Light & Wonder with Ryan Scott

Nick Hogan:

Hi everyone. Welcome to the fifth episode of ReelCast 4th season. For the next few episodes, I'll be joined by

a new trustee co-host who was once a guest here on ReelCast. I'm referring to Vice President of Gaming Operations

at Delaware North, Mr. Michael Carruthers. So first of all, howdy, Michael. How are things with you today?

Michael Carruthers:

Hey, good morning, Nick. How are you?

Nick Hogan:

Yeah, not too shabby. Thanks. Let's see. You're coming at us from New Orleans then, that area there today?

Michael Carruthers:

Very hot New Orleans, yes.

Nick Hogan:

All right, cool. So for today's episode, Michael, we're going to combine our industry news and listener question segments as

both are covering the same topic. So we'll start with that listener question, but before I jump into that, let

me say that we'd love to tackle any questions that anybody listening may have. So if you have a question

about what we're presenting or something you'd like us to present, please drop us an email at [email protected]. That's [email protected].

Our policy is to keep all questions anonymous, so please speak directly and don't worry about us revealing your identity.

That is not something we do.

Okay, so this comes from a slot director in the American Midwest who asks, "Hi guys. I am relatively new

to gaming, and I have to say that the industry's position on smoking confuses me to no end. I work

in a casino where smoking is permitted and I hear constant complaints from staff, grind players, and VIPs alike. Nonetheless,

the policy remains in place and no one seems willing to even discuss a voluntary ban, let alone implement one.

I've heard the old adage that smoking bans drop revenues by 25%, but do you feel that this is valid?

Do you collect data on smoking preferences? And if so, what does it say? Can you help me understand why

the industry seems so terrified of this topic?"

So first, many thanks to the listener for that question. Definitely a good one. Now, before I dive in too

deeply on this, I do feel that that 25% assumption is perhaps a bit rich. So the range I typically

hear is at 15 to 20%, and that's really provided that there are roughly, let's say, equidistant competitors that permit

smoking if you have a ban. Now, the reasons underlying that are pretty nuanced, but let's leave that be for

now.

Now, in answer to your specific question, we as ReelMetrics do not track smoking preferences on a player-by-player basis. Obviously

we compare the performance of, let's say, smoking areas versus non-smoking areas, et cetera, but we don't have a single

byte of data at the individual player level. I don't recall ever seeing such a preference on a loyalty program

enrollment form, and other than, let's say, smoking and non-smoking preferences for, let's say, hospitality and F&B preferences, I'm not

even aware of an operator that collects this information systematically. I'm not saying that they don't exist, I'm just simply

not aware of anybody doing it.

But as luck would have it, Michael, a couple of weeks ago, Mark Gruetze from CDC published a great story

about casino smoking policies, and the article basically put forward three things. So firstly was that there are little or

no hard data covering player preferences relative to smoking policies, what I just mentioned there. Two, that the data that

do exist suggests that smoking is wildly unpopular. And then three, on topic, most operators simply prefer to dance, dodge,

and kind of kick the can down the road until they're compelled, let's say, by a regulator or some other

authority to do something. So on the data front, Gruetze cites two studies. The first was by the late Mike

Meczka, who did a study in the Pacific Northwest just after COVID. It looked at how locals select casinos. So

the most prominent criterion that I guess it was 32% of respondents put forward was, first of all, location, so

what is a casino's proximity to the player. That's the first thing on which they chose. But then the second

most prominent criterion was, in fact, smoking policy, meaning that they wish to play only in smoke-free casinos.

And then the other study he cited was one conducted by BCSlots, and we had discussed this with Brian Christopher

and Josh O'Connell when they were on the podcast, which they show that 86% of players prefer smoke-free gaming, and

that figure goes up to 89% when the player's annual incomes are over 150K. Now, I think those are generally

pretty interesting because those who follow Brian tend to be pretty serious slot players. And those results track, I would

say, very tightly with the cigarette smoking rates in the US generally, which I understand are around 11%.

So Michael, I have all sorts of thoughts and theories as to why operators are so reluctant to impose voluntary

bans, but I'd way rather hear from you on this one. So as an operator of large, professionally managed, and

wildly successful casinos, what say you on this topic?

Michael Carruthers:

Yeah, that's a tough one, Nick, and I agree that it largely depends on the competitive landscape and the jurisdiction.

