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white paperTHE PAST AND FUTUREOF THESLOT MACHINE

White Paper – The Past and Future of the Slot MachineTABLE OF CONTENTSABSTRACT1INNOVATION AND A HISTORYOF THE SLOT MACHINE3SLOT MACHINES TODAY4WHAT’S NEXT?6QUESTIONS FOR THE INDUSTRY8

ABSTRACTIf you went into a bar in the late 1800s inor around New York City, it might havebeen called, The Burnt Rag, Milligan’sHell or even, Chick Tricker's Flea Bag. Youcould have had a punch made of hot rum,whiskey, camphor, benzene and cocaine,and had a better than average chance offinding a gambling machinecreated by a New Yorkbased company called,Sittman and Pitt. Themachine was basicbut innovativefor the time andallowed for achance to winprizes like freecigars and drinks.The exact date is up for debate, butaround this time an inventor namedCharles Augustus Fey is credited with thenext evolutionary step in slot machines– automatic payouts at the machine.He accomplished this by reducing thecomplexity of the five drums and 50cards, to three reelsand five symbols:spades, horseshoes,diamonds, heartsand the imageof a liberty bell.This is what gavethe machine thename Liberty Bell.establishments hosting one ofthese machines would literally discard twocards to tilt the odds in favor of the house,and none of these machines had a way todirectly pay winners.industries in which a singleimage is so iconic as the slot machine is tothe casino industry.MACHINESWOULD LITERALLYDISCARD TWO CARDSTO TILT THE ODDS INFAVOR OF THE HOUSE, By most accounts,these twoANDNONEOFTHESEThe machinedevelopmentscontained fivewere the openingMACHINESHADAWAYdrums carrying 50chapters of thecards, cost a nickelmodern-day slotTODIRECTLYPAYto play, and wasmachine. Clearly,based on the math andthe story didn’t endWINNERSthe concept of poker. Mostthere as there are fewThe Past and Future of the Slot Machinewhite paper 01

The purpose of this paper is threefold:1.BROADLY OUTLINE THE TIMELINEOF TECHNOLOGICAL INNOVATIONFROM THE EARLY SLOT MACHINESTO THE MODERN, SOFTWARE-BASEDELECTRONIC GAMING MACHINE.2.DESCRIBE SOME OF THE MOSTCUTTING-EDGE DEVELOPMENTSTHE INDUSTRY IS SEEING TODAY.3.LOOK FORWARD AT WHAT’S NEXTFOR CASINO FLOORS AND POSESOME OF THE QUESTIONS THEINDUSTRY WILL HAVE TO ASKITSELF TO ATTRACT THEPATRONS OF TOMORROW.The Past and Future of the Slot Machinewhite paper 02

INNOVATION ANDA HISTORY OF THE SLOT MACHINECONSIDER SOME MILESTONESTHAT HAPPENED BETWEENCARDS, REELS, SPRINGS ANDTHE FIRST ELECTROMECHANICALSLOT MACHINE1901 King Camp Gillette invents the doubleedged safety razor and Hubert Boothinvents the compact vacuum cleanerOne of the most surprising aspects of theevolution of the slot machine is that solittle changed for so long. Slot machinesshrugged off or were passed over for realinnovation from the late 1900s till past themidway point of the 20th century.1903 The Wright brothers fly the first gasfueled, manned airplane1902 Air conditioning, lie detectors, theteddy bear and neon light1905 Thank you Mr. Einstein for E mc21907 Plastic is invented1913 The first time anyone hears a zipperIf you’re thinking to yourself that youcould have been sipping a beer from acan in air-conditioning, wearing flip-flops,while using an arc welder before you evertouched an electronic slot machine, you’reentirely correct.1919 The pop-up toaster, flip flopsand the arc welderUntil 1964 and Bally’s fullyelectromechanical slot machinecalled Money Honey, slot machinesremained entirely mechanical: a leverwas pulled, a spring sprung, reelsreeled, stoppers stopped, kickerskicked and control cams cammed.1928 Penicillin, bubble gum andthe first electric shaver1922 The first 3-D movie1927 PEZ candy, Technicolor (color movies)and aerosol cans1930–1940 The first jet engine,Scotch tape, the electron microscope,polaroid photography, radiotelescopes, the first tape recorder,canned beer, radar, the photocopier,ballpoint pens and the helicopter1940–1950 Color television, the digitalcomputer, the Slinky, Silly Putty, JacquesCousteau invents the aqualung, now knownas SCUBA, the atomic bomb, the microwaveoven, mobile phones, the Tupperware seal,the Frisbee, the first time anyone hearsVelcro and finally, cake mix gets us to 1950The Past and Future of the Slot Machinewhite paper 03

SLOT MACHINES TODAYMoving forward in development, playersclub cards and analytics entered theindustry and redefined the concept ofloyalty programs. Ticket in/ticket out(TITO) changed the sound of casinos andput a serious dent in the plastic bucketmarket. Video slot machines changedthe look, feel and potential of games.Progressive jackpots transformed winningat a slot machine from a steak dinneror a new car, to a life-changing event.Server-based floors enable slotmanagement to reconfigure entiresections of a casino, or just one machine,from a work station or device dependingon any number of factors.Today, the slot machine experience can beextended from the casino floor to phones,devices and computers online. This notonly stretched gaming for patrons butopened gaming to the masses who neverset foot in a casino.While these virtual slot machines mightbe tough to count currently, according toTodd Eilers, Principal at Eilers & KrejcikGaming, LLC, “Our research shows over990,000 electronic gaming devices acrossthe U.S and Canada markets coming out ofQ2 2018. By 2020, the industry is projectingthat number to exceed one million.”The Past and Future of the Slot MachineIn terms of the nature of slot machinegames, which fundamentally can bedescribed as a chance only gameexpressing its math outcome throughcombinations of symbols on reels, a newclass of games has emerged. These gamescan be thought of as interactive gamingmachines where the player can interactin a broader way with the game than asimple press of a button to get a result.THIS NOT ONLYSTRETCHEDGAMING FORPATRONS BUTOPENED GAMINGTO MASSES WHONEVER SET FOOT INA CASINO.white paper 04

