CMA Finance Conference Long Term Gaming Trend Analysis Michael Alexander Sales Operations Manager Industry Data Online

Long Term Gaming Trend Analysis What’s the future of gaming revenue?  How long will the gaming income stream continue?  What are the long-term risks associated with Government legislation changes, ageing and technology?  Research based analysis of current and future trends help you plan, organise, lead and control your club’s financial future.

Current Trends

Club Gaming in NSW has been growing at slightly above the CPI CPI IncreaseSydneyAustralia * Source: ABS Consumer Price Index

Club/Hotel Performance since Smoking Ban introduction

Decline in number of people playing Poker Machines

Trends and Benchmarks are changing rapidly Game Type Analysis Feb-10Feb-08 2yr Comparison Standard Install %41.28%51.07%-9.79% Turnover %32.41%40.64%-8.23% Profit %35.60%44.74%-9.14% SAP Install %18.07%10.83%7.24% Turnover %20.74%12.40%8.33% Profit %20.26%11.83%8.43% Ante/Extra Bet Install %10.51%8.16%2.36% Turnover %14.56%10.63%3.93% Profit %13.66%9.63%4.03% Ante/Extra Bet-SAP Install %4.52%3.46%1.07% Turnover %5.04%4.01%1.03% Profit %4.09%3.26%0.83% Manufacture's Link Install %23.51%25.14%-1.64% Turnover %24.57%30.27%-5.70% Profit %23.94%28.94%-5.00% Multi-Game Install %2.07%1.34%0.73% Turnover %2.65%2.03%0.62% Profit %2.43%1.61%0.83%  Clubs have decreased standard games to increase SAP and Ante/extra Bet product  Players have moved away from Links and towards SAP and Ante/Extra Bet product

The Goal Posts have moved Changes in the NSW Club Financial Model Financial Modelling – NSW Clubs Previous Model New Financial Model Difference % Revenue100,000141,24341% Business GP%55.0%49.7%-10% - Overheads30.0%32.0%7% = EBITDARD %25.0%17.70%-29% = EBITDARD $25,000 0%

Future Trends

Where does our Financial model need to be? Needs Improvement KPIsExcellent 12%EBITDARD25% 24%Wages18% 12%AEMP6% $120Daily Profit / EGM$180 6%Gaming Promo4% 6%Gaming Wages4% 55%Bar GP64% 24%Bar Wages20% 55%Catering GP62% 50%Catering Wages42% 35%Overheads25% Source: DWS / PKF LCA Presentation May 2010

Ageing Population Can you capitalise on a larger older generation? Age Groups % of NSW Residents that visit Clubs % % % % TOTAL % ABS “By 2056 Australia's population is projected to increase to between 31 and 43 million people, with around 23% to 25% being 65 years or older. In 2007 Australia's population was 21 million people, with 13% being 65 years or older. Source: CDOL/Roy Morgan Research 2010

Technology – Short Term  Smaller – Medium Clubs – Analysis tools on gaming purchasing and business efficiency – There are cheaper alternatives  Staff  Systems  Medium to Larger Clubs – Increased skills in using gaming purchasing and business efficiency tools – Increased use of CRM systems and reporting tools  Invest wisely though

CDOL Gaming  What are the latest trends in the Gaming Industry?  How do my Gaming KPIs compare to Industry Benchmarks?  Armed with knowledge of the latest trends and your own gaming benchmarks, what is the most suitable product to buy for your gaming floor NSW

Regular News articles Performance trends Gaming Machine replacement rate Retail trade trends Case Studies Other relevant articles

How do my Gaming KPIs compare to Industry Benchmarks?

What are the levels of product on the gaming floor of others?

NSW March 2010 NSW March 2010 NSW March New Game report 2.Game Ranking 3.Linked Game Report What is the most suitable Game/ Manufacturer for my Gaming Floor

Dynamic Reports Filters are:  State  Performance Tier - Top 25% - Mid 50% - Low 25%  Region - Metro - Coastal - Country  Location - Sydney (West, Nth West, South, North, East) - Central Coast - Central West - Newcastle/Hunter - Sth Coast/Highlands - Riverina - Far Nth Coast  Machine Size

I look for flexibility with my purchase. What is my next step if this game doesn't work?

Future – Gaming Analysis Finding out more about our your gaming floor Mar-10 Average Turnover/Day/EGM ($) Trend Mar-10 Machine Distribution (%) Trend Denom Machine Numbers Average Turnover / Day/EGM ($) Average Profit/ Day/ EGM ($) Average Return/ EGM (%) Feb-10 Mar- 09 Mar- 08 Previous Year Install % Turnover % Profit %Feb-10Mar-09Mar-08 Previou s Year 1c121$1,255$ %$1,251$1,243$1,1291.0%80.60%73.19%78.21%79.50%81.09%82.96%-0.5% 2c6$1,520$ %$1,550$1,467$1,3233.6%3.70%4.07%4.26%3.59%3.37%2.71%0.3% 5c4$1,583$ %$1,620$1,191$1, %2.78%3.25%3.17%2.97%1.92%1.72%0.9% 10c3$1,685$ %$1,654$1,564$1,2787.7%2.15%2.62%2.58%2.16%2.41%2.88%-0.3% 20c2$1,655$ %$1,566$1,734$1, %1.25%1.51%1.46%1.18%1.14%1.13%0.1% 50c2$2,031$ %$4,225$3,142$1, %1.03%1.49%1.29%1.35%0.52%0.25%0.5% $113$2,226$ %$2,246$2,456$1, %8.49%13.85%9.02%9.21%9.52%8.32%-1.0% Also applies to  Manufacturers  Product Type  Game Type (SAP, Link, Standard, Ante Bet)  Patrons (Overall, Beverage, Catering, Gaming)

Future – Patron Analysis Finding out more about our patrons Mar-10Trending.... DenomPatron #'s Patron Split % of Revenue Gaming Spend Catering Spend Beverag e Spend Total SpendFeb-10Mar-09Mar-08 Males3, %47.15%$24 $20 $13$56 Females3, %52.85%$30 $14$8$ Gaming Non- Gaming TAB Punters Bowlers Total 7,143100% $382,043 $ 27 $ 16 $ 10 $ 53

Future – Catchment Analysis Find out more about the player by linking the Gaming, POS and loyalty data

Understand the games manufacturers are making? Changes in the maths of the games “The games don’t pay like they used too..” – They don’t!!... The maths structure of games is different – To give a $1,000 pay means the machine has to generate $1,100 in turnover with no wins.