We have properties that are a hundred percent smoking, a hundred percent non-smoking, some that have smoking patios, some have

a small non-smoking section, some have a small smoking section, so it's kind of run the gamut there with what

we offer and what we're allowed to operate in. But yeah, I think it's largely driven by jurisdiction and competitive

set.

Nick Hogan:

So you really feel that more than anything... Because it has always been my sense that pretty much everybody waits

until they're forced to do it, and it always does just seem to me kind of like just the fear

of the unknown. They're not really certain what the impact is going to be. We hear a lot of these

things where visitation stays steady, but the revenue drops, things of this nature, and it just seems to be that

uncertainty drives this a lot of times. Do you feel that's the case?

Michael Carruthers:

Yeah, I think I would agree with that. I think a lot of operators have moved to non-smoking only as

a result of, say, COVID and then the practices that came from that, right? They would've never gone from smoking

to non-smoking had it not been for the COVID policies that took place five years ago. And out of that

came to say, "Hey, this isn't so bad after all. Let's keep it the way it is," and there's some

large casinos in Southern California that have adopted that and kept that going since COVID. And yeah, if it works

for you, that's great. I think that that's a fantastic thing.

Nick Hogan:

Now, on those revenue declines, those are numbers that I hear pretty frequently, that 15 to 20. That's pretty consistent

with what you understand as well?

Michael Carruthers:

I don't know if there's really declines or not. I think if you benchmark smoking games versus non-smoking games, like

I said, we talked about the multiple or the delta like two times recited in that article. I often wonder

that there are other factors that impact that number. You might have a smoking section that's right-sized or undersized and

a non-smoking section that's oversized, so if you were to right-size that section, isn't parity as quite as great as

it is? Does that delta shrink? I think it does a little bit. But we're seeing anywhere from 1.4 to

1.8 times on our smoking performance versus non-smoking stuff, whether it's a patio or a section.

Nick Hogan:

Yeah, and that seems to be completely consistent with that multiple around 2X. You do see it in Europe, sometimes

a little bit higher in some of these environments. We have a 3X multiple whatever, but okay. Yeah, fair enough,

fair enough. Okay. So thanks again to the listener for that question. It prompted a little conversation about it here

today. And then also, I'd love to inform you that we now have some nerds building an analytical model for

this, so it did kind of get the gears turning here, so cheers for that.

Okay, Michael, time to move on to today's guest. So this gentleman is a Runnin' Rebel, having completed both his

undergraduate and graduate degrees in business at UNLV. He began his gaming career roughly 12 years ago at PENN Entertainment's

M Resort in Las Vegas. He started there in a special projects capacity and ascended quickly to head up the

resort's casino operations. And then from there he made the leap to Aristocrat Gaming, where he served in multiple strategic

roles, including VP of commercial strategies for Aristocrat's premium slot portfolio in US, Canada, Latin America, and EMEA. In December

last year, he made the leap to Light & Wonder, where he's currently serving as vice president of commercial strategy

for slots. I am speaking of course of Mr. Ryan Scott.

Howdy, Ryan. How are things in Southern Nevada this morning?

Ryan Scott:

They're great. Thanks for having me.

Nick Hogan:

You betcha. Thanks for joining us. Okay, so I thought we'd just start with your career here. So could you

walk us through how you got into the industry and the path that took you to your present role there

at L&W?

Ryan Scott:

Yeah, I think you covered a lot of the bases, but I think I started in the gaming industry very

similar to a lot of others, and that's by chance. I originally came to Las Vegas with the idea that

I was going to be here for one to maybe four years max, and 17 years later, here we are.

So I originally came to Las Vegas on a baseball scholarship to go to college. When I was at UNLV,

I really didn't know what I wanted to be when I grew up, but after a handful of surgeries and

constantly rehabbing injuries, I realized that I no longer wanted to chase the baseball dream.

Nick Hogan:

Yeah. So let's see. You were playing for UNLV, you were playing baseball. Which position did you play?

Ryan Scott:

I was. I was a catcher.

Nick Hogan:

Wow, okay. So hardcore baseball guy.

Ryan Scott:

Yeah. I grew up in baseball and loving baseball, and when I was a catcher, it was just always action

and you're always thinking, and I enjoyed that part of the game, and huge part of your life for a

long period of time, and luckily, growing up in a household of, you know, my mom was a teacher, so

there was never a plan A or B. It was 1A and 1B, and school definitely didn't fall behind. So

that was a good push.

