I am extremely excited about the prospect of getting involved in the enormously lucrative industry of legalized gambling. Our organization's mission statement is simple: Results. We utilize the most efficient and cutting-edge developments in marketing research and technology to maximize customer acquisition for our clients. Our marketing team has been approached by a representative of Bigsky Enterprise. Bigsky Enterprise is a large diversified conglomerate that is considering spearheading a new division entitled, ‘Bigsky Goldrush.’ Bigsky Goldrush would be a casino headquartered in the state of Montana. Knowing that there are various ethical, legal, and financial risks; Bigsky Enterprise is seeking consultation as to whether we think this foray into legalized gambling is a viable business opportunity; and if so, what our organization can do to ensure the undertaking is successful?
Gambling has long been a controversial activity in Montana. The first Legislative Assembly of the Montana Territory outlawed several games of chance, and the 1889 Constitution forbade gambling. (Article III, section 9, of the Montana Constitution.) You don’t have to look very hard to see the various deleterious economic, psychological, and social impacts the activity has on people. The 1998 Montana Gambling Study was legislated by House Bill No.615(Chapter 494, Laws of 1997) to examine the social and economic impacts of gambling in Montana. The study discovered that: in 1997, 78 percent of Montanans gambled in some form, and that, 3.6 percent of all Montanans can be identified as problem or pathological gamblers. “Problem and pathological gamblers informally admit a very high incidence of illegal acts as well as having very high rates of divorce, bankruptcy, credit problems, domestic violence, drug and alcohol dependence, depression and suicide attempts.” Increased gambling is statistically correlated with increases of crime. The study claims that, “for each additional $1M in gambling, roughly 172 crimes will occur.” It is easy to get addicted to the euphoric rush that comes with fast money; but the thrill rarely lasts forever. The truth is, American Novelist Hunter S. Thompson was quite right when he said; “Gambling can turn into a dangerous two-way street when you least expect it. Weird things happen suddenly, and your life can go all to pieces.”
There is a flip-side to every coin and gambling is not all bad. The popularity of the activity is undeniable. Figures found in the Montana Gambling Control Divisions 2014 Biennial Report revealed that in 2014, Montana video gambling machines generated a whopping $379,607,573 in annual net income! There are enormous societal benefits that are created with this cash flow; the most significant being the ‘Video Gambling Machine Gross Income Tax’ which is a 15% tax that is applied to income from line game, keno, and video poker video gambling machines. In FY 2014, the Montana GCD (Gaming Controls Division) returned 92.19 percent of the tax revenue collected through gambling activities back to Montana citizens with a distribution of $57,006,892 into the state’s general fund. The general fund largely encompasses the money used as the source of state government financing. Indeed, there is an argument that Montana has grown dependent on this income stream; “Unlike the federal government, (the) Montana state government cannot operate at a deficit.” Every dollar of tax revenue helps immensely. Balancing the budget is of utmost importance as passing a balanced budget is actually the “only constitutionally required duty of the Legislature.” (Montana.gov)
As of 2012 the money collected in tax revenue, while sizable in dollar terms, amounted to a mere three percent of the general fund. I believe we would be doing a great service to ourselves, as well as the dignified citizens of the state of Montana to try our best to raise that tax revenue number, much higher, with the addition of the Bigsky Goldrush Casino! This undertaking will be no walk in the park. With big money, comes fierce competition and with an estimated population of only 1,032,949 people, (US Census, 2015) Montana is not exactly a population-dense state. To secure our foothold in the market space, we will need to differentiate the Bigsky Goldrush Casino brand from the competitive swarm of 1,347 (GCD, FY16Q4) active gambling operators in Montana. This will take careful analysis and compilation of market research to determine which target segments we wish to pursue to maximize profit. We can say with certainty that the locals love to gamble! In the GCD study it was found that (in 1997) 78 percent of Montanans had gambled in some form and out of those people, roughly 94 percent of the money that was wagered went towards video poker and keno machines. Rudimentary analysis of the market share of video gambling device manufacturers in Montana quickly reveals one company that towers above the rest. International Game Tech (including their subsidiaries Spielo International, and Gtech) control a domineering 37 percent of the marketspace. The company’s stock, IGT, has significantly outperformed the S&P since the merger of Gtech and International Game Tech on April 7, 2015, soaring over 63%! (Stockcharts.com, 2016) This information could very-well suggest that many astute investors are currently seeing opportunity in the gambling industry and are speaking with their wallets as money flows into the (current) leaders of industry.
Most of the information I have relayed to you relates to the sole activity of gambling, in which, most operators have chosen the ‘turnkey’ route of using (primarily rented) video gaming machines. The reason for the gravitation of this strategy is clear. The numbers suggest that video gambling machines work. MGC figures state that the average gaming machine in Montana pulls in an annual gross income of $22,753. These machines have minimal overhead as well as low maintenance costs and are clearly needed to be incorporated into the backbone of any serious gambling operation. With a properly executed (and well-marketed) strategy it would seem feasible to be able to create a profitable operation using machines alone. Now, let's take this analysis one step further and take into consideration the fact that 93% of gambling establishments hold alcohol licenses, the rapid growth of Montana as a highly-sought-after residential and tourist destination, as well as the seemingly endless alternative avenues of income streams the casino business model can produce!
I believe that Bigsky Enterprise is onto something with this Bigsky Goldrush Casino concept. There are indeed various moral and ethical concerns that have the potential to negatively impact our brand that must be accounted for. However, utilization of our extensive research and insight in marketing, coupled with a brilliant, well-executed business plan creates an asymmetrical risk-reward paradigm in which we all benefit. Let’s take on this project, make immense profits, provide a fantastic source of entertainment for the community, and sleep well at night knowing our tax-dollars are hard at work, supporting the state we love!
Census.gov. (2016). Montana Population Estimates, July 1, 2015. http://www.census.gov/quickfacts/table/PST045215/30
Gambling Control Division. (2014). Montana Department of Justice Gambling Control Divison Biennial Report Friscal Years 2013-2014 and Report of the Gaming Advisory Council. 8-23.
Gambling Control Division. (2017). Video Gambling Device Manufacturer Market Share Fiscal Year 2017- Licensed Active Machines. https://media.dojmt.gov/wp-content/uploads/Manufacturer-Market-Share-1.pdf
International Game Technology PLC. (2016). 20F Annual Report for the fiscal year ended Dec. 31, 2015. http://phx.corporate-ir.net/phoenix.zhtml?c=119000&p=irol-IRHome
Montana., (1991). Constitution of the State of Montana. Helena, Mont: Published by Mike Cooney, Secretary of State. Article III § 9
Montana.gov., (2016). Budget Basics. http://leg.mt.gov/css/fiscal/budget-basics.asp.
Stockcharts.com. (2016). IGT Daily Stock Chart. http://stockcharts.com/h-sc/ui?s=igt
Taylor, S., Nemecek, B., Brod, R., Williams, P., & Caldwell, R. (1998). The 1998 Montana Gambling Study. Montana Legislative Services Division. 8-10.
Thompson, H. AZQuotes.com. Retrieved October 25,2016, from AZQuotes.com Web site: http://www.azquotes.com/quote/293660.