Multimedia Games, Inc.
Address:
8900 Shoal Creek Boulevard
Building 3, Suite 300
Austin, Texas 78757
U.S.A.
Telephone: (512) 371-7100
Fax: (512) 371-7114
http://www.multimediagames.com
Statistics:
Public Company
Incorporated: 1991
Employees: 152
Sales: $96.8 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: MGAM
NAIC: 339999 All Other Miscellaneous Manufacturing; 513220 Cable and Other Program Distribution; 514191 Online Information Access Services; 713290 Other Gambling Industries
Company Perspectives:
Multimedia Games is a company with more than just 'games, player stations, and networks.' With the advent of networked-type games, hall and casino operators have scrambled for ways to manage game delivery, monitor play, and compile data so that they may better respond to customer needs and playing patterns. Multimedia Games is now beta testing systems that fulfill these new demands.
Key Dates:
1989: MegaBingo is launched via satellite from Indian gaming hall.
1994: Gamma International and TV Bingo Network merge; company is renamed Multimedia Games.
1995: Electronic player stations are introduced with MegaMania bingo game.
1997: MegaBingo super jackpot prize is doubled to $2 million.
1998: Revenues increase 81 percent, to $70.5 million.
1999: MGAM enters Class III gaming with video lottery systems for tribes in Washington.
2000: The company begins testing software for translating remote telecast via Internet.
Company History:
Multimedia Games, Inc. provides high-stakes bingo gaming and video lottery gaming systems to Native American-owned gaming centers and charity bingo halls nationwide. The company produces MegaBingo and MegaCash, live bingo games that link players at various bingo halls via satellite. Individual electronic player stations at gaming centers provide high-speed bingo gaming by connecting participants at numerous locations via private intranet. Games include MegaMania Bingo, BigCash Bingo, Flash21 Bingo, Super FlashCash, and MegaNanza. Multimedia Games also designs and manufactures video lottery games for the Native American market, including the popular Meltdown, Filthy Rich, and Reel 'Em In games.
Bingo Gaming via Satellite in the Early 1990s
Multimedia Games originated as two companies, Gamma International, Ltd., and TV Bingo Network, Inc. (TBN). Gordon Graves cofounded both companies to provide technology and services for the gaming industry, undergoing dramatic growth with federal approval of gaming on Native American land. Gamma International, established in 1988, produced MegaBingo, a high stakes bingo game transmitted daily via closed-circuit satellite television and, simultaneously, over a data telecommunications network and an audio conference call network.
Gamma designed MegaBingo to provide a low-cost operation for high-stakes bingo at charity bingo halls and Native American gaming centers. By linking several facilities into one game, hosted by Creek Nation Tulsa Bingo in Tulsa, Oklahoma, MegaBingo allowed participating bingo halls to offer larger jackpots, thus increasing the incentive to play. In addition to large cash jackpots and other prizes, MegaBingo provided the opportunity to win a $1 million jackpot. When a player made 'bingo' within a specific number of balls drawn or covered all 24 numbers on the card within 50 balls drawn, that player won an opportunity to spin the Super Jackpot Wheel, with the lowest prize being a $50,000 jackpot and two slots marking a $1 million jackpot.
By early 1994 the company provided bingo games to 54 bingo halls on Native American reservations in 17 states. The 12-minute show generated $16 million in gaming revenue each year from 1991 to 1994 and revenues of about $3 million per year for each game hall. Gamma awarded more than $50 million in prizes between 1989 and 1994. The success of MegaBingo led to the development of a similar show, MegaCash, broadcast during Saturday and Sunday matinee gaming.
Graves formed TBN (originally Graves International, Inc.) in 1991 to provide multimedia communications, data processing systems, and interactive games for network television and cable television, as well as the gaming industry. Graves intended TBN to operate games specifically for the home television market. Its first game versions, however, were unprofitable. The company licensed a bingo game to Bingo McLaughlin, Inc. to produce the game at the reservation of the Pawnee Tribe of Oklahoma, which connected with other bingo halls in Oklahoma by satellite, and to provide electronic player stations for bingo play linked by computer. Bingo McLaughlin went bankrupt, however, leaving TBN with a write-off of $700,000 in 1992 and 1993. TBN also handled management and marketing for Gamma's MegaBingo operation.