Nick Hogan:

Okay, very good. And then so your first gig, tell us about your first gig there at M Resort. So

that was just straight out of school, you started there?

Ryan Scott:

It was. So as I mentioned, I had some surgeries and I was rehabbing those, and that's how I ended

up having a chance discussion with Anthony Marnell III. He was a big supporter of UNLV baseball. I didn't know

Anthony too well. I knew of Anthony and I just ended up working up some courage and asking him for

some advice on what I should do next. I started my MBA while I was rehabbing with my fifth year

and knew I had one year left and wasn't quite sure what I wanted to do, and luckily enough he

invited me over to the M Resort, which he built and was the president of at the time, and he

walked me through his transition from being a catcher in baseball as well.

And so we bonded over that, and he transitioned from his baseball in college and professional career into the casino

business when his family was running the Rio in the '90s. And he generously created a position for me, like

a management training position, where I would get exposure to every single position over a 15-month period. So I spent

time as a housekeeper. I stocked the buffet on seafood night, which resulted in me having to throw away a

pair of shoes. I was a table games dealer, which was maybe the most nervous I've ever been in my

life, and I got tapped out pretty quickly.

But I think that was such a good start in the industry because it provided me a foundation of just

how every single position contributes to the whole and really helped me understand the business from the ground up, and

I think that was a great start. So great opportunity that I enjoyed. I started in the slot department after

that, looking after performance and operations, and over time took over all the slot department operations as well as eventually

the table games department as well. A lot of great learnings, good experience at the M Resort, and then I

moved over to Aristocrat in 2018 and I joined... Yeah.

Nick Hogan:

Cool. And it's interesting to me, so a lot of things are falling into place. So I played catcher when

I was a kid, one of my sons played catcher, and I know it's important for the... You know, strategically,

catcher is absolutely one of the most important people on the field, right? And one of the things is you

have a view of the field. And so it's very interesting to me that he put you in that position

where you had a view of the entire company. So it's kind of like a catcher position on a casino

resort.

Ryan Scott:

Yeah, yeah.

Nick Hogan:

Sorry. So you were just starting then. And you made the move over to Aristocrat.

Ryan Scott:

I did. I made the leap to the vendor side in 2018. So I went over to Aristocrat as the

senior director of product and portfolio strategy for gaming operations, which oversees the premium product and the strategy there, and

shortly after I moved into the vice president role, where I was responsible for the premium product for North America

and eventually Latin America and EMEA as well. And after five years there, I was presented with an opportunity to

expand my skill set and take on some new challenges here at Light & Wonder. I started here in January,

and just past six months, and sat on the sidelines for 2024, but that brings us to today.

Nick Hogan:

Okay, cool. Now, without question we have people listening today who aren't entirely certain what a VP of commercial strategy

does for a living. So can you tell us about that department at Light & Wonder and what it is

that you're doing, what your days look like, et cetera?

Ryan Scott:

Yeah, and my wife loves to answer this question as well because it's such a variety of things and it's

very hard to kind of pin one down.

Nick Hogan:

Yeah.

Ryan Scott:

So essentially commercial strategy sits between a various number of functions, including R&D, marketing, sales department, operations, and finance, and

we're integrated into the product organization because we need to communicate what the right products are for the market. We

work on proper positioning and messaging of the product, how much it costs, when it goes, where it goes, really

to just ensure that our overall portfolio is the best opportunity to succeed. And commercials, it can be a catch-all

because it's definitely connected to a ton of different areas in the business, but it's a continuing theme, as you

mentioned. It gives a broad view of the business and you're able to see all the things going on all

at once.

Nick Hogan:

Yeah. Okay.

Ryan Scott:

So on a daily basis, if you're asking about what we do on a daily basis, it typically starts with

a review of the order funnel and reviewing and approving some orders and projects. We typically review the product roadmap

to make sure that we're aware of any changes or need to adjust any plans, go over any product launches

or pushes, and then, of course, everybody's favorite. We have plenty of meetings, whether that's a finance meeting or preparing

for a customer presentation, so there's quite a few deliverables there. But my favorite part of the role, I think,

is getting in the field, and Michael and I were recently together, but it's important to me to spend time

with customers, and that's a real comfort zone to me and provides an insight where I'm able to keep a

realistic view of what's actually happening in the real world and hear it firsthand from the sales team and also

the operators.

