State of the Gaming Industry

1. State of the Gaming Industry Presentation byFrank J. Fahrenkopf, Jr.President and CEOAmerican Gaming Association East Coast Gaming Congress May 19, 2009

2. Weathering the Storm • Unprecedented economic environment for the industry • Twin challenges

3. Twin Challenges – Consumer Spending • Decrease in consumer spending • Commercial casinos generated more than $32.5 billion in gross gaming revenues in 2008, down 4.7 percent. • N.J. revenues were $4.5 billion, an 8.5 percent decline • Public opinion polling shows 60 percent of casino gamblers have cut back due to the recession, similar to percentages cutting back on movies, concerts, restaurants, etc. • A Time magazine survey found that 61 percent of Americans predict they will spend less when the economy improves than they did before the downturn

4. Twin Challenges – Credit Crisis • Liquidity crisis poses bigger threat to industry than decline in consumer spending • Expansion has always been key to the health of the gaming industry ($ was cheap and abundant) • Companies that accumulated large amounts of debt have been put in a stranglehold – can’t refinance • Experts estimate that no new developments will break ground on the Strip for 5-7 years (A.C. - ?)

5. U.S. Commercial Casino Industry – A Valued Partner Despite current economic challenges, the gaming industry continues to contribute to U.S. communities. In 2008, commercial casinos: • Employed more than 357,000 people who earned $14.1 billion in wages • N.J. – Employed 38,585 people earning $1.16 billion • Paid more than $5.6 billion in direct gaming taxes to states and communities • N.J. – Contributed $426 million in gaming taxes

6. Racino Sector Remains Strong The racino sector continued to grow in 2008. • Three new racinos opened, bringing the total to 44 in 12 states • Gross gaming revenues increased 17 percent to $6.19 billion • Racinos paid nearly $2.6 billion in direct gaming taxes, more than 16 percent more than in 2007 • The sector employed more than 29,000 people, up 6.6 percent from last year

7. Regional Markets Showed Relative Strength Regional, “drive-in” markets faired relatively better than destination resorts • Indiana, Pennsylvania, Missouri, Iowa, Louisiana, Michigan and South Dakota saw gaming revenues increase compared with 2007 • Nevada, New Jersey and Mississippi experienced significant revenue declines from 2007

8. Equipment Manufacturers Gaming equipment manufacturers continued to grow and make significant economic contributions in 2008: • $12.7 billion in direct economic output, a 6.7 percent increase from 2007 • 29,600 jobs, an increase of 5 percent from last year • $2.0 billion in wages, an increase of 5.3 percent compared to 2007

9. 2009 – More of the Same? First quarter gross gaming revenues for the 12 commercial casino states were down more than 7 percent from 2008 • Nevada, New Jersey, Mississippi and Illinois continue to be hit hardest • Pennsylvania and Indiana saw double-digit growth as a result of new properties. Missouri revenues also increased significantly.

10. First Quarter Comparisons

11. Potential Gaming Expansion • States realize the potential of gaming in difficult economic times • Georgia • Kentucky • Massachusetts • Minnesota • New Hampshire • Ohio • Texas • Delaware – legalized sports betting? • New Jersey – legalized sports betting? • However, new gaming states must be mindful of tax rates and be careful not to “kill the golden goose” with rates too high to promote development or reinvestment

12. Public Perceptions of Gaming Entertainment State of the States polling found that: • 81 percent of Americans view casino gaming as acceptable for themselves or others • 59 percent agree that going to a casino is just like going to a concert, sporting event or play. You are paying for the entertainment experience.

13. Casinos and Their Role in U.S. Tourism Polling also found that: • 65 percent of Americans and 84 percent of travel and tourism professionals think the casino industry is “very important” or “somewhat important” to the overall U.S. travel and tourism industry • 82 percent of gaming state travel professionals think that casinos have encouraged leisure travel in their state • 66 percent of Americans and 75 percent of travel and tourism professionals think casinos are a vital part of the business travel market.

14. Casinos and Their Role in U.S. Tourism Polling also found that: • 79 percent of travel and tourism professionals agree that elected officials and the media have hurt business travel in the U.S., particularly conventions and meetings, by criticizing these events as not involving real business.

15. The Federal Landscape • How will the new administration impact gaming issues? • Gaming in the 111th Congress • Meeting and incentive travel • “Card check” legislation • Internet gambling legislation • New taxes?

16. Meeting and Incentive Travel • AGA is part of a coalition with travel industry partners that promotes the importance of business travel and defends it from attacks from government officials and the media • Efforts are having a positive impact • Encourage gaming industry members to visit www.meetingsmeanbusiness.com or www.americangaming.org to find out how you can get involved

17. “Card Check” Legislation • Amends the National Labor Relations Act to require the National Labor Relations Board to certify union representation without a secret ballot election if a majority of employees sign authorization cards distributed by union organizers • AGA, at the direction of its board, is working with coalition partners like the U.S. Chamber of Commerce to oppose the legislation • Issue has been losing momentum in recent weeks

18. Unlawful Internet Gambling Enforcement Act • Passed in 2006, it attacks the payment mechanisms used to place bets on offshore gambling sites • Makes it illegal for banks, credit card companies or similar institutions to collect on a debt incurred on an online gambling site, but • Regulations released November 2008

19. Unlawful Internet Gambling Enforcement Act UIGEA Regulations • No clear definition of “illegal Internet gambling” • Financial institutions must perform due diligence to make sure that their commercial customers are not in the Internet gambling business • Experts expect regulations to have little impact on online gambling • Went into effect January 19, 2009, but companies have until December 2009 to comply

20. Internet Gambling Legislation • Three bills introduced this month • H.R 2266, introduced by Rep. Barney Frank (D-Mass.), would delay compliance deadlines for UIGEA regulations for one year • H.R. 2267, also introduced by Rep. Frank, would establish a federal regulatory and enforcement framework under which Internet gambling operators could obtain licenses authorizing them to accept bets and wagers from individuals in the United States • H.R. 2268, introduced by Rep. Jim McDermott (D-Wash.) would establish a taxation framework for Internet gambling operators

21. AGA Position Due to the divergent views of its members, the AGA is neutral on the issue of Internet gambling.The AGA will continue its policy of putting any legislative proposal through three tests: • The legislation must not create competitive advantages or disadvantages between and among commercial casinos, Native American casinos, state lotteries and pari-mutuel wagering operations; • No form of gaming that currently is legal should be made illegal; and • The legislation must deal with fundamental states’ rights in an appropriate manner. Decisions on whether to support, oppose or remain neutral on individual pieces of legislation will be made by the AGA board on a case-by-case basis.

22. What’s Ahead for the Industry • Customers are still enjoying our product every day • Analysts: The worst may be behind us • Industry will emerge stronger and more efficient • Innovation and adaptation will continue to be hallmarks of industry

23. 2009 State of the States 2009 State of the States: The AGA Survey of Casino Entertainment was released yesterday and now is available for download at www.americangaming.org

24. State of the Gaming Industry Presentation byFrank J. Fahrenkopf, Jr.President and CEOAmerican Gaming Association East Coast Gaming Congress May 19, 2009