The merger of TBN and Gamma began with an April 1994 agreement that arranged for TBN to produce MegaBingo for Gamma and to purchase the necessary equipment and assets from Gamma. TBN financed the acquisition with secured notes and warrants and formed a subsidiary, MegaBingo, Inc., to operate the game.
The arrangement allowed TBN to extend MegaBingo game play through an interactive TV game show, Million Dollar TV MegaBingo, its first profitable game for the home television market. Launched in May 1994, the show allowed viewers to hire a proxy to participate in the Sunday night MegaBingo game; each of the six participating bingo halls provided proxy players. The customer arranged for a surrogate player by mail, telephone, or in-person registration at the bingo hall. For $5.00, each player received two bingo cards for the proxy player and two copies for home monitoring. In early July TBN began offering in-person registration through more than 100 authorized retail stores, with sales averaging 60 proxy plays per outlet during the first week. The Million Dollar TV MegaBingo show, introduced in the Tulsa and Oklahoma City markets, included a trivia game with contestant participation, Native American news, and a rebroadcast of the MegaBingo game played earlier that evening, so that participating viewers could see if they won.
At the end of 1994, TBN completed the acquisition of Gamma, renamed American Gaming & Entertainment (AGE), for $1.8 million plus debt liabilities. AGE became a subsidiary of the company and TBN took the name Multimedia Games (MGAM) to reflect the new direction of the company, toward electronic game cards on individual playing stations and Internet gaming services. MGAM developed two proprietary technologies, MegaMania, a game software, and Betnet, a communications infrastructure designed for business-to-business applications. Using these new technologies, the company sought to change the dynamic of bingo gaming.
In early 1995 MGAM began to offer bingo faces on hand-held, electronic bingo machines as an option to paper cards for the MegaBingo game. The machine displayed bingo faces on an LED flat screen, which a player marked from a keyboard. On the electronic system, a customer can play more cards simultaneously than with paper cards, resulting in higher level of play and increased revenues at bingo halls. The electronic game also attracted younger players to bingo. In an agreement with Power Bingo Corporation (PBC), MGAM arranged for the distribution of the electronic bingo faces and provided maintenance and repair on PBC machines at participating bingo halls. PBC received a percentage of MGAM's net revenue and MGAM received exclusive rights to distribute Power Bingo machines at Oklahoma reservations, plus a fee for machine service and maintenance. MGAM expected net revenue of $10 per machine per month.
MGAM used its association with gaming organizations to market Interlott pulltab/breakopen cards and vending machines at Native American and charity gaming markets. In a distribution contract with International Lottery, Inc., MGAM agreed to sell and distribute 1,500 machines the first year and 2,500 machines the second and third years in order to maintain exclusive rights, with the option for up to nine one-year extensions of the contract.
In June 1995 MGAM launched the Indian Gaming Network of Oklahoma (IGN-OK) to provide a bingo game to smaller bingo halls via satellite. MegaBingo Lite allowed the smaller halls an opportunity to link into one bingo game and to entice new player participation with larger jackpots. Nine halls participated in the 15 minute show, offering a $25,000 jackpot that increased $250 per game until a player won. MGAM presented MegaBingo Lite on Thursday, Friday, and Saturday evenings from the MegaBingo Studio at Creek Nation Tulsa Bingo.
MGAM also expanded gaming services with a two-hour bingo show, called Mega MegaBingo. The company held its first two-hour MegaBingo extravaganza on Labor Day and garnered gross revenue from wagers of $1.8 million. MGAM gave away two $500,000 annuity prizes and an additional $500,000 in prizes--in increments of $33,333; $25,000; $12,000; and $5,000--for a gross margin after prize giveaways of $191,000. The session involved 28 bingo halls in eight states, earning $567,000 combined.