Nick Hogan:

For sure. Okay.

Michael Carruthers:

Great. So Ryan, as you covered, you jumped from casino operations to the supply side after a five-year run with

PENN at the M Resort in Las Vegas. Talk to us a little bit about that transition and whether or

not there were, specifically if there were assumptions that you had about the supply side coming from the operator side.

And then conversely, once you got to the supply side, what the assumptions were about the operator side and how

you had to confront and correct some of those or deal with those assumptions.

Ryan Scott:

Yeah, that's a great question, and my first assumption when I made the jump to the other side was that

I had to make the games. So when I was talking to them about the position, I don't know how

to make games, and luckily enough there were some pretty talented game designers in the building, and my responsibility was

just managing those games when they came to market, so not to mess that up. But it was a really

interesting transition. I spent the first six months or so thinking I had just made a huge mistake. Out of

my comfort zone, thought it would be a very familiar, similar kind of skill set there, and I was surprised

to learn so much. So instantly we started talking about a three to five-year roadmap in 2018, and when we

were on the operator side, we were thinking, "What products can I place on the floor in the next three

to six months or right now?" So really shifting that view from the current to out in the future and

trying to predict the future, which is always a tough task.

So I learned a ton about the various markets that we operated in, and that was a real learning period

for me. There's a lot of nuances to taking product to different markets. And I also thought that all the

processes internally on the manufacturer side were down to a science. And I was always wondering, "Why can't I get

that contract turned same day? I placed the order. Where's my contract?" It's amazing the people in the systems that

are involved in order just to get a contract from a contract to the install of a slot machine, which

is really an interesting piece of learning there as well.

But another piece that was eye-opening and really important was just learning how many different philosophies there are on how

to manage slot floors. So you can work in a certain market or with a certain company for a long

period of time, and you assume that everybody views decisions the same and has the same philosophy, but it's definitely

not the case. And as an operator, you can position yourself as a product leader, or maybe you're a wait-and-see

type operator, or a penny pincher, but they all operate differently and they all operate for their own reasons, and

it's important to understand what drives some of that. And one of the biggest things for me that... One of

the biggest factors... Sorry, the lights. There we go. Sorry. I'll keep going, but yeah, the-

Nick Hogan:

All your lights just went out there. No problem.

Ryan Scott:

Yeah, sorry about that.

Nick Hogan:

It's all right.

Ryan Scott:

But one of the factors that drives those decisions is definitely regionality and being able to go into the field

and see unique markets like Washington and Oklahoma firsthand really helped me understand the why behind a lot of decisions

and maybe why it's not all cookie cutter. So it was really important.

Michael Carruthers:

Yeah.

Nick Hogan:

Yeah, you brought up some good points there. As operators, we're thinking of more immediate in terms of what can

I put on my floor in the next three to six months, and it's hard for us to plan out

three to five years because the technology changes so much. I just don't know what's going to be available to

us, and we're not the ones that are really dictating what contents are being created, right? It's the unique folks

on the supply side that are driving that bus. So that's a very valid point.

Following up on that, do you feel that there are operator and suppliers, that there are areas that they're just

not hearing one another and completely missing each other on things?

Ryan Scott:

Yeah. I mean, I think this is, as I mentioned before, an area that I really enjoy and that's connecting

the operator and manufacturer side. So I feel that being able to speak the language of operator allows me a

unique lens and the ability to have some unique conversations. I will start by saying that I think the communication

channels today are much better than they were 10 years ago.

Michael Carruthers:

For sure.

Ryan Scott:

It used to be very transactional and even sometimes adversarial, but that seems to have evolved and the conversations are

much more focused on partnership, I think. And I think transparency is definitely driving a lot of that when it

comes to identifying what's important to both sides and being clear about that. That really helps the conversation. And from

the supplier side, it's very common to talk about the rate of reinvestment in the R&D functions when we're talking

to customers, which really provides them the commitment that the suppliers are putting into the business to produce games over

the long run and be a sustainable partner, and likewise, the operators are more transparent on game performance and optimization

efforts because it's positioned more as a partnership. So that's the intro there, but just kind of hitting on that

there's not too many glaring misconnections in my mind. I feel that it's actually in a good place. There's no

misconnections certainly that don't lack logic on either side.