Understand the games manufacturers are making? Example of 3 x 90% return games Game #1 Game #2 Game #3 Dribbler Average Game Chasing the big pays Prize Symbol Ave Prize Amount # of Prizes Prize Pool # of Prizes Prize Pool # of Prizes Prize Pool Jack 10c 700,000 70, ,000 45, ,000 20,000 Queen $10 2,400 24,000 3,500 35,000 1,000 10,000 King $ , , ,000 Ace $1, , , ,000 Hits / Total Prize pool 702,451100, ,610100, ,340100,000 Line Hit Rate Average Pay

Are volatile games good or bad? That depends on your customer Player TypeDriverGame TypeSpend Small Punter Timewasters /Entertainment Looking for games with low volatility, entertaining features $20 Average Better Feature / Prize /Entartainment Looking for ok run on machine, occasional $100 win $50 - $100 Good PunterLink / FeatureLooking for volatile games $300+ wins$100 - $200 Big Hitters Status / big prize Looking for games with Very high volatility, big paying features $300+  What Type of players do you have?  Do you have the Games that meet that market?  What are the games the Manufacturers are releasing?  Have we trained our staff in the latest gaming trends?  Future Benchmarking in this area may produce a game/player profile

You will need to know the right number of games for your gaming floor You should be looking at minimum $120 per day, ideally $150 or more – You will have better control over your Hold % – This applies to 80% of your gaming floor, fine to have overflow machines You need to know the right level – What is your usage of all machines during key periods – What is your future need – QLD have started a leasing scheme Daily Turnover Guide > $2001 $ $2000< $ %60%13% Source: Club Data Online – March 2010 NSW Gaming Benchmarks

Catering Does your food draw people into the club? Catering is still a good way to draw people to the club – Doesn’t currently work as well as previously but is still the key long term – Get staff to upsell, especially receptionists – Diverse but efficient menu  Older clienteleRissole / Roast (Lower Quality)  YoungerQuick / Trendy / Healthy (Higher quality)  PriceGood range  You need to know your market... Spicy Portuguese chicken?  Cafe style food/coffee has been a massive craze  Pull ideas, especially marketing ideas from wherever you can  It can be as simple as the best chips Get Chefs and Contractors working for you

Out there future trends Social Media - Posting feature and game prize + Casino logo to Facebook - Promoting your venue through blogs + photos of the great time they had last Friday night. - Listening to other managers it may not be your marketing manager controlling this GPS Technology - “Michael, I have you favourite table/seat available tomorrow night. Would you like me to place a booking and send Sarah a nice invitation for you??” - “Your mates, Steve + Tom have just walked in, do you want me to put a Corona on Ice for you?” Download a Schooner?? Not sure about this one

Society Changes From Materialistic To Post-Materialistic IndividualsCommunity Progress + GrowthSustainability ProcessedNatural GlobalLocal ImportsAussie Made PossessionsExperiences FormalInformal ProfitsPeople IndependentCo-operative Source: Steve Tighe,

How long will the gaming income stream continue?  It is here for the long haul – it will just be harder to sustain and grow gaming income levels.  This wont be for all clubs.... Why are they growing more or less?  Gaming still represents a minimum 60% net contribution.  To maintain strong income from gaming play will get down to the overall ‘club product’ – strong visitation levels, stick ahead of the competition, good staff, full service offering (good food, beverage, entertainment), invest in your venue (fresh & modern) etc  Engage your customers.  Build stronger relationships with gaming manufacturers – finance staff should be more involved in gaming purchasing decisions – look at ROI  Keep up with gaming replacement programs – maintain investment.  Forecasting and strong economic modelling required. Long Term Gaming Trend Analysis – What's the future of gaming revenue?

What are the long-term risks associated with Government legislation changes, ageing and technology.  Biggest risk is that clubs put their head in the sand and hope the challenges pass by – the challenges will always be there as gaming is an easy target just like the resources sector.  Lack of planning and slow responsiveness.  Increased license fees, taxes, insurance costs  Restrictions on trading hours, drinking age, ATMs – may need to do more with less  Need to ensure you have strong associations and a strong board  Boards need to become more commercial and professional with strong governance discipline to deal with the future direction.  Training and education needs to be maintained.  Risk that clubs will make poor diversification decisions to make up for possible revenue shortfalls  Another risk is that clubs don’t embrace, understand or invest in new technologies.  Costs of new technologies may be high so long term budget planning is necessary  High aged population with baby boomers leaving the workforce possibly with less disposable income  Ensuring clubs appeal to the Gen X and Gen Y market Long Term Gaming Trend Analysis – What's the future of gaming revenue?

Michael AlexanderBen ThomasGreg Hurley Sales Operations Manager Business Development Manger General Manager Mobile Mobile Mobile Further Information Club Data Online – Financial + Gaming Benchmarks CDOL WebReporter – Gaming Market Research and Consumer Trends CDOL Earthcheck – CO2 Measurement and Sustainability Benchmarking