The combination of Gamma and TBN proved successful. Within the first year of operating MegaBingo, MGAM added eight gaming halls to the MegaBingo network, including Pascua Yaqui Tribe's Casino of the Sun in Tucson and the Prairie Band Potawatomi Hall in Mayetta, Kansas. Wagering revenues for participating bingo halls increased more than 20 percent. MGAM earned a $0.5 million profit on $17.1 million in revenue at the end of fiscal September 30, 1995, compared with a $1.5 million loss on $1.4 million revenues the previous year.
Proprietary Technologies Yielding Positive Results in 1995
In October 1995 MGAM introduced MegaMania, a high-speed bingo game that allowed players to participate in the MegaBingo games on an individual electronic station. The company's Betnet technology provided the communications network that linked stations at participating gaming centers, allowing players to compete for larger jackpots through a greater number of participants. In addition, MegaMania involved strategic decisions to increase the players' chances of winning, with prizes available every 20 seconds. At 25 cents per card, odds for the progressive jackpot made $100 or more available to win every 15 minutes, and a jackpot of approximately $20,000 available every few days. MGAM installed 330 MegaMania machines in five bingo halls on the network.
The game proved to be quite popular, with more than 70 percent of the machines being played at any time. The rate of play, or 'handle,' per machine averaged $110 per hour and the net revenue after player prizes, or 'hold,' averaged $15.00 per hour per machine. MGAM received ten percent to 30 percent of the hold, and bingo halls garnered a net revenue of $50 per machine per day. The electronic playing stations, manufactured by Video King, were designed to allow machines from other manufacturers to network with the system. The popularity of the MegaMania game resulted in a backlog of orders for the electronic play stations.
A dramatic increase in revenues during fiscal 1996 was attributed to the success of MegaMania. Although the game did not have a significant installed base until April, MegaMania contributed $6.1 million to the 40 percent increase in total revenues of $23 million that year. At the end of fiscal 1996, 1,000 electronic player stations operated at 24 Native American gaming facilities in six states.
In December MGAM began to offer proxy players via the Internet for game play at participating Native American bingo halls. Customers used a proxy at any of 51 bingo halls in 13 states in order to compete against about 15,000 players for jackpots of up to $5,000. Players joined the American Gaming Network at betnet.com, with a payment of $29.95 and a one-time fee of $4.95. Payments were made on the web site with either a credit card or bank account, by telephone credit card payment, or check by mail. The customer had an account that MGAM debited $5.50 for each proxy play of three bingo cards. The game was not available for viewing in realtime, but could be downloaded immediately afterward. Participation was open to residents of all states except Hawaii, Arkansas, and Utah, where bingo gaming was illegal. MGAM hoped to introduce faster-paced versions of bingo to the Internet to attract younger players.
The U.S. Attorney's office challenged MegaMania's status as a Class II game, considering it to be too different from bingo. In April 1997 MGAM signed a memorandum of agreement to make certain changes to maintain its Class II status. Changes included interactive daubing bingo faces on a touch screen, and to lower the cost and prize pattern of the game. The low-cost version, at ten cents per card, provided average jackpots of $7,000, with a maximum prize of $22,000. MGAM expected the low-cost version to stimulate greater interest in MegaMania.
Throughout 1997 the company continued to receive orders for the MegaMania games, resulting in record sales. Once again MegaMania was responsible for a dramatic rise in revenues, a 70 percent increase to $39 million, and net income of $1.3 million.
In October MGAM upgraded the super jackpot wheel of the MegaBingo game, raising the top prize to $2 million and replacing the two $1 million slots on the wheel. The prize was available in $100,000 cash and a 24-year annuity. The company also added bonus prizes such as cars and trips to Las Vegas. The MegaCash game, played on Saturday and Sunday matinees, offered a $1 million jackpot.