If I were to talk about maybe one opportunity, I think from a game design standpoint, there's certain aspects of

games that operators have taken a pretty harsh stance on, whether that's liability, or volatility, or persistence as of late,

and the truth is that there's no universal definition or measurement to these things, and that's resulting in some tension

when these conversations come up. So the game designer might include a persistence element in a game, and that persistence

element could be short-term, not shoppable by the player, but the operator hears the word persistence and has already made

up their mind that, "Nope, not going to take that game." So I think similarly, when we talk about liability,

there's definitely some hard and fast limits that vary greatly between operators. It's not a hard and fast limit, and

we've definitely launched some games in the past where there's some higher liability due to maybe a free game re-trigger

that may happen once in every 700 years of continuous play, but it's in the par sheet and in the

math, it's a possibility, and-

Nick Hogan:

[inaudible 00:24:18].

Ryan Scott:

I understand that from the operator side, that sometimes it's easier just not to have that exposure to liability, or

volatility, or persistence, but there's definitely some communications that can take place and some mathematical justification and support that's available

that could at least start the dialogue, and I think that's somewhere, an area of improvement or something that we

can continue to get better at.

Nick Hogan:

Yeah, fair enough.

Michael Carruthers:

Yeah. Yeah, I'll give you credit there. It is difficult for the supply side to accommodate and make everybody happy,

right? To give us all what we want. Even within my own portfolio, we have properties where I have some

games that I can take and some that I can't based off of the liability, you know? So it varies,

and I understand that, but it's tough to place us all at the end of the day, but I appreciate

you trying.

Ryan Scott:

Yeah, of course.

Nick Hogan:

So Ryan, talk to us a bit about Light & Wonder's commercial strategy in slots. So can you take us

through, let's say, a few of the pillars and explain how this is impacting the company's output on a product

perspective?

Ryan Scott:

Yeah. Our current emphasis is... I'll back up. But just starting with the product development side, our current emphasis is

really on talent, tools, and technology. So if you hit the three T's, it's attracting and retaining the best talent

possible, providing them with the best tools, like the industry-leading hardware line that we have, and technology that enables them

to deliver the highest quality of games. From a commercial standpoint, we're focused on bringing to market the right product

at the right time for the market and continuing the great momentum that we've seen here from Light & Wonder.

Nick Hogan:

Yeah. Okay, cool. Yeah, what's been very interesting for us is we changed very significantly the way that we're ranking

slot product, right? So we moved from, we were just doing more of a kind of a linear strategy previously,

and now what we do is we break it all out by segment. So we're basically ranking with segment vectors

in the mix. And what we see is that, what we're really trying to do there is we're trying to

select and put forward those games that really resonate with the most important segments, and then they just show incredibly

durable, productive capacity over time. So there's a lot of stuff that you guys have produced that's very much in

that category. So the Huff N' Puff series, for example, on the core side is just that way, like we

see it resonating with the most important groups, and it's just like metronomic. It just hangs in there and does

really well. And so there's no secret that in these indices that we put together, L&W and Aristocrat just dominate

these rankings across both premium core.

So you've had experience inside each of those companies now, and what is your sense in terms of why you

believe these two organizations are really hitting this mark while so many others are struggling?

Ryan Scott:

I can speak to a couple of high-level similarities that I've seen, and those would be a strong commitment to

the R&D reinvestment. I think the breadth and depth of portfolio is very important, and I think the development of

strong internal and external brands, like you just touched on, seemed to be common themes. So I know as a

customer, I always wanted to be confident in what I was placing on my floor, and I wanted to know

that this game that I'm placing on the floor, I have confidence in and has a high likelihood of being

successful, but if for some reason it's not, I want the assurance that there's another game behind it that will

pick up the slack. So I think that confidence and placement is key in having a holistic portfolio view.

As far as the player preference that you mentioned, the player preferences, I think we've seen some of the shift

in play, especially in the mid to high denom, where they're not necessarily playing primarily classic stepper games anymore. There's

been a shift, especially in my time in the market recently, where you walk into a high-limit room and it's

predominantly video, and we're seeing those players gravitate towards those, and there's been brands on both sides of that equation

that you mentioned that have been able to capture and lean into that mid to high-denom video play.

Nick Hogan:

Yeah. Yep, yep. And what we've seen too is this play is getting far more aggressive over time, right? So

we see stronger sessions, we see stronger average bets, all these things, just really, really incredible. And yeah. And I'm

also curious about just in your strategic role, do you do a lot of data ingestion and analysis and things

of this nature? Are you guys actually doing a lot of analytical work or is that done by other departments

there surrounding you?