SLOT MACHINES TODAYAccording to Marcus Yoder, Vice President,Regulated Markets Business Developmentat Gamblit Gaming, LLC, “We have seenthat the term “Skill-based game” is reallynot the right way to classify these games,as this description implies that the gamesbase their outcomes predominately on theskill of the player. They most often don’t.In reality, the new games you are seeingintroduced would more aptly be describedas Player Interactive EGMs.The amount of skill to play these interactivegames varies, but in no instance is skillthe predominate determining factor.Gamblit games actually use RNG math in atraditional sense to generate the wageringoutcome. Our games are just simply moreinteractive and we think fun to play, than atraditional slot machine.”continuedBased on our field data, we are bringingnew players into the mix, so our gamesare complimentary, not disruptive tothe traditional player market of today.We’re focused not on a revolution, butincremental growth.”When prompted to speak on thetransformation of chance-based,traditional slot machines to skill, Yoderadded, “To many, myself included,Gamblit games are crossing from theterrestrial casino gaming world into theterrestrial casino interactive gamingworld. Why? Because instead of simplypressing a button and waiting on chance,our games allow you to get involvedin the game, even to the extent thatyou can influence the outcome.”Elaborating on this perspective, Yodercontinued, “The introduction of VideoGame EGMS is not a fork in the road. It’san introduction of a spectrum of videogame styles. Much like billions of peoplelike different styles of games on theirphones, we see different types of playersgravitating to the various genres we haveon our Player Interactive EGMs. There’sno question that these games will havea bigger footprint on the floors goingforward making it just a matter of timing.The Past and Future of the Slot Machinewhite paper 05

WHAT’S NEXT?“If you don’t know where you are going, you’ll end up someplace else.”― Yogi Berra, former New York Yankees catcherWhat’s next for the industry is difficultto predict as patron demographics anddemands shift, as well as how technologydevelops. What is certain, is that the industrycan no longer merely hope that casino floorswill attract and retain tomorrow’s patrons.According to Floyd Barroga, VP ofTechnical Compliance at BMM Testlabs,“Success requires promulgation of statuesand regulations which will encourage theintegration of compelling product throughthe execution of leading-edge design.Robust testing through independent testlabs such as BMM and internal controlsimplemented by regulators and operatorswill lead to player trust of the newtechnology as the industry incorporatesvarying styles of games.”The Past and Future of the Slot MachineBarroga continued, “Today the industryis at a crossroad, and the stakeholderscan use this opportunity to collaborate. Interms of real innovation, the regulators caninvite industry innovators to discuss thecurrent technology and the requirementsto bridge the gap moving towards productthat incorporates the latest securityprotocols and entertaining features.”white paper 06

Building on this idea of innovation bornfrom collaboration, it’s possible to see andimagine opportunities for existing andemerging technologies to converge withthe gaming industry around every cornerin day-to-day life. Consider for example:Localized climate control: Withcigarette smoke as a top-10 obstacleto new players entering a casino,1 andmicro-climate air cleaning technologyavailable, when will the two merge?Biometric identification at gamesand across the casino: From becominga security feature on phones to a ForbesMagazine report that, "77% of airportsand 71% of airlines are reviewing digitalID options,"2 biometric identificationis moving from science fiction to howbusiness is done. Think of a thumbprintor glance replacing player’s cards.Expanded slot functionality:Drinks, 911 emergency services,valet, charitable donations, music(phone or online service), in-screentexting, total phone integration.Slot machines as betting portals:Simultaneous betting on the slotmachine as well as on sports, esports,table game stadium gambling all from aconfigurable window on a slot machine.Artificial intelligence and analytics:Going beyond studying what people havedone, to predicting what they’ll do.Integration, integration, integration:Seamless connections that make it easierand more personal, but less private to bea patron.Skill-based gaming tournaments: Thenext evolution in skill-based gaming,Esports out of the stadium and acrossthe casino floor?Bridging the platform divide: Fromslot machines to devices, the exact lookand feel anywhere you play.Augmented reality slots: Using VRglasses to find computer generatedprizes, bonuses and offers.Cashless gaming: How paymentswill be made and accepted (phone,thumbprint or iris scan?).New forms of currency: What will beconsidered ‘currency’? (think of Bitcoin).Voice controlled everything: “Alexa,open an upper-left betting window onthe Lakers game; open an upper-rightbetting window on arena roulette; opena non-betting window to watch theCeltics; zero-out betting windows andslot sound; log me into the 4pm ZombieShooter tournament as a single player;play Elvis from my Pandora accountwith volume level eight; turn on in-gametexting; donate 10% of my cash outtotal to my whale charity; order a CubaLibre and turn smoke control to ten.”1 American Gaming Association study of March 20182 Forbes September 29, 2018The Past and Future of the Slot Machinewhite paper 07