WMS: Revenue Model Innovation for Gaming Solutions

Abstract

In 2014 WMS Gaming, a manufacturer and seller of slot machines to casinos, was considering a redesign of its existing revenue model. As technology evolved and customer demand for gaming solutions intensified, new and innovative revenue models were being adopted in other technology markets. Most notably, the subscription revenue model, in which customers paid a monthly subscription fee rather than a large upfront fee, was becoming widely adopted in the software industry. Product manager Dayna Stone had the task of evaluating several revenue models and recommending one that most suited WMS's business needs and at the same time took customer needs and wishes into consideration. Complicating this decision were several factors that would have to be kept in mind. Americans' love of gaming had led to a mushrooming of casinos, which meant increased competition for casino dollars. Yet the financial crisis of 2008 and its aftermath had weakened demand for casinos. In addition, casinos, depending on the type of customers they attracted, differed in their appetite for innovation and maintenance of their slot machines. Students will step into the shoes of Dayna Stone as she undertakes the task of weighing these factors and selecting the right revenue model.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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Resources

Exhibit 1: Examples of WMS Gaming Products

Figure

Exhibit 2: Casino Visitors by Age

Figure

Source: VP Communications Inc. and Peter D. Hart, 2013 AGA Survey of Casino Entertainment.

Exhibit 3: Gambling Revenues, 2007 vs. 2013

Figure

Exhibit 4: Top Five Favorite Casino Games

Figure

Source: VP Communications Inc. and Peter D. Hart, 2013 AGA Survey of Casino Entertainment.

Exhibit 5: Nationwide Gaming vs. Non-Gaming Revenues

Figure
Total Output by Revenue Source Supported by the Commercial Casino Industry in 2010 ($ in Billions)

Gaming

Food and Beverage

Hotel

Other

Total

Direct

34.6

6.5

5.1

3.5

49.7

Indirect

19.8

5.4

3.6

2.2

31.0

Induced

30.8

6.4

4.6

3.2

44.9

Total

85.1

18.4

13.4

8.8

125.7

Note: Direct revenues are casino revenues from gaming, food and beverage, and lodging and entertainment. Indirect revenues come from goods and services bought from other businesses. Induced revenues are driven by individual spending by casinos and casino industry supplier employees.

Source: Brattle Group, “Beyond the Casino Floor: Economic Impacts of the Commercial Casino Industry,” prepared for the American Gaming Association, February 6, 2012.

Exhibit 6: Comparative Revenue Models across Industries

Product

Industry

Description

Revenue model

Previous/Alternative Model

Date Implemented

Customer Type

Comcast

Cable modem

Telecom

Purchase and rental of cable modem boxes for Internet access

Monthly charge for modem rental; no charge if customer buys modem

Upfront purchase only

n/a

Consumer

T-Mobile

Jump plan

Telecom

Subscribers eligible for upgrades to earlier phones

Monthly fee, plus pay half of total device cost (min.)

Higher subscription fees; device subsidy; lock-in plans

Launched July 2013

Consumer

Microsoft

Office 365

Software

Subscribers get access to Office productivity software

Monthly fee for full access to products; segment tiered

Perpetual licenses, with tiered bundles

Launched June 2011

B2B/Consumer (B2B focus)

Adobe

Creative Cloud

Software

Subscribers get access to graphic design, video editing, and web development apps

Monthly fee; bundle and standalone options

Perpetual licenses, with tiered bundles

Offered: 2012; became only option: 2013

B2B/Consumer (Consumer focus)

Rackspace

Managed Hosting

Hardware

Combination of public, hybrid, and private managed IT services

Variable monthly fee based on service parameters

Industry shift from upfront purchase and ownership

n/a

B2B

Amazon

Kindle HDX

Consumer Electronics

Tablet device coupled with content ecosystem including eBooks, media, and apps

Loss-leading device supporting retail content sales

n/a

Originally offered: 2007

Consumer

Source: Created by the authors.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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