Bally, oldest gambling company, turns 75

Las Vegas – The company immortalized in The Who’s 1969 song, „Pinball Wizard,“ has turned a wizened 75 – and perhaps more importantly turned the corner in its return to its game maker roots.

Bally Technologies Inc., mentioned in the Pete Townshend lyric, „the Bally table king,“ celebrated its diamond anniversary last week at a Playboy-inspired villa at The Palms casino-hotel by unveiling a new digital-mechanical slot machine.

The oldest surviving gambling company got its start in 1932 when founder Ray Moloney developed the „Ballyhoo,“ a 31-by-16-inch wood and metal pinball game that offered affordable fun during the Great Depression – at seven marbles for a penny.

Later models had automatic coin payouts for high scores, a precursor to the modern slot machine.

„I’m sure if Ray and Earle Moloney could be back here they would be extremely impressed with where these guys have taken Bally,“ said Earle Moloney Jr., the 59-year-old nephew of Bally’s founder.

For the 1932 Chicago Coin Machine Exposition, founder Moloney wrote a song about his game, a box with metal pins and holes: „What will they do in Thirty-two? Play Bally-hoo!“ For their 75th, Bally kept up the sales pitch by introducing ReelVision, the first seven-reel casino gizmo set to hit the market.

But the company’s history as a gadget maker was not a straight shot. It fell numerous times into pitfalls with regulators, and nearly faced game over when it overpaid for a slew of companies that had little to do with bells and flippers.

In 1951, the federal government restricted slot machine shipments to the only state that had legalized gambling, Nevada, and sent Bally and others into a tailspin.

Bally turned its creativity into making other coin-operated devices, from coffee vending machines to bowling games and kiddie rides. The company even dabbled in making TV remote controls (they had a cord) and sewing machines. None of it went very far.

Moloney said he spent his childhood trying out the company’s newest inventions at its plant in Chicago.

„It was like having a swimming pool in your backyard,“ Moloney said. „To be able to take all your buddies over to Bally and take them into the showroom and let them play all the new games made you a real popular guy.“

In the late 1970s and ’80s Bally licensed, through its Midway division, blockbuster arcade games made by Japanese partners, „Space Invader,“ „PacMan,“ and „Ms. PacMan,“ which each became best-sellers.

While the craze shaped a generation, coin arcades did not live up to the promise of hefty profits, and Bally sold its pinball division to longtime rival Williams Manufacturing, which became slot competitor WMS Industries Inc., in 1988.

The real money was in slots.

Gambling was legalized in New Jersey in 1976, followed by American Indian casinos in 1988 and shortly after in a host of other states, spreading slot machines throughout the country.

In its heyday, Bally attempted in 1979 to leverage its slot dominance by opening Bally’s Park Place in Atlantic City, N.J., and stocking it only with its own machines. New Jersey regulators forced then-chief executive Bill O’Donnell to step down amid allegations of mob ties, and limited slot machines per manufacturer to 50 percent.

In the following years, the company went on an unsuccessful buying spree of several companies, including other casinos in New Jersey and Nevada, and bulked up on debt with the purchase of fitness clubs, theme park operators like Six Flags Corp., and an exercise bike manufacturer.

As a result, the Bally name was scattered throughout the country. Today the name-brand casinos are owned by Harrah’s Entertainment Inc., and the fitness clubs and theme parks have been sold off.

While Bally was distracted running other businesses, Reno, Nev.-based International Game Technology pushed forward, coming to dominate the market for video lottery terminals and wide-area, progressive jackpot games like „Megabucks“ and „Wheel of Fortune,“ which can pay off in millions of dollars, more like a lottery than an idle pastime.

IGT commands 58 percent market share of slot machines nationwide, while Bally has 12 percent, virtually tied with WMS Industries Inc., and Aristocrat Leisure Ltd., according to a March report by Goldman Sachs.

Most slots now accept up to USD 100 bills – and the machines have powered a casino industry worth nearly $ 60 billion in the United States alone last year.

The 1980s represented an era of unprecedented growth that Bally mostly missed.

„All those things would not have happened with a fox like Bill O’Donnell,“ said Christian Marfels, a Dalhousie University economics professor who wrote a history of the company. „I presume that Bally’s course would have been totally different (if he had stayed on).“

„If one were to look back at Bally’s history, they really became too diversified,“ said Bally chief executive Richard Haddrill, who has headed the company since 2004. „And really, that diversification seemed to cause them to lose their focus.“

After the company returned its attention to slots in the 1990s, it was acquired in 1996 by Alliance Gaming Corp., an operator of slot machines in taverns, supermarkets and gas stations. Alliance changed its name to Bally last year.

The company went on another buying spree, but this time focused on slot technology.

Since 2002, it has bought several companies that make system software that links slot machines and tracks player activity. In 2004 it purchased Sierra Design Group, which gave it key technology to break into the server-based market that includes American Indian casino games.

Bally is now the leader in slot systems, accounting for the back-end software behind about half of the 625,000 linked slot machines in North America.

While shoring up its technology platforms, the company also reduced manufacturing and installation times on its slot machines, developed new products such as the iView, a player-interaction screen that can be retrofitted on other brands, and has taken more than its average share of the market at newly opened casinos.

Together the changes have helped the company’s share price climb some 40 percent since the beginning of the year. In comparison, IGT‘s fell about 15 percent.

„My task was to take all the technology companies that Bally had acquired and the technology that they developed and integrate that into a more cohesive long-term strategy,“ Haddrill said. „That has taken a while, but I think it’s working very well.“

Analyst David Katz of CIBC World Markets agreed. „I think by all accounts we would call this a turnaround,“ he said.

The industry is now waiting for another wave of replacement orders after most coin slot machines were changed over to coinless, ticket models several years ago.

Bally hopes to cash in with its latest model. The seven-reel ReelVision will for the first time offer payouts, however small, on every spin of the mechanical wheel.