1. Terry O’Halloran MBA, B.Ec
CMAA Finance Summit
Gaming in 2030
Terry O’Halloran MBA, B.Ec
November 2018

2. Topic for today
Diversification strategies and alternate forms of revenues can become a more sustainable business model for clubs rather than a reliance on gaming. As an industry, questions we should ask are: where do we go to next, who do we partner with: someone external, or do we continue to struggle, do we form partnerships with other like-minded clubs, can we survive with EGM’s only, how do we execute good corporate governance and protect member funds and the future viability of our club.

3. A story of diversification

4. Diversification What is it and why?
What is Club and Management’s first considerations?
What plays to a Club’s strengths?
What doesn’t play to a Club’s strengths?
What form can partnerships take?
How does Governance play into this?
Learn from others – we have had a few pokes in the eye

6. $100 Gaming importance GAMING $64 BAR $16 OTHER $3 OTHER $3
CATERING $17
OTHER $3
GAMING SURPLUS $37 (58%)
BAR SURPLUS $5 (30%)
CATERING SURPLUS $1.5 (8%)
OTHER $3

7. What the numbers are telling us
ITS ALL IN THE DATA

8. The steroid problem

9. Top heavy
EGM SHARE
AVERAGE

10. 2030 Prediction

11. The demographic challenge
The player base is getting older
Life expectancy increasing
Retirement funds are finite

12. The gender challenge
Female involvement 50+
Changes in society

13. Polar opposites 2014 to 2018 The move down The move up
What are the risks?
Why has this happened?

14. Not-for-profit doesn’t mean a charity
CLUB ECONOMICS

15. 2030 Gaming
92%
Maximum bet ($10) and top prize ($10,000) will remain
In 1995 dollars (at 2% CPI), that is exactly half in 2030 dollars
Smoking rates in adults will be in single digits, expect further encroachment on areas people can smoke
Reward programs further limited and regulated

16. Club Market Continued reduction of licenses by trading scheme
What will happen to the value of licenses if the SA2 boundaries change in 18 months?
EGM Rationalisation – market will move from 70,000 (present) to 65,000 (2030).
Venue rationalisation – 1,100 Clubs (2018) to 803 (2030) with an average of 81 machines per venue, up from 63 (2018).

17. Cost changes The issue of power costs and self sufficiency
How should layouts change to reduce costs? 95% of Clubs have enough room.
What is the future of ‘sacred cows’?
TABs
Courtesy Buses
Bowlers Bars
Auditoriums

18. Starting point EGM Ratio General Business Carparks Members CRT
Café seats
Restaurant seats
1 EGM per 2.5sqm
2.5m aisles
Average EGM age – 1,700 days
$4,200 per EGM per year investment (non system)
Outdoor reaches balance at 1.2
Promotions / loyalty : gaming revenue = 4.5% (subset of AEMP at 8%)
Gaming wages (gross) – 3%

19. Ask the hard questions What is your Rewards program really costing?
How are you evaluating and measuring promotions in all their forms?
Is your plan based on your venue or cloning parts of other venues? What works in Canada Bay won’t necessarily work in Coonamble.

20. Ask the hard questions
Are you using applicable and relevant benchmarks?
Does everyone have a finance hat/glasses on?
Are the skillsets up to scratch?
Are the right people getting a seat to the table? The wider the inclusion, the better the input.

21. Predictions
‘Member Manager’ will develop as a position and surpass that of ‘Gaming Manager’
Player analysis will be the most sought after skillset by 2020
Skill based gaming will not meaningfully eventuate
Online Gaming under Club licenses will not materialise before 2030.
Clubs will be permitted to trial ‘play for fun’ games online using points that are not Gambling product derivatives by 2021.

22. Predictions We will see server based gaming in by 2025
Cashless and TITO will not be surpassed by virtual money by 2025
Lighting Dragon Cash Link will still be 8-10% of the installed base by 2023 and stand alone dollar games will be less than 1.5%
We will see Revenue Participation by 2021
We will impose our own limits on RTP approval by 2022
Smoking ban by 2023

24. 2020 Checklist Benchmarks for key silos in Gaming Investment schedule
RTP and retention
Rewards program costs as a %age of Gaming revenue
Contribution of top players vs All
Gaming room investment, age of machines
Investment schedule
Relevant constitution
Property utilisation review
Objective operational review
Form a Gaming Group

25. 2030 Checklist Functioning Strategic plan Functioning Master Plan
Organisational Structure road map
Demographic projections and regional development plans

26. Terry O’Halloran MBA B.Ec
Associate – Member Insights and Gaming Specialist
(m)
(e)