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“Volume! Volume! Volume!”
Thursday, Jun 28, 2012 - Posted by Rich Miller * Business people are always looking for a way to make money. No problem there. But sometimes they do it by taking advantage of the way laws are written. So, for instance, the state video gaming law apparently doesn’t limit the number of licenses that people can have. Therefore, the way to make real money is to open up a whole bunch of small, inexpensive to operate storefronts that focus almost solely on the five video terminals allowed by statute per location…
I’ve seen the business plan for one of the proposed locations via a friend who’s not connected to the owners. It’s basically a narrow room with terminals on one wall and a few tables and a bar. “Prepackaged sandwiches” means it’s not really an “upscale neighborhood pub and deli.” These are basically just mini casinos designed to have very low overhead costs. String enough of them together and you’re looking at some real money here. * The Illinois Commission on Government Forecasting and Accountability estimates that each machine would generate $70 to $90 a day for the establishments. So, that could mean, if all nine Sangamon County stores get liquor licenses and are then approved by the Gaming Board, the chain could make up to $4,050 per day, every day gross. And that’s just Sangamon County. The company has applied for liquor licenses all over the place, including the Metro East. If they end up with, say, 30 storefronts, they’re looking at grossing as much as $13,500 every single day. The state tax rate is 30 percent (with local governments getting a taste of the state’s end) and there are some annual fees for the machines, but that’s still a pretty darned good daily after-tax gross, if you ask me.
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- mark walker - Thursday, Jun 28, 12 @ 10:43 am:
Ya gotta love entrepreneurs.
- OneMan - Thursday, Jun 28, 12 @ 10:53 am:
Saw a variation of this coming in 2009
http://htsblog.blogspot.com/2009/05/how-you-could-game-video-poker-in.html
- titan - Thursday, Jun 28, 12 @ 10:56 am:
5 video units at (let’s split it down the middle) $80 per day is only $400 a day gross. The establishment will need to have an employee and pay rent and utilities, etc. Probably not a huge net profit without the location having additional revenue streams (like liquor/tobacco sales).
- OneMan - Thursday, Jun 28, 12 @ 10:57 am:
Only 5 applicants from Springfield so far http://www.igb.state.il.us/VideoGaming/PendingApplicants.pdf
- Elo Kiddies - Thursday, Jun 28, 12 @ 10:58 am:
Chris has a long list of clients, including some convenience stores, but I didn’t think he had a hand in gaming legislation.
- Esquire - Thursday, Jun 28, 12 @ 11:13 am:
Last Winter, I traveled through Louisiana, which is a poor state. Every gas station and convenience store had a former utility closet or store room set up as a casino room. This did not strike me as the type of economic development plan that would promote prosperity.
It reminded me of the times when the mobsters would install juke boxes in taverns or slot machines in corner groceries.
- Rich Miller - Thursday, Jun 28, 12 @ 11:16 am:
===It reminded me of the times when the mobsters would install juke boxes in taverns===
Um, dude, that’s basically what the mob is doing today. All over the place. With video gaming.
- 3rd Generation Chicago Native - Thursday, Jun 28, 12 @ 11:18 am:
4 drink minimum? This will also benefit the town with DUI’s.
- Rich Miller - Thursday, Jun 28, 12 @ 11:18 am:
===4 drink minimum? ===
No. Maximum. Apparently, they’re hoping to attract women who don’t want to hang out in bars.
- Quinn T. Sential - Thursday, Jun 28, 12 @ 11:19 am:
{* Business people are always looking for a way to make money. No problem there. But sometimes they do it by taking advantage of the way laws are written.}
Most of the time they take advantage by writing the laws themselves.
You didn’t actually think we were naive enough to believe that many of the geniuses that have been elected to the Illinois legislature actually sit down at the computer and draft laws themselves, did you?
A great many of them never even bother to read them (some well intended ones due to limited time and the legislative shuffle) before voting on them.
This law, and so many others was actually drafted by those planning (way in advance) how they would be exploiting it once it was passed an enacted.
I can’t understand why you; of all people, would seem surprised by this.
- Frank - Thursday, Jun 28, 12 @ 11:20 am:
===4 drink minimum? This will also benefit the town with DUI’s.===
It says four drink maximum. Had to read that again myself.
- wordslinger - Thursday, Jun 28, 12 @ 11:22 am:
I’ll believe legal video gaming when I see it.
Meanwhile, the Outfit supplies the machines and splits the profits with the operators.
If you’ll recall, the Outfit and their allied lawmakers were the greatest supporters
- OneMan - Thursday, Jun 28, 12 @ 11:22 am:
Titan…
The report says the estimate of $70 to $90 is conservative, with other states showing average revenues as high as $240 (with fewer allowed locations). West Virginia has about $135 per machine (with longer bar hours).
