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Supreme Triumph, Times Two

Posted On: 8/25/2011

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The amusement industry won two huge victories in a row this summer. Triumph in the U.S. Supreme Court was followed almost immediately by victory in the Illinois state Supreme Court.

Last November, we predicted that the amusement trade would be "waiting with baited breath" for the high court's ruling on a 2005 California law that, if upheld, would have banned youths' access to so-called "violent" videogames.

As it turned out, the ink was hardly dry on the controversial June 27 verdict (knocking down the California videogame law) when the Illinois state Supreme Court delivered a ruling on July 11 that cleared the way for operator-run video lottery terminals.

Perhaps understandably, trade celebrations were much louder over the Illinois verdict. Industry members nationwide hope that ruling will lead to a multibillion-dollar VLT market there ... and possibly in other states.

Yet the federal ruling on videogames is probably more significant -- even though it ostensibly focused on the consumer market. Here's why.

Assorted setbacks in Oregon, Iowa, Alabama, North and South Carolina, and elsewhere remind us that gambling markets come and go -- sometimes with shocking speed. But Supreme Court verdicts are (usually) forever.

The federal decision to put videogames under First Amendment protection is now the law of the land. Happily, this law applies not only to consumer game sales and rentals but also to pay-for-play games in public spaces, which are "rented" in the eyes of the law.

However, the videogame verdict is even more important than that. By implication it sets a precedent for just about any form of entertainment this industry may put before the public today, tomorrow or whenever. Accordingly, for the amusement trade, the significance of June's videogame ruling can hardly be overstated.

Now let's turn to Illinois. Does the promise of VLTs in the Land of Lincoln mean revival and growth for more states as well? At this point, it's too soon to tell. On the one hand, these are unprecedentedly bad times for the economy. That's a key reason why Illinois lawmakers went along with the desire of state operators to create a VLT market: the state badly needs the money.

As Illinois industry members know better than anyone, amusement pros still have many obstacles to overcome before getting their VLT industry off the ground. (You can read about some of those challenges in this issue and at VT's website.)

Stacked against any negatives, however, are the patience and smarts of the Illinois Coin Machine Operators Association, including its manufacturer and distributor members. We are confident that the same political discipline and wisdom which helped ICMOA and its allies get the Illinois Video Gaming Act passed in 2009 will also help them cross the finish line eventually. By 2012 they will live in the "land of VLT opportunity."

ICMOA's successful 20-year lobbying campaign to get VLTs legalized is a superb template for other state operator associations to follow. But it remains anyone's guess whether a successful VLT market in Illinois will set a precedent for other states.

Most governors and state legislatures have probably noticed that three states which legalized operator-run, tavern-based video poker many years ago -- Montana, West Virginia and South Dakota -- also have relatively small budget deficits (or none, in the case of Montana). Coincidence? Not likely.

On the other hand, even hard times don't always change antigambling forces into gambling supporters. Look at Alabama, for example. Two governors in a row have now effectively opposed electronic bingo -- despite its strong popularity with the public, proven tax revenue-generating power and its considerable ability to drive business and create jobs.

In a similar vein, several multibillion-dollar markets (both real and potential) created by Internet-based sweepstakes videogames are being systematically crushed in Massachusetts and Virginia, or sporadically depressed in Florida, North Carolina and Ohio.

Finally, California and other states have recently proven quite hostile to SWP (skill with prize) entertainment ... despite the fact that manufacturers can show expert legal opinions that the machines in question are not gambling devices. Why is this happening?

States make good profits when citizens buy lottery tickets, but not when citizens play privately owned amusement machines. Cynics have long warned that even redemption equipment could be vulnerable if casinos get ruthless about eliminating perceived competition.

Considering all these complex pros and cons, the crystal ball for operator-run "risk-reward entertainment" is still murky. But that's all the more reason for the industry to savor this summer's "supreme triumphs." Twin wins of this magnitude don't come along very often.