Thursday, September 17, 2009

Tribes' Promotional Slot Play Agreement With State Not To Cost Much To Mohegan

By Ken Davison
Feather News

The state announced in late August that it settled with the Mohegan and Mashantucket Pequot Tribes over how much they should pay the state for their recent slot machine free play promotions.

Within a few months after the Mashantucket's began giving its Foxwoods casino customers free play coupons to play on the slot machines in 2006, the state filed a lawsuit and asserted that the state was entitled to 25 percent of the value of the free play coupons given to customers just as the state is entitled to 25 percent of the casino's slot machine revenues. The Mohegan Tribe, though not part of the lawsuit, agreed to accept the terms of any settlement reached between the state and the Mashantuckets.

The key part of the August agreement states that if the amount of free play coupons (or eBonus coupons as given by Mohegan Sun) exceeds 5.5 percent of slot revenue for the month then the casinos must pay the state 25 percent of the value of the coupons that exceed that 5.5 percent threshold. This portion of the agreement didn't make it into some articles in the local newspapers.

A year after the Mashantuckets began their free play program, the Mohegan Sun began its own free play program by giving out what they called eBonus to customers. According to a Feather News analysis, the Mohegan Sun could continue to run their eBonus program as they have been and not end up paying the state anything on the promotional program.

Both casinos have been giving out free play on a monthly basis for a few years now. The Mohegan Sun has spent an average of almost $1.5 million a month on the program since it began in November 2007. In only two of the 21 months since the program began, the Mohegan Sun has only given out twice an amount of free play that exceeded 5.5 percent of its slot revenue for that month.

The last time the Mohegan Sun gave out more than 5.5 percent of its slot revenue in any given month was in June 2007 when it gave out almost $4 million in eBonus free play, which amounted to 5.8 percent of its roughly $68 million in slot revenue for that month. According to the terms of the new agreement, anything over 5.5 percent of the slot revenues for the month would be taxable so that would mean that .3 percent is subject to the state's 25 percent tariff.

The last monthly numbers that are available are for July 2009. The Mohegan Sun gave away about 4.3 percent of its July slot revenue in eBonus slot play while Foxwoods gave away in Free Play about 7.6 percent of their total July 2009 slot revenue. In that instance, Foxwoods would have to pay the state 25 percent on 2.1 percent (7.6 percent minus 5.5 percent) of their slot revenues.

Foxwoods has given out over $150 million in its Free Play program since inception, incuding the famous giveaway of $23 million during the month of December 2007, which amounted to a whopping 42 percent of its slot revenue of $56 million that month and led to changes in the executive management of the Foxwoods.