities going on in there.

AWS: It’s one thing to talk about creating great content again, but how do you go about actually doing it?
JO: There are a number of ways we do that. We do spend a lot of time listening to the operators because they are the best at running their floor. That’s what they do and they see how the content moves. It’s not just about great games but also from stand-alone machines to links and what the players are telling them. It’s impressive when you walk around a NSW club – these guys are on a first name basis with their regular players so they give us a lot of feedback. We try to have clear innovation, which means uninfluenced innovation or “clear blue sky” innovation. I think that is important. There is a game on our stands called “The 3rd Prince” which is a battle game and you’re actually in a battle which determines whether you win or lose. That’s what we call “clear blue sky” innovation. That was at the heart of the old Aristocrat when there was less competition in NSW – it was always “what do we do next?” It produces this great, innovative powerhouse.

The other factor is what else is working in the market place. Generally now, when you think of slots you’ve got to think of what is working, why it’s working and what are the trends. You talk about denominations for example. You see certain jurisdictions in different parts of the world start to pick up in the mid denominations or the lower line. So you’ve got to follow those trends. And finally it’s the world outside – the changing player base. “The Walking Dead” machines we developed – which are based on the television show – are really an example of us taking a risk by looking at what properties with a different demographic it might work at. One of our values is courage and that was a courageous decision but last year at G2E Las Vegas it won Best in Show. So there are a number of ways we try to improve the content.

AWS: When you talk about the changing player base, Aristocrat is predominantly an Australian company but it is also the dominant player in Macau. What are the differences in finding success in Macau as opposed to Australia and what were the factors that led to you enjoying such success in Macau?
JO: There are a couple of answers to that. The core benefit to begin with was that we had a lot of Asian players in Sydney, so if you look at the top five or top six games – the games that make up the core of the Macau and Asian slots floors – those are the games like “5 Dragons” and “50 Dragons” – great games that were already themed. They were for the Asian community in Sydney – and we have a very large Asian community in Sydney – so we always thought in that way. Obviously we weren’t solely about the Asian market in Sydney because we’ve also got games like “Queen of the Nile” and “Buffalo”, but when the Macau market opened up those Asian themed games were obvious ones to bring here. We then realized what a big market this was and started to target Macau specifically.

The other interesting factor is that the Asian market itself is very diverse. We talk a bit more about the Philippines these days.

The majority of our business in Asia comes from outside Macau. That surprises some people but there is a lot of business outside of Macau. Even just in the Philippines you’ve got language, culture and history, so targeting games for the Philippines is different to targeting games for Macau or for Vietnam.

So we look at where the growth in Asia is coming from, which games have cross-over potential and which really need to have targeted games. A couple of years ago we did a Manny Pacquiao link which was clearly coming from the team in the Philippines. Manny supported us in that. So we can’t think of Asia as one market these days. It is very fragmented with different regulators and such a rapid rate of change. We’ve all had to adapt to it and of course the amazing Macau story.

AWS: How does the Macau downturn affect your business?
JO: Slot machines are still only a small percentage of the Macau market – around four to five percent – which is very different to a lot of markets that we’re in. And clearly it’s a mass market product. You see even in the recent share changes that people are moving towards mass floor because that’s where the revenue is going.

For us, it’s clear that most of the decline is coming from table games and it’s how the operators react to that. It will be interesting to see how they react with the new openings too with fewer table games and fewer junkets playing on tables. For us, we’ve just got to focus on making great slot games in that space. It doesn’t change. This market is going to go through a lot of change with openings. The DICJ – we support what they’re trying to do with regulation as this market matures and in particular responsible gaming. I always say in every market that we (the industry) have the greatest interest in responsible gaming being taken seriously because it is about a sustainable industry.

So we support the DICJ in that but it means getting used to change. We try to help our operators through that. Also, mass market I think will increase over time because slots are not intuitively negative products in Asia. People are still learning, there is growth to be had in slots and a lot of excitement in slots. The final thing I really want to talk about with Macau – it’s easy to talk about growth rates but just think about scale. The scale of this place today is phenomenal. If you went back a few years and said, “Would you be happy if this was the outcome?” everyone would be. They would all say “Wow, we’ll take that!” So I’m encouraged when I hear the operators – they are very bold in saying, “Think about the scale of this market and the success of this market. Don’t dwell on the 50 percent decline.” I mean, we all know what’s driving that but this market is highly sustainable, it’s profitable. Just look at the dollars going through – that’s okay. In many ways it is re-basing for the future but it is re-basing at a very healthy level. Whatever is happening with table games doesn’t change my thinking about the importance of this market when it comes to the potential for slots.

AWS: A newer area when it comes to gaming is online gaming and that refers not just to real money play but also social gaming. What do these online opportunities mean for Aristocrat and what have you learned from your ventures into this space so far?
JO: We’ve already built a very successful slot business, Product Madness, out of Vegas and it is successful in many ways. What we’re learning is that strong land-based content is strong social slot content. It out performs any general slot content we put out and that’s very encouraging for us. The use of it – and remember this is quite an immature industry that is growing quite quickly – but the use of it is quite closely linked to the players who play slots in casinos. It’s not really surprising if you think about it. They play land-based and they enjoy the experience of a win, so even in a social environment where it’s not a credit you can take out it’s still a winning experience and they enjoy the chase and the scatter and the game.

