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Revenue Sharing and Free Play

– By Ryan Burns

In order to survive the current economic downturn many gaming operators have had to become more efficient and effective to successfully adapt to the increasingly competitive gaming market. With casino patrons becoming more value conscious and sophisticated when comparing casino promotional offers and rewards, casinos have had to become more innovative and enticing in their marketing schemes. In turn, operators have had to balance projected gains received from these promotional offers with the costs associated with providing them. Not to be outdone, state and local governments (SLGs) have also become more aggressive at targeting gaming revenues as a means to bridge their own budgetary pitfalls.Gaming operators in locations throughout the United States are currently engaged in debates with SLG officials and representatives relating to the ever-increasing role the gaming industry is expected to play in supplementing the local tax base through tribal ‘revenue sharing’ and ‘community impact’ payments.

While some SLGs have been actively pursuing a higher percentage of net gaming revenues to call their own, others have attempted to redefine the items included in the net gaming revenue calculation or taxable base. In certain jurisdictions (Connecticut, Oklahoma, New Mexico, etc.) state regulators have asserted their ability to assess revenue sharing payments from tribal casinos on ‘free play’ amounts. This revenue is in addition to the actual net gaming revenue already collected from patrons.

Free play, or no-cost wagering, consists mainly of credits that can be used for play on gaming machines that are downloaded from a players’ loyalty club card, inserted from a promotional ticket, or negotiated through match play coupons used at a table game position. In most, if not all situations, free play cannot be ‘cashed out’ and must be cycled or played at the respective gaming position; only winnings on free play are paid or credited to the patron’s account as redeemable credits….

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