Operators now see value in both outright slot sales and recurring-revenue lease models as ways to stock the slot floor
SLOTS: Buy or Lease?
Operators now see value in both outright slot sales and recurring-revenue lease models as ways to stock the slot floor
BY FRANK LEGATO
Stocking the slot floor once was a relatively simple proposition for operators. Suppliers would demonstrate new games to slot directors, who would buy the slots and place them on the floor to sink or swim. The ones that returned decent daily win would stay, and the losers would either be warehoused or sold to secondary markets.
This was the model in the 1980s and much of the’ 90s, when most slots were three-reel mechanical games or basic multi-line video. But the evolution of slot technology ultimately would change things.
As the 20th century yielded to the 21st, innovation among slot developers began to result in games that were more elaborate, more complex, and more expensive to develop. Over the past 20 years, slot-makers have raised the competitive bar with giant LED screens, ever-more-radical cabinet and seating styles— and lots of themes.
As in branded themes. Drawn from movies, TV, music and all other varieties of popular culture, these slot themes require the manufacturers to license intellectual property, one more item on the cost side of the ledger. Eventually, all these development and licensing costs led manufacturers to develop a new pricing model: the lease, or recurring-revenue model.
In a nutshell, manufacturers lease machines— loaded with software and plug-in ready— to casinos in return for a percentage of the profits, or a flat monthly fee( depending on jurisdiction). The manufacturer typically handles maintenance of the machines.
Should the game flop, the manufacturer can simply swap it out with new game software within the same hardware.
At first, slot directors were horrified at the prospect of sharing revenue with slot vendors. However, as cabinet costs went up, the advantages of having an instant fix of an active gaming position grew, and manufacturers refined their creativity and technology to produce games that became wildly popular with players.
The R & D, equipment and licensing costs incurred to develop the newest premium games would make many of the games cost-prohibitive for operators to buy outright, but once on the floor, the hits were routinely outstripping house-average win many times over. Operators began to see the mutual benefit of lease partnerships with slot manufacturers.
14 Global Gaming Business APRIL 2025