Businessmodel of Scientific Games

Customer Segments

SGC provides a range of gaming and casino products and services, principally to clients in the casino and gaming industry. The Company’s customers can be organised broadly into the following categories:

• Gaming Operators, comprising commercial, tribal and governmental casino and gaming operators, including operators of traditional physical casino businesses and online or mobile gaming platforms;
• Gaming Regulators, comprising official state and national gaming regulators across the US; and
• Consumers, comprising general consumers across multiple demographics, in particular online gaming and social media users. SGC serves a number of leading gaming and betting businesses, including UK-based companies Ladbrokes and Gala Coral.

SGC’s core market is its native US, with the Company also serving clients across various other North American markets. The Company, however, serves a global client base, notably through its Lottery segment, which has sold instant lottery games to customers in approximately 50 countries worldwide.

Value Propositions

SGC provides value to its customers in the following ways:

• Its industry standing and reputation, with the Company established as one of the leading providers of gaming and lottery products and solutions in the world, serving major gaming and betting companies such as the UK’s Ladbrokes and Gala Coral;
• Its broad range of products and services, with the Company offering a broad portfolio of products and services – including arcade and bingo machines, lottery cards and instant game products, and other casino services – to gaming operators, regulators, and consumers;
• Its international reach, with the Company serving customers across a number of international markets in addition to its extensive domestic client base in the US;
• Its intellectual properties, with the Company utilising a range of proprietary technologies and intellectual properties in its gaming products and solutions, making its offerings unique within the industry; and
• Its industry expertise and experience, with the Company employing specialist technical personnel across its operating segments, as well as a team of experienced industry executives. ### Channels

SGC operates a website at www.scientificgames.com, through which it provides information on its products and services, operating divisions, and licensed properties. The Company does operate its own online sales channel, nor does it operate its own gaming portal. Consumers, however, are able to access the Company’s gaming content through various third party gaming operators, both physical and digital, as well as through social media networks such as Facebook.

SGC principally makes its sales through its in-house sales force, which is organised by operating segment. These personnel make sales directly to clients, with whom they agree contracts primarily on an order-by-order basis. SGC also operates its own manufacturing, storage, and distribution infrastructure to produce and deliver its products. The Company also utilises the services of certain third party manufacturers.

Customer Relationships

SGC does not operate its own self-service sales or service channel. Consumers, however, are able to access the Company’s products on a self-service basis through third party operators.

SGC principally makes sales through its direct sales force, the members of which consult directly with client in order to fulfil the exact requirements outlined in an agreed sales or service contract. The company’s products are offered primarily on an order-by-order basis, with its casino-management systems typically sold under contracts that include casino-management systems software licenses, systems-based hardware products, maintenance and product support fees and professional services. The Company seeking to secure repeat business through the quality of its offerings and service.

SGC provides ongoing support to its customers, operating a 24h-hour customer assistance service, which can be accessed over the phone for personalised responses to queries and technical concerns. Customers can also contact the Company’s specific departments and segments through the Company’s website. Additionally, SGC operates social networking accounting with Facebook and Twitter, through which it is able to update customers on company developments and interact with clients directly.

Key Activities

SGC is a developer, manufacturer, and distributor of technology-based products and services, and associated content for the gaming, lottery and interactive gaming industries.

The Company aligns its operations into three reportable business segments: Gaming, which supplies products such as gaming machines, video lottery terminals, conversion kits, and automatic card shufflers; Lottery, which designs, prints and sells instant lottery games, and provides other lottery-related solutions; and Interactive, which develops and supplies social gaming and interactive real-money gaming products. SGC’s product and solutions portfolio includes gaming machines and game content, casino management systems, table game products and services, instant and draw-based lottery games, server-based gaming and lottery systems, sports betting technology, lottery content and services, loyalty and rewards programs, interactive gaming and social casino solutions.

Key Partners

SGC maintains a network of key partners across multiple industries and business sectors, which support the company’s development and distribution operations. These partners can be organised broadly into the following categories:

• Supplier and Vendor Partners, comprising suppliers of materials, equipment, and technologies that are utilised in the development of the company’s products, as well as suppliers of services that are utilised more broadly across the Company’s operating segments;
• Manufacturing Partners, comprising various contract manufacturing providers that assist in the production of the Company’s various gaming and lottery products;
• Licensing Partners, comprising various intellectual property owners form which the Company licenses technologies or branded content for use in the development of its gaming and lottery products;
• Joint Venture Partners, comprising a range of gaming and gambling businesses with which the Company jointly provides products and or services through mutually owned entities, particularly in markets where the Company is not itself well-served;
• Strategic and Alliance Partners, comprising companies across multiple sectors with which the Company collaborates on various marketing, branding, and other projects. SGC has launched a number of partnerships in recent years. This includes a distribution partnership with InComm, an industry partnership with Georgia Lottery Corporation, and a partnership with Twentieth Century Fox Consumer Products to produce a The Simpsons-themed slot machine.

Key Resources

SGC’s key resources are its technologies and intellectual properties, its materials and supply chain, its manufacturing facilities, its storage and distribution infrastructure, its sales channels, its partnerships, and its personnel.

SGC uses a range of proprietary technologies and intellectual properties in the development of its products and solutions, which are protected by intellectual property rights, including trademarks, trade dress, copyrights, patents and trade secrets. Searches of records published by the US Patent and Trademark Office identified a number of patent applications filed in SGC’s name, including applications entitled ‘Logistics methods for portable, mobile processing of lottery and contest tickets’, ‘Method and system to fund and conduct second chance games’ and ‘Method and apparatus for providing player incentives’.

SGC also owns and or leases a number of properties – including administrative offices, manufacturing facilities, and warehousing facilities – across the US, as well as in India, Spain, and Chile.

Cost Structure

SGC incurs costs in relation to the development and manufacturing of its products and solutions, the procurement of materials and supplies, the maintenance of its IT and communications infrastructure, the operation and maintenance of its manufacturing and storage infrastructure, the operation of its sales and distribution channels, the implementation of marketing campaigns, and the retention of its personnel.

In 2015 SGC recorded cost of services totalling $372.7million, cost of product sales totalling $405.5 million, and cost of instant games totalling $325.9 million. The Company also recorded selling, general, and administrative costs in the amount of $567.7 million, and research and development costs in the amount of $183.9 million.

Revenue Streams

SGC generates revenue through the development, manufacture, and sale of gaming, lottery and casino products, as well as the provision of related gaming services. The Company derives its revenue under sales and service contracts agreed principally on an order-by-order basis.

In 2015 SGC generated revenue for the year in the amount of $2.76 billion, up on the $1.79 billion recorded by the Company in 2014. The bulk of the Company’s revenue was attributed to its provision of gaming services, which accounted for $1.35 billion. the company’s product sales and instant games accounted for $863 million and $544 million respectively.