Casino International’s Jon Bruford met with WMS International’s Sebastian Salat, the man who has led the company’s rise to a major player in the gaming industry in the just seven years. Sebastian explained how the company has grown, where they plan to expand their business in future and what makes the Barcelona-based arm of the company tick.

Casino International: How does the company setup work? The parent company is in Chicago, how is the rest of it structured?

Sebastian Salat: What we have with WMS International in Spain is a facility with a sales force, and sales co-ordination for all the orders we receive from the sales force outside Spain in other countries, they are placed here and we take care of building these orders in Chicago or here in Spain, we provide technical support to all our customers in Latin America, Western and Eastern Europe and Asia. We also act AS distributors, when we buy machines from our mother company and sell them to end users; in other cases we just act as agents on behalf of the American entity and make sure the games are shipped from the United States to the end users. We have a small industrial activity here, which is game configuration. We import shells from Chicago, machines without glass, without software, bill a cceptors, and we finish them here and ship them to the end users. We employ 25 people in our Barcelona offices, plus five more in other countries like Holland, Italy, Macau, Miami.

CI: What are the main markets for WMS? You mention Latin America, Asia, Western and Eastern Europe; in terms of specific countries, what are your strongest markets?

SS: Our strongest markets in Europe are Holland, France and Portugal, they have been our top markets over the last 12 months. In South America, Argentina and now Chile, with the new licensing laws there. In Asia, the Philippines is our largest market and we are currently taking off in Macau.

CI: Is there anything about those countries that you think draws players and operators to WMS product?

SS: It’s a combination of reasons. The outstanding one is the effort that WMS has made since we started seven years ago in the international market, in customising product for every single one of these markets. We have put in remarkable effort into customising the machines to each market in terms of the mathematics, playability, translations and special features.

CI: Where are you looking for future growth?

SS: WMS Gaming International is dealing with non-North American markets, excepting Australia and New Zealand. When we discuss our projections for the following year, we always consider the new countries that are going to open, laws changing et cetera. As you know, there are some markets that have been dormant giants for years like Brazil, and Mexico, which is finally opening with Class II gaming but no casinos there yet. But we have a lot of potential in existing markets because WMS is not a niche manufacturer any more, as we were in the past. We have previously just been a manufacturer of multi-line, multi coin video slot machines; this time is over, as now we are selling mechanical slots, poker machines, linked progressive products. So we have a lot of potential in simply selling these newer product lines into existing markets. To increase our sales, we do not need other markets to open, we just need to add these new lines to the international product portfolio, which is something we are doing now. For example, in January this year, WMS International got the green light to sell Jackpot Party Progressive, which is a linked progressive product. Before January it was only available in North America; we started selling the product and it’s added something like $8million additional to our sales, just because we added it to our existing product line. Without any new jurisdictions, just selling this product into existing jurisdictions. That’s how we’re planning to expand our business, not just into the new jurisdictions but also adding new products like five reel mechanical machines which have not been available until now but will be available from September this year.

CI: What’s your local market like here in Spain? Do you have any kind of domestic strength here?

SS: The casino market in Spain is small, with something like 26 casinos. In total, they have something like 2,000+ slot machines, which is a very small number. There are many reasons for this, but first of all you must consider that there are 240,000 AWP machines in bars, cafeterias, coffee shops, so traditional slot players are not used to playing in casinos, but in any bar or arcade where AWPs are offered. Also, AWPs in Spain are now offering interesting prizes, between 600 to 1,000 Euro, which is enough of a lure for the slot player to stick with the machines in the bars and cafes rather than going to a casino to find slots. The other problem is that there are still some of the autonomous regions, with their own regulations, which are limiting the stake in the slot machine and also the top payout; this means they are paying out prizes much smaller than those paid out by French casinos or Portuguese casinos. Some regions are giving their casinos more freedom, changing their limits and allowing the casinos to operate and compete with their international neighbours, with higher jackpots and higher stakes, and against AWP machines. Regarding WMS in Spain, we are selling our machines only to the regions that are accepting the international slot machines. We are not selling to the autonomous regions that insist on reduced top awards, because we think our product has been designed to please players and we don’t want to offer our players a ‘decaf’ product. A player may play in Casino Lisbon and play one of our top machines, and afterward come to a casino in Spain and see the same brand but the player would quickly notice it is a ‘light’ version of the same product. We want to keep the personality of our products, and to modify that personality is against our principles and something we will not do.

