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Let the Games Begin; NIGC Numbers Tell No Lies

Indian gaming continues to grow

Indian gaming continues to grow as the National Indian Gaming Commission's
recently released statistics for 2003 clearly reveal. Gross gaming revenues
at Indian gaming facilities across the U.S. topped $16.7 billion, a 13.7
percent increase over 2002's gross revenue of $14.7 billion.

"The Indian Gaming industry has grown significantly and steadily throughout
the past decade," said NIGC chairman Philip Hogen in a press release. "This
growth has allowed tribes to create jobs, develop economically, build
infrastructure within their communities and provide services for tribal
members."

The composite gaming data is based upon audited financial statements
provided by the nation's 224 tribes active in gaming and covered 330
tribally-owned gaming establishments.

The explosive growth of tribal gaming in California is easily evident in
the 2003 NIGC numbers. For administrative purposes, NIGC divides the
country into six regions. Region II, comprised of Indian-owned casinos in
California and northern Nevada, recorded an increase in gross revenue of
over $1 billion, accounting for well over one-half of the overall national
increase. Political wrangling over how to "share" Indian gaming revenue in
Sacramento (as well as in a number of other state capitals) demonstrate the
growing significance that Indian gaming has in state economies, as well as
the still developing links between the reservation and off-reservation
economies.

As might be expected, the 43 largest casinos, those with annual revenue of
$100 million or more, generated the most revenue, $10.7 billion. These
casinos, while comprising only 13 percent of the Indian gaming universe,
are responsible for 64 percent of the total revenue generated. As is the
case with most any industry, the larger players dominate the scene.

The 73 smallest casinos, those with revenues of less than $3 million
annually, generated just over $76 million in revenue. At 22 percent, this
category is the largest in terms of number of gaming establishments, but
the proceeds generated represent less than one percent of the overall total
for that part of Indian country lying within U.S. borders.

The mean (average) annual gross profits experienced by these smaller
casinos in 2003 was slightly over $1 million. The median (the number midway
between the highest and lowest individual totals) was only $833,000. This
data reveals that the gaming windfall, imagined by some to have swept all
across Indian country, is indeed illusory. Not every Indian casino is a
Foxwoods or Mohegan Sun.

Has Indian gaming reached its saturation point yet? Doubtfully. Has it
reached its peak growth rate? Perhaps. With fiscal shortfalls looming in
state capitals nationwide, state politicians are turning to the
increasingly ubiquitous video lottery terminals and other forms of
state-sponsored gambling to raise revenue.

Although IGRA calls for a quid pro quo, potential gaming tribes or those
returning to the compact bargaining table are finding that revenue sharing
has become a pervasive reality of doing business. That said, a number of
states have opted to bypass Indian gaming and enter the arena themselves in
order to balance their budgets without having to "share" any of the spoils.
Other states, Maine and Rhode Island in particular, continue to stubbornly
refuse their Indian citizens the opportunity to "let the games begin."

Although growth in 2003 was certainly impressive, last year marked the
third straight year of declining growth, down from 14.8 percent in 2002 and
17.0 percent in 2001.

Look for Indian gaming to continue to grow over the next few years, albeit
at a slower rate as increased competition from state and commercial gaming
takes hold. Look for more states, following California's lead, to redouble
their efforts to dig deeper into Indian pockets, the funds in which are
supposed to fund tribal programs, not bail out state treasuries.