But, here is the main reason I think the revenue estimates are so low, to be blunt they come from the gaming board and the gaming board does not like video poker. So the lower the revenue they were able to predict the less chance there would have been of passage.
Would be interesting to see the business plan, because the revenue has to be split between the machine owner and the venue owner. So at 70 a day it isn’t going to work at 100 a day it might.
- Rich Miller - Thursday, Jun 28, 12 @ 11:28 am:
===they come from the gaming board and the gaming board does not like video poker===
They come from COGFA.
- OneMan - Thursday, Jun 28, 12 @ 11:45 am:
Ok thought commission was referring to the gaming board (yeah, that makes no sense)….
But their numbers still don’t seem right.
In order for a machine to have a gross revenue of $80 with a 92% pay out it would have to take in about $1,000 in wagers.
1,000 * 0.08
So I now have $80 in revenue, not bad you say or just a machine sitting in the corner.
But wait, the state takes 30% or $24 so you are left with $56, still not bad but that has to be split under the law as I understand it between the machine owner and the venue owner (fairly confident they can not be one in the same).
So then you end up with $28 a machine in revenue or about $150 a day with 5.
Even hitting the $1,000 in bets per machine is a bit of challenge.
Assuming the average bet is .25 (I think that is high, but we will use it to start with) It would require 4,000 bets to have $1,000 to enter the machine. With a facility open 12 hours a day that takes 333 bets per hour or five a minute, very plausible.
But lets take the average bet down to .15 then it takes 555 bets per hour, again plausible, but more of a challenge.
- Liberty_First - Thursday, Jun 28, 12 @ 11:51 am:
* Business people are always looking for a way to make money. No problem there. But sometimes they do it by taking advantage of the way laws are written. *
Very odd assertion Rich, the law is the law.
- Newsclown - Thursday, Jun 28, 12 @ 12:11 pm:
I can understand putting the terminals in Springfield’s OTB parlor.
But what this business plan looks like is the gambling equivalent of allowing more head shops in town. These are not going to be high-class, neighborhood-improving operations. I think they will look like sad and tawdry cousins of payday loan shops. Probably co-located, in fact, for the “convenience” of the bettors. Is this really a better deal than a little tax increase?
- Rich Miller - Thursday, Jun 28, 12 @ 12:15 pm:
===Is this really a better deal than a little tax increase? ===
Yes, for several reasons, the utmost being the utter political impossibility of passing yet another income or sales tax hike. Also, too, there’s the cutting the Mafia out of the picture angle.
Move along.
- Small Town Liberal - Thursday, Jun 28, 12 @ 12:36 pm:
- Very odd assertion Rich, the law is the law. -
What’s the assertion? I’d say there’s an insinuation at best.
Also, laws can be changed, and folks taking advantage of a loophole is one reason that happens.
- downstate hack - Thursday, Jun 28, 12 @ 1:07 pm:
If the cities don’t like this set up don’t issue a liquor license.
- Arthur Andersen - Thursday, Jun 28, 12 @ 1:36 pm:
One of the proposed Lucy’s is a stone’s throw, if you will, from Casa AA in what one could call an “upscale strip mall” if that term is not an oxymoron.
Besides the NIMBY factor from all my neighbors, the high rent and limited parking at this spot make me wonder if it will pass muster.
- Walter Sobchak - Thursday, Jun 28, 12 @ 1:37 pm:
Oregon has ‘adult delis’ which have to be seen to be believed. Club Keno, twenty video poker machines, and a stale sandwich or two to maintain the deli fiction. Mini casinos all.
- HatTrick - Thursday, Jun 28, 12 @ 3:38 pm:
I guess it makes sense since Stone’s “government” operation (Governmental Consulting Solutions) lobbies for so many local governments throughout the state (Metro East, Will County, Central Illinois). They/he/Lucy’s ought to have some insight into how these locals will deal with the video gaming issue. It is not a bad twist either: They/he lobby for the local governments (pay you with local revenues — or better yet, state “grants” — to lobby for them) and then you have a business that generates revenue for local governments. So, in a sense, you could say you’re paying your own way. In a sense. Not a bad night’s convolution over a few Pepsi.
- ToughGuy - Thursday, Jun 28, 12 @ 6:13 pm:
Downstate Hack is right. Most cities and counties have an ordinance on the books that states the maximum number of liquor licenses they can issue under their jurisdiction. If there are licenses available they simply have to either allow or deny an additional liquor license. If all the licenses are filled they either have to deny or create another ordinance to increase the ceiling on the number of licenses. The number of liquore licenses can be controlled as closely as the jurisdiction wants.