'The Eater or the Eatee'
National Backlash Sends
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To Nevada, Atlantic City

America's biggest gaming companies are headed for a showdown and shakeout, say close observers of the industry.
A national backlash has arisen in the last two years against efforts to usher in new markets across the country, and the result will be serious consolidation until only five or six major players will be left, say Wall Street analysts.
Five years ago, with the rush to legalize riverboat casinos in the Midwest, companies expected an entirely different scenario.
"What the companies thought before was that we'll have gaming in 50% of the states," says Michael French, a Coopers & Lybrand gambling consultant.
"We had development teams all over the country. Well, that hasn't happened."
Steve Wynn's Mirage spent $15 million in Connecticut, pursuing the rights to operate a casino in Bridgeport, which would have been even closer to New York City than is Atlantic City. But the effort collapsed, caught in local political wars. Wynn, weary from the fight, said he would stop lobbying states for new business.
The possibility of partnerships with Native American tribes has also diminished. Most tribes with a burning desire to launch casinos have already done so. And new tribal initiatives have been hit by a recent U.S. Supreme Court decision, which eliminated the right of tribes to sue states in federal court when unable to negotiate a state compact for gaming.
So big companies in the industry have decided that it's either get aggressive about growth or lose out entirely.
"Five or six companies in gaming
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are going to determine the future of the industry," says Glenn Schaeffer, president and chief executive of Las Vegas-based Circus Circus Enterprises.
"There are two many public casino companies for the set of opportunities available over the next few years."
In June, Hilton Hotels Corp. agreed to pay $2 billion for Chicago-based Bally Entertainment Corp., and Hilton says it will look for other purchases. Caesars Palace parent ITT Corp and MGM Grand Inc. say they definitely will make deals soon.
"We're going to be the acquirer, not the acquired," says MGM Grand CEO J. Terrence Lanni.
Others share the same sentiment.
"You become the eater or the eatee," says Stephen F. Bollenbach, chief executive of Hilton Corporation.
""I think this will be like the cable business was," he said, referring to the massive consolidation there in recent years.
"We intend to be the John Malone of the gaming business."
But consolidation in the casino business, he says, is different from other industries. There mergers can mean operating efficiencies and layoffs. Gambling companies, though, want more blackjack dealers.
"It's a unit-expansion business. You build a casino, get it to its upper level of earnings, and then those earnings will only grow, if you're lucky, at about the rate of inflation. To get real growth in your company, you have to continue to add units."

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