Introducing New Gaming Opportunities in the Late 1990s
MGAM introduced several gaming systems in 1998. In February the company installed 350 of the fast-action, FlashCash electronic player stations, available for 24-hour play. During the first three weeks in operation, game play averaged $65 per machine per day. Comparatively, MegaMania took eight months to reach the same level of play. MegaRacing, a simulcast off-track betting system, opened at three native American gaming sites in Oklahoma, handling $275,000 in wagers in the first 17 days and becoming profitable for participating tribes in that time. MGAM supplied the tribes with the signal for the broadcast and related services. The company also launched BigCash Bingo, offering linked bingo with jackpots starting at $10,000, sometimes reaching $30,000 to $40,000 before a player won.
MGAM recorded another dramatic increase in revenue for fiscal year ending September 30, 1998. Revenues increased 81 percent, to $70.5 million in 1998, while net income rose 69 percent, to $2.2 million. MGAM began to see a shift in revenue sources, however, as the paper-based MegaBingo game yielded to the popularity of electronic bingo-style games. In addition, some halls discontinued MGAM's services as they began to produce their own in-house high stakes bingo games and to utilize more profitable Class II interactive or Class III games. The number of bingo halls served dropped from 61 in 1996 to 47 in 1998, while interactive, electronic playing increased from 1,000 machines in 20 gaming centers in 1996 to 3,270 machines in 64 facilities in 1998.
In 1999 MGAM began to offer direct bingo play via the Internet, launching its first interactive Internet bingo game in March. Available free at gamebay.com, FlashCash operated like a tournament sweepstakes, with cash and merchandise prizes, including a $100 prize for the player with the most points during a week of playing of two-minute games. A special 90-minute session on Sundays offered a $100 prize and the ten players with the most points played a special session for an additional $100. During the first week FlashCash averaged 25 players per game and 54 players per tournament. MGAM distributed 100,000 cards and the web site received more than one million hits. By August the FlashCash averaged 400 players per game, with 850 involved in tournament play and the web site received 13.8 million hits per week. The introduction of FlashCash quadrupled membership of the on-line player's club. MGAM funded the site with targeted advertisements based on preference data during game play.
After national legislation defined the terms of Internet gaming, MGAM planned to offer FlashCash with a $10,000 prize; a wager of 50 cents per card won 50 cents to $100 per game. The $10,000 prize went to any player who covered a straight bingo pattern in the first four balls drawn. For an additional 25 cents per card, the jackpot rose to $25,000.
In April MGAM received approval from the Washington State Gambling Commission to develop, manufacture, and distribute Class III interactive video lottery games for the Tribal Video Lottery System (TVLS), being one of two companies to receive a license. The games imitated scratch-off lottery tickets, but with the look and feel of a slot machine. In June the company introduced several game styles, including Fruit Cocktail Deluxe, Spin & Shout, Cherries Royale, and Meltdown, as well as High Noon Poker. MGAM estimated net revenue per machine at $200 per day, with MGAM garnering 15 percent net for revenue of $30 per day per machine. MGAM offered the machines as rentals initially, with the expectation that once clients saw the profitability of the machines, that purchase or lease-purchase agreements would follow. MGAM installed the first 100 units for the Washington (State) Squaxin Island Tribe at the Little Creek Casino. By the end of fiscal 1999, the company installed more than 700 TVLS games at seven casinos. The system involved a casino management system, individual video lottery terminals, and a cashless wagering system.
As individual electronic player machines became more popular, revenues from MegaBingo continued to decline in 1999. Although electronic interactive bingo expanded to 80 clients with 4,420 playing stations, MegaBingo revenues decreased 22 percent, as participation declined to 32 halls. MGAM restructured its MegaBingo satellite television game, improving both the potential revenues at participating halls and improving the odds for winning. Renewed marketing efforts resulted in four bingo halls joining the network in October 1999, two in Oklahoma and one in Washington, at tribal gaming centers, and one charity bingo hall at Hollywood Park Racetrack in California.
In December MGAM sold a majority interest in its Gamebay.com subsidiary, selling 65 percent in a private sale of common stock and raising $4.7 million. Licensing agreements were established between MGAM and Gamebay. Gamebay obtained use of existing intellectual property to apply to nongambling Internet sweepstakes for a $1 million fee and five percent of Gamebay's revenues. If Gamebay is taken public in the future, MGAM has the option to retain a 20 percent ownership position and reduce the fee by three percent.