Ryan Scott:

Yeah, we do a lot of analytical work. So we try to leverage as much data as we can get.

As I mentioned before, operators are more willing and transparent with the data, and that really helps us out both

from a fleet optimization, portfolio management, and then also a game design standpoint. So the more information, the better. We

digest it in a lot of different ways. There's various levels of information that we can get depending on the

partnership, so we can get as granular as we would like to as far as gameplay patterns and stuff like

that if the partner's willing to leverage our L&W connect solutions, or if we just simply get a performance file,

we're able to try to maximize the portfolio for each of our operator partners. So we leverage a lot of

tools internally, as much data as we can, and we try to make as many data-based and non-emotional decisions as

we can to make sure that we're doing the right thing.

Nick Hogan:

Okay. Very good.

Michael Carruthers:

So Ryan, in slot supply, the competitive landscape has kind of settled on the big three, Light & Wonder, Aristocrat,

and IGT. Talk to us a little bit about the competitive position that you guys are in versus Aristocrat and

IGT, and where do you feel that you truly have the upper hand or where are there areas that you

could improve?

Ryan Scott:

Yeah, I'm really excited about both the current state and the future of Light & Wonder. As a whole, I

think Light & Wonder is a company that has a really strong land-based offering. When we talk about commercial strategy

and what I am adjacent to, land-based being slots, tables, and systems, and luckily for us, we have really strong

product in all those segments. For slots, I was able to watch from the outside the transformation of the portfolio,

leveraging some really strong traditional brands with on-trend mechanics that matched those brands and saw the success of what that

brought, and I think that us taking brands like Huff N' Puff, like you mentioned, and Ultimate Fire Link, as

well as some of our external brands, like Wizard of Oz and Wonka, really provide a lot of exciting opportunities

for us moving forward.

Michael Carruthers:

Great. Can you talk to us a little bit about the extent to which you guys are using product bundling

as a tool? Table products, SMS, online offering slots. Is that core to your commercial strategy in slots? And if

so, where do you see that playing a role in the future?

Ryan Scott:

Yeah, I think we're in a very strong position to offer some of those bundling packages. You know, if you

look at the multiple lines of business that we operate in. The biggest thing for us is we want to

show up as one company to our customer. So when we're talking to an operator, whatever their needs may be,

whether it be online, land-based tables, systems, slots, we want to make sure that we're meeting those needs. As we

talked about a couple of times already, no one customer is the same and their needs might be a slots-only

type offering, and some might be slots, table, systems, some might be an omnichannel push, and we want to be

best positioned to support whatever those needs may be.

Nick Hogan:

Okay, very good. So I want to go back for just a second on when we were talking about the

competitive positions and what you're doing in the strategic side of things. So talk to us a little bit. Since

I started ReelMetrics, it goes back 10 years, when we first started, premium floor share was around, just nationwide, was

somewhere in the neighborhood of three and a quarter percent. And when we look at it today, we've been banging

this gong for a long time just saying, "Hey, look, we're looking at premium in the wrong way." So we

really did publish a lot of analysis about this, really we're banging the gong on premium, and today it's up

to 16% that we're seeing on floor shares.

In terms of your roadmap, can you break us out a little bit on that, where you're focusing premium core

or this kind of thing? What are really the long-term views on...

Ryan Scott:

Yeah, I think it's been really encouraging to see the trends on the premium product, and I've quoted plenty of

those studies and what's been published in my efforts. You know, I really think that the effort to get more

good games on casino floors is a strong one. The roadmap really is to be a balanced offering, and we've

probably hit on it multiple times here, but every floor is different. Even Michael mentioned within his own company, there's

floors that are different for various jurisdictional regions, different player demographics, competitive landscapes, and when we look at the portfolio,

we really want to make sure that we're offering something for as many people as we can, obviously leaning into

our strengths with the brands that we have, some of the mechanics, some of the segments that we do really

well, and we want to maintain leadership and continue to grow.

So I think it's keeping our eye on the market, looking at the various segments where players are going and

trying to provide as many offerings and strong offerings as we see the hit rate increase of these games, and

we want to be well-positioned as the market continues to evolve because, like you said, it was 3%, and over

that period of time, we've seen a lot of change. And so we want to be prepared for that and

be on the front lines of that.

