An official publication of Global Gaming Expo

DECEMBER 2002 

EDITORIAL

The trend is friendly

By Charles Anderer

The closely watched midterm elections in the United States last month provided much good news for the gaming industry. Topping the list is that federal and state budgets are a mess and American voters apparently don’t care.

The cash-strapped municipal government of Pittsburgh is reportedly considering selling ad space on police cars as a new source of revenue. Similar initiatives are being studied in parts of Florida and Texas. R. Glenn Hubbard, chairman of the Council of Economic Advisers, a conservative economist with close ties to the Bush administration, believes federal deficits of $100 billion to $200 billion a year don’t really matter so long as there’s a commitment to hold the line on government spending and to reduce deficits in the long term.

The Democrats, who were born-again champions of fiscal responsibility in the 1990s (because it won them elections, they think), are looking inward. One conclusion: Fiscal responsibility is a loser. When pollster Stanley Greenberg asked voters to choose among 12 reasons to support Democrats, dealing with the deficit came in last.

Maybe it’s because in this one instance Americans can identify with the plight of their government. After all, they’re in debt up to their eyeballs as well. The average household is putting 14 percent of after-tax income toward principal and interest payments, the highest level since the mid-1980s. At the low end of the income spectrum things are positively ugly. In 1998, the Federal Reserve reported nearly one-fifth of households with incomes under $50,000 had a debt service of greater than 40 percent.

For the gaming industry, the same pressures on state budgets that have reopened discussions about expanded gaming in places such as Pennsylvania and Maryland are sure to spread elsewhere. One could argue there exists a unique window of opportunity for suppliers of gaming products, particularly electronic gaming devices.

At the same time, the industry figures to come under more scrutiny than ever. As gaming enters the mainstream of American economic life, efforts to expand are forcing the industry to continually refine the arguments in its favor. The industry has crafted a mostly effective public response to arguments that it understates the magnitude of the problems its products cause certain individuals. On a state-by-state basis, those in the industry who stand to benefit from expansion should encourage legislators to adequately fund problem gambling education and treatment programs as part of any new gaming initiative. They should also encourage the implementation of mandatory problem gambling education programs for employees.

In a similar vein, let’s continue to be vigilant about the basic issue of game integrity. One of the brightest people in this industry, James Maida, the president and co-founder of Gaming Laboratories International, is fond of saying, “If man made it, man can cheat it.” In the past two months, we have been painfully reminded of the truth of that maxim, as employees of GameTech International and Scientific Games Corp. were implicated in separate scandals involving insider manipulation of the companies’ respective betting technologies.

The issues these crises raise are enormous and go far beyond the troubles of two suppliers. Computer hacking has become an informal sport, particularly among younger people. And just think of how many of them are drawing the wrong lessons from the Breeders’ Cup betting scandal. After all, many informed observers believe that had Medaglia d’Oro, the 5-2 favorite, won the last race rather than 44-1 shot Volponi, the scam would have succeeded because there would have been 18 winning tickets, with the cheaters holding six of those tickets and collecting a total of $849,996.

So before you say, “Poor Sci Games,” and move ahead to the next topic, consider this: Expect a new wave of attacks on gaming and wagering systems, if only because the perception exists that this one was so close to succeeding.

For all of that, the gaming industry remains a safe and sure bet for the growing numbers of cash-strapped jurisdictions looking for new ways to make ends meet. And even the industry’s most die-hard opponents would have to admit gaming makes more sense than putting ads on cop cars.

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