MGAM's efforts to extend Internet bingo play to overseas markets came to fruition in May 2000. The Republic of Liberia selected MGAM to provide high-speed interactive bingo for the Liberia International Lottery via the Internet. MGAM launched the game in July 2000.
The company's TVLS proved to be successful for MGAM, which installed three systems at casinos in Washington in May. In addition, five existing clients ordered an additional 400 terminals, a $3.5 million value. Meltdown, a slot-style game with bars and the nuclear symbol, and High Noon Poker proved to be the most popular of the video lottery games. MGAM signed a licensing agreement with WMS Gaming to adapt its casino video slot gaming devices to Native American video lottery in Washington State. The agreement involved nine WMS games, including the popular 'Filthy Rich' and 'Reel 'Em In' games. MGAM had the game ready in September for introduction into the Washington State Native American casino market. The seven casinos with TVLS new software allowed for cashless account wagering.
MGAM introduced new technology in the hope of expanding participation in MegaBingo by providing a less expensive broadcast system with new Internet software. In June MGAM installed and began to test the VC-2000 video clone software, which translated data received on the Internet into a telecast. Thus participating MegaBingo bingo halls no longer needed a satellite receiver to broadcast the game; the new system employed personal computers instead. If tests succeeded, the MegaBingo television game would become inexpensive to install, saving costs of production, transmission, and reception. In addition, the technology allowed the show to originate from multiple locations, using digital cameras to present the winner over the air.
While trying to maintain its traditional base of business, electronic player stations continued to be the main focus of development. By October 2000, more than 5,000 machines were interconnected in 92 Class II, Class III, and charity gaming facilities nationwide. In November the company launched the MegaNanza bingo game, a Class II game with the excitement of a Class III game. In April 2001 MGAM signed a licensing agreement with Alliance Gaming Corp. to distribute Bally Gaming & Systems products in Washington's Indian casino market. Under the agreement Bally Gaming received a royalty and a guarantee that MGAM would purchase a minimum number of units during the first two years.
Principal Subsidiaries: American Gaming Network LLC; MegaBingo, Inc.; Multimedia Creative Services, Inc.; TV Games, Inc.
Principal Competitors: GameTech International, Inc.; Littlefield Corporation; Online Gaming Systems, Ltd.
Further Reading:
Busch, Melanie, 'Tulsa, Okla., Firm Explores Internet Gaming with Bingo Service,' Knight-Ridder/Tribune Business News, August 1, 1996.
'Circuit Courts' Rulings Stand on MGAM's MegaMania Game,' Business Wire, January 29, 2001.
'MGAM Becomes a Leading Supplier of Interactive Video Lottery Systems in Washington State,' PR Newswire, June 23, 1999.
'MGAM Reports Gaming Site Performance,' PR Newswire, April 5, 1999.
'Multimedia Games Adds Contracts with 10 New Bingo Halls,' PR Newswire, February 25, 1999.
'Multimedia Games Announces Launch of Interactive Internet Bingo Game,' PR Newswire, March 24, 1999.
'Multimedia Games, Inc. Announces New Electronic Bingo Card Product,' PR Newswire, January 26, 1995.
'Multimedia Games, Inc. Introduces New Product,' Business Wire, June 12, 2000.
'Multimedia Games, Inc. Premiers New Indian Gaming Network,' PR Newswire, June 28, 1995.
'Multimeda Games Records $227,000 Profit,' Journal Record, May 8, 1997.
'Multimedia Games Sells $1.4 Million in Electronic Stations in 3rd Fiscal Period,' Journal Record, July 21, 1998.
'Multimedia Games to Launch Internet Gaming Product,' PR Newswire, December 28, 1998.
'TV Bingo Network Changes Name to Multimedia Games, Inc.; Completes Acquisition of MegaBingo,' PR Newswire, December 27, 1994.
Source: International Directory of Company Histories, Vol. 41. St. James Press, 2001.
