Weekly Briefing - Brothers' Slots Gamble Is Paying Off Overseas
Scott Zeidman's brother Larry was building muscle cars for a living when he began to restore and sell antique slot machines out of his garage in 1978. By 1991, his niche business had grown enough to merit a warehouse. In 2002, the brothers sold $8 million worth of mostly used slot machines to casinos in Third World countries. Their L.A. Slot Machine Co. Inc. operates from a 55,000-square-foot, four-building warehouse complex in El Segundo. Used slots sell for $400 to $4,000, about one third of their new price.
"I'm an attorney. I came into the business in 1989, when it got so large, it was necessary to have a full-time attorney to deal with legal issues of the different states' and countries' import and export laws.
"In 1991, we outgrew the garage and rented a small space in our parents' fabric warehouse. It grew so large we eventually took over the whole warehouse and kicked them out.
"We own 7,200 slot machines. The major portion is selling used slot machines to casinos in countries in Central and South America, Southeast Asia and Russia and Ukraine. We buy them from every casino in the country: Las Vegas, Indian casinos and cruise ships.
"A Vegas casino has to replace their machines every three years or so. It used to be five. If people want to play it, the casino has to have it, and a good portion of the new ones are video slots. The casinos aren't buying the reel slots anymore so they're selling them to us.
"The casinos in most other countries are always a step behind the U.S., but that's not true for Russia. There's so much money in Moscow right now, they only want the latest and the greatest.
"We also buy from the U.S. military. In officers' clubs in other countries like Germany and Korea they have slot machines and video poker, and they upgrade them. The army games are generally set at a higher payout percentage than slots we get from anywhere else. Military slots are very loose, they pay out 97 to 98 percent. Vegas slots generally pay out 92 percent, and some go as low as 87 percent.
"We sell very few slots in the U.S. But a small portion of our sales is retail to individuals, antique machines for non-gaming purposes. We sell about 100 a year to residents in California. They start at about $1,100."
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