Nick Hogan:

Okay, fair enough. So then what I'm going to do here is kind of jump in a time machine here

and go back to, it was 2019, I was over at Aristocrat meeting with a pack of you guys. I

know you were there, Nathan Drane was there, Chris Nemlich was there, a few others, and we were talking. I

have kind of a claptrap memory on these types of things, but at one point you asked me the question

which was, "Can you think of an argument for a single supplier having 100% floor share of an American casino?"

And you asked me that and I just kind of sat there for a second and then I was like,

"Well, theoretically yeah. Practically no chance," right? And I've had this conversation with plenty of people, including all the co-hosts

we've had on this, including the one who's on here today, where we've talked about that. Michael, you were down

in Australia and you came back and I remember you were saying, "Jesus, some of these environments, it's one product

floor-wide."

Okay, so I'm assuming you have no memory asking me this question, but I'm going to ask you to kind

of put yourself back there in that conference room and tell me what it was that got you to ask

me that question. So really, what was on your mind there?

Ryan Scott:

Yeah, I actually do recall that conversation because I didn't ask that question too often.

Nick Hogan:

Okay.

Ryan Scott:

But maybe if you had some data that might help, it would be a good icebreaker. But yeah, I'm glad

that question could continue on beyond that conference room. But really for me, the operator mindset was very fresh in

my mind and I wanted to know if others felt that game performance and fair share metrics could ever overcome

some of the self-imposed ceilings that are placed on either certain products or manufacturers, whether that's an emotional or a

budgetary ceiling. Emotional factors that I encountered could be nostalgia of an old theme, could be a long-standing relationship with

a salesperson that might end up getting a placement on the floor that otherwise wouldn't or shouldn't be on floors.

But I think it came down to if floors and markets were driven solely by data, the composition of the

market would look a lot different. So-

Nick Hogan:

For sure.

Ryan Scott:

... I think to echo you and my former coworker, Don, theoretically yes, but practically no for those reasons.

Nick Hogan:

You were in the club market in New South Wales. Or where were you? Because I remember you came back

from there and you were, just looking at your face, you were still stunned, Michael, when you came back.

Michael Carruthers:

Yeah, we, for a period of time, owned some pubs in Brisbane and we would walk into the competitor's place

and they'd have 40 machines, they'd have 36 Dragon Links and four Ainsworth dollar games, and that was their room.

And I was like, "I can't believe that they have such high quantity of these things," and then fast-forward five

years and look at where we're at today with our L&W lounges and similar stuff. We're modeling that.

It's interesting though, that you asked this question, Ryan, in 2019, which is pre-COVID, because a lot of the data

that Nick and his team have done since COVID have shown that we are grossly over-diversified across our floors. We

had way too much variety that we didn't need. So it's just interesting that that question came about before all

that data was available to us.

Ryan Scott:

Yeah. Yeah, I would say maybe somewhat of a crystal ball there, but also just also coming from an Australia

trip and seeing other things. So yeah, a lot of factors went into asking it, but I think to your

point, the variety conversation and diversification on floors, that's just for the sake of an emotional decision over a data-driven

decision is something that we've definitely seen over the last few years.

Nick Hogan:

And it does vary certainly by geographic market too, because you do see, so for instance in Europe, right, you

will see a lot of mixes and, let's say, kind of more, let's say Austria, Germany, Switzerland, these kinds of

places, you go into places, they may have 70, 80% floor share and just a Novomatic, let's say, right? So

it's all Novomatic multi-games of 70, 80% of the mix, et cetera. And you do see it, I would say,

in a lot of, yeah, new or emerging markets around, let's say, well, you see it sometimes in Africa and

Latin America elsewhere.

But I do have to say that in some of these places with much larger inventories, I think a lot

of the setup historically was just, it was spreading your risk, right? So that was a big reason for all

that diversity on the floor, just nobody had any idea how stuff was going to perform once it came in

and these kinds of things, and yeah, what we see is as we look at more and more data sets

and we look at how this stuff works, what we see is that as in other mainstream retail environments, it

really does pay to focus on a far tighter mix with far less diversity and really focusing on those player

preferences and then catering to those preferences. And so yeah, we are always big fans of reducing the overall diversity

levels on floors if they're kind of out of control.

