State Lottery director says he is planning to take action to address IGT's 'underperforming' machines.

PROVIDENCE — With competition this summer from a new casino in Everett, Massachusetts, Rhode Island continues to see losses in its once booming state-sponsored gambling industry.

A single week — Aug. 18 to 24 — saw a 20.58% drop in video-slot revenue at Twin River Casino. It dropped from $9,028,561 the same week a year ago, to $7,170,595.

"How can we compete with Encore?" fretted state Sen. Frank Ciccone, during a meeting Monday of an increasingly worried legislative oversight committee. "I know everyone thinks it's just going to be a fly-by-night and people are going to come back, but player rewards, free play ... two weeks ago, $500 free play ... Rhode Island can't compete with them."

"How do you think we can overcome that?" he asked Twin River Casino's vice president and general manager, Craig Sculos.

Sculos pointed to Rhode Island's much higher tax rate on the slots as one reason a casino across the border can afford to give higher rewards, and suggested the big giveaways now are part of an "opening marketing program. They are coming in strong, making a statement in the market. ... Our pitch, senator, is to say: 'You don't have to drive. It's not 90 minutes. It's two hours plus and we'll take better care of you.'"

Ciccone said he made the trip in less than an hour on a Sunday.

Over the course of an hour Monday, state Lottery Director Gerald Aubin reported:

Instead of growing from one year to the next, as was the case for decades, the amount of money generated by the Lottery and then turned over to the state to pay for education, roads and scores of human-service programs is not meeting the projections on which this year's state budget was based. As of Saturday, it was down by $9.3 million.

Gambling is Rhode Island's third-largest source of revenue. Of particular concern to Aubin and the lawmakers: the amount left behind by video-slot players at the Twin River Casino in Lincoln was down 15.95% from where it was at the same point a year ago. Revenue from the live table games at both the Lincoln and Tiverton casinos was also down.

Aubin told the lawmakers he intends to "take action'' on Tuesday to address "underperforming'' video-slot machines provided by International Game Technology, which potentially would give IGT's competitors a chance to install more of their own machines as replacements.

It won't all happen in one day. But Aubin told the lawmakers he intended to invoke a provision in IGT's contract that allows the Lottery to reassign up to 15% of the machines IGT provides if they are underperforming.

IGT currently provides 4,364 (84%) of the 5,175 machines in exchange for 7% of net revenue from they generate. The rest are provided by Scientific Games (616) and Everi (195).

Aubin did not say how many machines he would reassign, but he acknowledged the Lottery has known since a March "efficiency'' report there was a problem. That was put on the back burner while he and other key players in the Raimondo administration negotiated the proposed 20-year extension of IGT's current contract with the RI Lottery.

IGT essentially runs the technology for Rhode Island’s video-slot and traditional Lottery games under the contract. It also provides the majority of the video-slot machines at the two casinos.

In a telephone interview Monday night, IGT Chairman Robert Vincent said he was personally unaware of Aubin's plans to meet with representatives of his company on Tuesday, to apprise them he was taking "appropriate action." But Vincent said it is not unexpected and that IGT has taken steps to replace 270 of the electronic machines with "newer products" over the next month, starting Tuesday.

On a related note, the state is days away from launching a mobile sports-wagering "app," allowing gamblers to place bets online anywhere in the state.

"An exact time-frame or date by which mobile sports wagering will begin is uncertain,'' Aubin said. "The hope is to have the mobile sports wagering begin on or before the National Football League season begins on September 5, 2019; but that date is subject to change based on testing results."

Rhode Island is counting on the new app, just as it counted on the introduction last year of in-person betting on college and professional athletic events, to offset losses.

Any thought that this would be a magic bullet dissipated in mid-August with more than 90 layoffs at the Twin River Casino in Lincoln. The news came days after publicly traded Twin River Worldwide Holdings reported table-game revenue at its Rhode Island casinos fell 34% in July, the first full month with Encore open, compared with the same period last year. Video slot machine revenue fell 17% in July.

While the one-month revenue plunge was dramatic, it reflected a trend.

The overall amount the state banked from casino gambling and traditional Lottery games (scratch tickets, Keno) dropped from $369.8 million in Fiscal Year 2016 to $364.9 million in the year that ended on June 30, 2018.

For years, the video-slots at the state's two casinos were a cash cow, with the state keeping roughly 61 cents out of every dollar left behind at the end of each day. But the state's share of this video-slot activity dropped, during this three-year period, from $293,157,674 in FY16 to $288.4 million in FY18.

The losses were only partially offset by live table-game play, from which the state gets only 15.5 cents out of every dollar wagered and lost.

The net result: the state's share of the casino revenue dropped from $308.8 million to $306.9 million over the same three-year period.

Official numbers are not yet in for the year that ended June 30.