CI: What do you see as being your core product?

SS: Still video slots, still multi-coin, multi-line video slots. We are particularly focussed on developing machines for markets oriented to local players, video slots with moderate or high volatility. Machines for gamblers, or for players that go to the casino quite often, we focus our efforts on this product particularly and we consider this as a key product, because this generates more income for the casino. After seven years with WMS supplying to the international market, the players, when they play a WMS machine, they expect the machine to behave in a certain way; they know they are going to be playing this machine and they’re going to have a chance for a good return on their money and they’re going to have a winning experience. This is what they expect, so all of our machines have these things in common. I think the response to this product line has been very good. Our machines are not cheap, our average price increased last year - but the players and the operators understand that there is value behind a WMS machine, and whichever WMS machine they put on their floor, it is going to perform.

CI: How are you getting on in Eastern Europe?

SS: Let’s skip Russia... We know already the situation and how much the industry is suffering there. We can also brush over Kazakhstan, as the government there is considering taking the same path as Russia, with locating casinos outside the cities, and new law as well... Ukraine is doing well but it’s a market that can never replace Russia. Also, western manufacturers are generally suffering because the Russian manufacturers that started in Russia during its boom times are also looking to Ukraine, and are charging prices that are far below western manufacturers’ prices prices. If you look at the Baltic republics though, we are doing very well in Latvia and Estonia, for instance, and Poland. We’re getting into Hungary now, and we’re doing pretty well in the Czech Republic too. So we have a presence that is growing. In the last three years we have put a lot of effort into Russia, and we postponed our entrance into other markets in Eastern Europe. Now we have more time and resources to concentrate on those markets and grow them. I want to stress that we did not put all our eggs in one basket with Russia though; in my career, I have seen big markets closing down overnight. Turkey, in 1998, closed down in one night. Maybe 30 casinos, the next day no longer existed. I’ve seen Brazil close down its gaming twice. I have already had some experience of key markets, of monster markets disappearing in hours. So when we were successful in Russia and selling so many machines, I warned the company that while we were having success we needed to look wider still, because one day if this market closes down we could have some difficulties. So now we’ve developed Latin America very well, we have a strong presence there, and in Western Europe. So when the Russian ‘disaster’ happened, and all this mess started we were quite prepared and we managed to fill, this fiscal year, something like three quarters of the gap left by Russia. This was achieved largely by selling the new product lines mentioned earlier, which brought in fresh revenue.

CI: Have you been with this branch of WMS since its inception seven years ago? How did you get here?

SS: I started in this industry 23 years ago, with Unidesa, first as an engineer, designing software for slot machines. Then I was promoted to Product Manager, then later to Sales Manager, then to Director of International Sales, and I spent 16 years with Unidesa in total. After so long, I felt I needed a change, and WMS - or Williams as it was then - offered me the possibility of running international sales. It was basically the same job as I had been doing, but I wanted to experience working for an American company, and the difference of working for a publicly traded company. I accepted the challenge and we opened this office in Spain to run the non- American, non-Australian world. We started from scratch, from zero sales, and from there you can only get better! We have been quite successful and now account for 22 per cent of the company’s overall sales, which I think is a significant number in seven years. That figure is quite stable too, over our lifetime. Even as the company’s overall pie is growing, our revenue is a stable amount of that bigger pie, so we are growing.

CI: Is it difficult having R&D and marketing based in Chicago while you’re based in Barcelona?

SS: Even though they are based in America, you have to differentiate between R&D and game design. We have a game design studio in Uxbridge, Greater London, and also one in Sydney Australia. In the US, we also have game design studios in Las Vegas and Chicago. All these studios work to design new games, new concepts which are later on implemented by engineering. The reason we have the four studios is so that we can capture the different flavours of different markets, which help us to create more diverse games for international markets. It implies a certain level of difficulty, having marketing in the US because they’re not that handy, but it’s all about having a close relationship with them. We have a conference call every week with both product management and marketing, we also see the marketing guys at every international show, so we see them every month. We work very closely as a result of this, and they are aware of what we are doing and what we need. Despite the time difference, it is working well.

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