Stocks of major gaming equipment manufacturers were somewhat mixed in the final month of trading for the year. With economic concerns over the Eurozone still looming and a legislative fight over payroll tax extensions going into Congress’ winter break, traders remained apprehensive about a recovery picking up steam. While the NASDAQ Composite slipped nearly 0.6 percent, the S&P 500 and Dow Jones Industrial Indexes both climbed a modest 0.9 percent and 1.4 percent, respectively.
The month of December was largely a reproduction of the year’s performance. For the year, the S&P 500 Index remained relatively flat, while the NASDAQ Composite recorded a negative year, declining 1.8 percent. Only the Dow Jones Industrial Index posted a gain, climbing 640 points, or 5.5 percent. For comparison purposes, the AGEM Index outperformed the overall market, gaining 10.8 percent during 2011. However, the gain was largely driven by a few AGEM Index members, as only seven manufacturers reported a year-over-year improvement in their stock price.
During the month of December, the AGEM Index reached a composite score of 116.27. Although nine of the publicly traded global gaming suppliers recorded a gain in their stock valuation, the overall index reported only a narrow gain of 0.43 points, or nearly 0.4 percent from the prior month.
Selected positive contributors to the index during the month included the following:
• Bally Technologies (BYI) reported a 3.18-percent gain in its stock price, adding 0.36 points to the index.
• Lottomatica (LTO) contributed 0.28 points to the overall index due to a gain in its stock valuation of 1.57 percent.
Selected negative contributors to the index included:
• INTRALOT (INLOT) posted a decline of 17.93 percent in its stock price, removing 0.19 points from the index.
• WMS Industries (WMS) contributed negative 0.16 points to the index, sourced to a 2.15-percent fall in its stock valuation.
Federal regulators and the Nevada Gaming Commission each took steps closer to making lawful online gambling a reality. Although no law has been modified or added, interpretation and opinions by the enforcers has. The Department of Justice was asked to clarify if “the Wire Act and the Unlawful Internet Gambling Enforemcent Act (UIGEA) prohibt a state-run lottery from using the Internet to sell tickets to in-state adults where the transmission using the Internet crosses state lines, and whether these statutes prohibit a state lottery from transmitting lottery data associated with in-state ticket sales to an out-of-state transaction processor either during or after the purchasing process.”
The Department of Justice opinion dated Sept. 20, 2011, did not address the UIGEA as it concluded that the Wire Act does not prohibit “interstate transmissions of wire communications that do not relate to a sporting event or contest.” In short, online lotteries are not prohibited by the Wire Act; additionally, it doesn’t restrict legal online gaming under state laws. This appears to clear the way for intrastate gaming, outside of a sporting event or contest, to legally exist.
Two jurisdictions have already begun the move forward. Online poker was allowed within the District of Columbia last year, but its execution has yet to be seen. Nevada swiftly became the first state to approve regulations surrounding online poker in December. While no lawful poker site is operational in the state and there are no plans for one in the near term, Nevada has established the framework for a future Internet-based house of cards.
With online poker taking place in various forms in other parts of the world for more than a decade, the technology is readily available. Only the politics and vetting remains, and Nevada appears to be taking the lead in an emerging domestic market. That said, companies are already forming a line to serve this future market.
Aristocrat Technologies is one of a handful of companies to file its application to provide an online gaming platform to existing casinos, much in the same way it leases its gaming hardware today. Although, Aristocrat isn’t betting only on poker. Aristocrat wants to offer a free-play casino with a variety of games today, with the intent to collect real-dollar wagers when laws change. Details of future potential online gaming operators are likely to emerge as approvals are possible in the spring of 2012.
Although the market potential for online gaming operators is substantial, legal changes also provide a significant opportunity for global gaming manufacturers. Many will evolve from hardware-based suppliers to global software firms.