What I’m also learning is that as the world moves towards mobile through phones and tablets, people will come back to great slots content. If you look at a lot of casino floors you will still see people playing games from 2007 despite the fact they have far newer technology available to them with newer screens, graphics and animations. They still like that classic experience. So there is an evergreen nature to slots which I notice is rare in non-slots content.

There are only a few genres in social that have that sustainability. Others are quite fashionable so you look at the big games – how long will that big game be popular for and what’s the next big game? There are so many people developing these games in the social space and none of us know. None of us could have predicted the success of “Angry Birds” or “Candy Crush”, so what’s the next big thing? The generation using social are so used to multiple devices and multiple tasks. It can change from one network to another in the blink of an eye and all of a sudden “bang”. It’s much faster than the slower moving land-based environment which is more habitual I think.

AWS: Macau has eight new properties opening between 2015 and 2017 of which Galaxy Phase II and Broadway Macau have recently opened. You will no doubt have had dealings with all of them. What are your observations on these?
JO: I think they are all pretty clearly differentiated and segment the market pretty well. I’m not an operator so I can only bow to the knowledge of those guys and listen to them heavily which is why we try to spend as much time with them as we can. What’s clear is that the second Galaxy opening appears to be more mass market and that’s working.

The premium nature of other properties – and Wynn is a fine example of that – I think we will always try and tailor our content to individual needs. I’m a great believer in having multiple options and it’s not for me to say what experience each player is going to like. With that said, I think it is definitely going to move more towards the mass and I expect we’ll be seeing these properties targeting themselves more towards mass and premium mass which is still a highly profitable business. I like the diversity. There is no doubt when you walk around the different casinos you know you’re in a different property and when you’ve been here a while you know what property you’re in and what they stand for. They all have a place, I think, in the community in Macau.

AWS: Well as much as people have historically thought “VIP” in regards to gaming in Macau, mass has always been very healthy as well.
JO: The first time I came to Macau I was with a colleague and the ferry was full of locals. As we unloaded on our way to the casino I thought “Wow, we’re never going to get a room by the time we get to reception!” My colleague said “Watch this”. So we got off the bus and we were the only ones that went to reception – the rest just shot off straight to the mass floor!

AWS: The gaming industry is always going to come across anti-gambling campaigners and in your case one of those would undoubtedly be Australian Senator Nick Xenaphon who is renowned for his anti-slots stance. What are your thoughts on what he is trying to do?
JO: I don’t go down that path to be honest with you. We have to work with all of the interested parties and I do not back away from responsible gaming. I came from the liquor industry and no one wants to see people abuse alcohol. A small percentage of people abuse it but the vast majority use alcohol responsibly. It’s the same in gaming but you have to address people who need help culturally to manage that. We know that the people who have an issue need to change culturally. I mean, I don’t believe you can force change on people because people find a way of doing things. You need a cultural change.

The greatest example I like to use is drink driving. When I grew up, drink driving wasn’t frowned upon. These days you genuinely have people who will say to their friends, “Don’t drive drunk and if you do I’m not getting in the car with you”. It’s stupid on so many levels and that’s cultural. It generally happens with new generations. I have two young boys in their 20s at university now and I see that their behaviour is far more responsible than ours was at their age thanks to 20 years of cultural change. That’s what we need to be driving.

So no, I don’t shy away from different views or radical views. I think it has to be focused though on cultural change. For our industry to be successful in 20 years’ time everywhere from manufacturers to clubs to casinos, we need responsible gaming. You can’t shy away from regulatory change, you need to support it but at the same time inform it because if you just think you’re going to stop something by saying to someone “Don’t do it”, you’re mistaken. It just causes the problem to go elsewhere. But history says you need a few people out there to bring the issues forward, then you address them based on facts.

AWS: Aristocrat’s popular “Fa Fa Fa” link has been turned off for more than a year now in Macau while the DICJ determines what it should do next following a software glitch that led to a dispute with a player over a jackpot. Can we expect to see “Fa Fa Fa” back in Macau anytime soon?
JO: At the moment we’re focused on our new products, so we’ve got “Yellow Dragon” on the floor and the new “Good Fortune” link with the cumquat tree. That sounds like corporate speak but these links are just as powerful and just as effective so they are going to be increasingly our focus. Working with the DICJ in regards to “Fa Fa Fa”, we’ll continue to support what they want to do but clearly it’s been turned off for a period of time so we’ll focus on new links. I think the industry is working well with the regulator now to get through these issues. There has been some progress made over a period of time.

AWS: Our readers will take that as a “no”!
JO: Well it’s not something that’s within my control so we’ve developed alternative products that are just as strong. “Good Fortune” in the Philippines is a powerhouse. It’s a very strong link with the same attributes the players used to love. That’s been our focus and to some extent the future of “Fa Fa Fa” depends on how well that product plays and how the regulators think about it over here.