When you're the prettiest girl at the dance, you have your choice of suitors. At this dance, IGT is prettiest by far.
International Game Technologies is the largest slot machine manufacturer in the United States, controlling about two-thirds of the market. It's reasonable to assume, based on discussions with those in the industry, that IGT will supply at least 60 percent of the slot machines that soon will populate casinos across Pennsylvania.
Normally, IGT would sell its devices directly to the casinos. But because of Pennsylvania's peculiar requirement that slot machines pass through in-state distributors, the company or companies that win the right to supply IGT machines stand to score the largest distribution contracts, worth millions over the coming years.
So the courting of IGT by would-be distributors is well under way.
"Everybody is second to IGT," said Mark Lerner, an attorney with Bally Gaming and Systems, a Las Vegas slots manufacturer. "Everybody divides up the rest."
Do the math: There will be up to 61,000 slot machines in operation once Pennsylvania's casinos are fully developed. In the first year of business, 30,000 or more might be in place.
Slot machines cost $6,000 to $10,000 apiece, and if middlemen get to keep 5 percent of that -- a tentative business model some prospective distributors are using -- that's a gross income of about $12 million in the first year. If IGT distributors get 60 percent of the business, the distributors looking at more than $7 million.
That is serious money, especially if you're a group of start-up investors looking to cash in on the introduction of slots gambling in Pennsylvania.
Officially, the jockeying began last month, when the Pennsylvania Gaming Control Board announced that it would begin accepting applications from potential distributors. Unofficially, the jockeying has been under way for more than a year, and many of the top slot machine manufacturers already have handshake deals -- contingent on would-be distributors winning licenses from the state.
That means IGT -- having been contacted by dozens of embryonic distributors, all of whom were hoping to win a slice of the IGT pie -- already has sifted through the field, narrowing the dozens of inquirers to a handful with which it hopes to deal exclusively.
Some of the people and businesses said to have expressed interest in distributing for IGT are:
Former Allegheny County Chief Executive Jim Roddey, WQED Multimedia President George Miles and Doris Carson Williams, head of the African American Chamber of Commerce of Western Pennsylvania, who have formed a company called New Century Entertainment.
Neely Frye, a lobbyist who was once the top floor aide to the powerful Philadelphia lawmaker, House Speaker John Perzel.
Melissa Heller, a former employee of Philadelphia City Council, a lobbyist for IGT and one of two principals of a company called Keystone Slots LLC.
Atlantic City Coin & Slot Service Co. of New Jersey, which distributes slot machines for IGT elsewhere. Any out-of-state company that wants to supply machines in Pennsylvania presumably would have to open a branch office or subsidiary in Pennsylvania.
Would-be distributors who don't make IGT's short list have worked to align themselves with other manufacturers, and those companies, like IGT, have vetted potential distributors and settled on finalists.
Manufacturers can pick and choose because there are fewer manufacturers than potential resellers. Only 10 companies so far have applied for manufacturing licenses in Pennsylvania, while the state Gaming Control Board has set no limit on the number of distributors.
The board has said it will license all qualified distributors, then "let the market decide" which distributors win contracts with slot machine manufacturers.
Even though the manufacturers have compiled their short lists, much still depends on how distributor regulations shake out. The control board is still debating whether the state should be split into regions.
If the state is split into two distributor regions, such as east and west, IGT and other companies who want to sell slot machines in Pittsburgh and Philadelphia would have to deal with at least two suppliers, instead of one.
Manufacturers would prefer to deal with as few distributors as possible. "They'd like one broker from the whole state," Mr. Roddey said.
Actually, they'd rather deal with none at all, but Pennsylvania's 2004 slots law mandated the distributorships, on the premise that forcing the seven track casinos, five stand-alone casinos and two resort casinos to buy slot machines through in-state middlemen would create more jobs and new businesses in the state.
IGT won't comment on business negotiations, but Ed Rogich, vice president of marketing, said IGT was "waiting to see what the rules of the game are."
Even though the manufacturers have privately settled on their short lists, only one, Aristocrat Technologies of Las Vegas, has announced its preferred partner. Aristocrat said it would allow Keystone Gaming Machines -- based in Philadelphia and headed by Robert Nix III, son of the late Supreme Court Chief Justice Robert N.C. Nix Jr. -- to resell its slot machines.