So it was one of those questions, man, that is just you asked it and it stuck in my head

and I was noodling it for a while. Yeah, it was one of those. I do think in America, in

these casinos, which such large inventories and stuff that I think would be almost impossible to pull that out-

Ryan Scott:

Yeah, I agree.

Nick Hogan:

... from the operational side. Okay, very good. Michael?

Michael Carruthers:

Yeah, so before we wrap, Ryan, are there any upcoming events or initiatives that you'd like to promote or talk

about before we close?

Ryan Scott:

I don't think there's anything in particular. I think that I'm going to be doing plenty of promoting over the

next three or so months leading into the G2E season here. I wasn't able to attend last year, so I'm

looking forward to seeing as many familiar faces as I can and getting a chance to catch up, and I

look forward to seeing everybody at the upcoming trade shows and customer meetings, and I'll try to save all my

initiatives and promotions for those. So I appreciate it.

Nick Hogan:

Very good. And Michael, how about yourself? Any big events coming up on your side that you're going to be

hitting?

Michael Carruthers:

No, just looking forward to, like I said, the gaming show this year. I know that we're working on a

couple additional Light & Wonder lounges, so that's exciting stuff. But yeah, I look forward to G2E.

Nick Hogan:

Okay, cool. What, are you doing some UFL Lounges? You're doing a few of those?

Michael Carruthers:

Yeah, we went live with one in West Virginia a month and a half ago, and we're working on another

one in West Virginia and one for our property in Arkansas. So exciting stuff.

Nick Hogan:

Okay, question here. Sorry, I know we're coming close, but now I have to ask the question. So in these

lounges, typically do the vendors subsidize that in some way? I just don't know how the model works.

Ryan Scott:

Oh, sorry. Do you want me to take that one, Michael? Yeah, it depends on market and it depends on

customer. Like we mentioned before, some of it comes down to deals as far as being able to commit to

footprints and so on and so forth.

But yeah, it's an investment that we make, and we recently leaned into some of the LED technology as of

late. We recently did a lounge with Gila River in Arizona that featured some LED components, and as Michael mentioned,

we have a number of lounges working with him, and I think for Light & Wonder, we're in a position

now where the portfolio is strong enough to justify those type of lounges, and it's portfolio-wide, so we can leverage

Huff N' Puff, and Ultimate Fire Link, and all the brands that I mentioned, both internal and external, to build

out a branded area that we see in other industries. If you go into a Target, you're going to see

an Ulta section, you're going to see these branded areas within some of these big-box stores, and I think that

that's a real big opportunity for us to continue to partner with the casino operators and show premium performance and

let players have a destination to go play their favorite games.

Nick Hogan:

Yeah, generally we're big fans of them. We've seen just so many of those things just murder inside of these

environments, so we're usually pretty pumped when we see them building one, so I'm happy to hear you're making some,

Michael.

Ryan Scott:

Yeah, they do that.

Michael Carruthers:

Yeah, same thing. I mean, you guys have what, seven or eight different iterations of Huff N' Puff out there?

I mean, so you put four or five of those in a lounge, a couple Kongs, and some UFL stuff,

and there's a lot more that you could add into there, but there's 30, 40 games easily right there, so-

Ryan Scott:

Absolutely.

Michael Carruthers:

... this is easy low-hanging fruit if you ask me.

Ryan Scott:

Yeah, yeah. We've had a lot of interest in it as well, operators proactively reaching out to us to ask

what options do we have because they do see the success and the uplift that it provides on the games,

and maybe another data point there, Nick, for you to start tracking if a game's in a lounge and what

the effects are, so...

Nick Hogan:

Oh, yeah, we check them out. We're always looking at them. I don't have a nifty multiple for you right

up, but it is a multiple, I'll tell you that.

Ryan Scott:

Perfect. If you get it, let me know.

Nick Hogan:

They do really well typically, so we're big fans of these lounges, for sure. Okay, cool. Michael, do you have

any other questions for Ryan today?

Michael Carruthers:

No, I appreciate your time and, like I said, it was good. This is the second time we've gotten to

catch up in the last month or so, so I appreciate your time, and good to see you again.

Ryan Scott:

Yeah, likewise. It's been great.

Nick Hogan:

Okay. Well, thank you so much for joining us today, Ryan. It's great speaking with you, man.

Ryan Scott:

Thanks. Likewise.

Nick Hogan:

Okay. Ciao guys. Bye.