Entertainment Inc.

Overview of the Gaming Industry

Brief History
Harrah’s Entertainment: (NYSE: HET)
-Founded in 1937 by William F. Harrah
-Headquarters in Las Vegas, Nevada
-Owns/Operates nearly 40 casinos in 3 different countries
-The World’s Largest Gaming Company
-Owns brands such as Caesars, Horseshoe, Bally’s, etc…
-Employs over 80,000 employees

"Each of our brands will be the overwhelming first choice for casino
entertainment of its targeted customers."
CEO - Gary Loveman
-Chairman, CEO, and President of Harrah’s Entertainment, Inc.
-Hired as COO in 1998, promoted to CEO in 2003
-A Former Professor at the Harvard Business School
-BA in economics from Wesleyan, PhD in economics from MIT
-Presided over a great period of growth including the $9.4 billion
acquisition of Caesars
-Named “Best CEO” in the gaming and lodging industry by
Institutional Investor Magazine 2003-2006

"He has a lot of very unconventional ways to look at the gaming business--looking
at it as a retailer, looking at the distribution points, taking a very macro point of
view toward the gaming industry. He's really brought a new and different
perspective to anything we've seen in the past." –Eric Hausler
Financials
2Q Ended June 30 2007

 Total Revenue: $2.7B

 Net Income: $238M
 Earnings Per Share: $1.25
 Stock Price (NYSE: HET) (as of 9/28/07): $86.93

 On of Dec. 19, 2006: entered into a definitive

agreement with TPG and Apollo to acquire
Harrah’s Entertainment for approx. $27.8B,
including the assumption of $10.7B of debt
– Each shareholder is to receive $90 in cash for each
outstanding share upon closing
– Transaction is expected to be completed in late 2007 or
early 2008
Early Competition
Forces Change
 By mid 1990’s: competitors entered new
markets
– Flashier properties – theme parks (MGM), animals
and shows (Mirage)

 Harrah’s had to grow the business in a

limited market

 Harrah’s was a 50-year-old company –

too established to try and replicate these
“must-see” properties

 Customer relations was their

competency and so they aimed to
become an industry leader based on
that customer loyalty
Information Technology
 All IT focuses on CRM
– Sandeep Khera is the director of operational customer relationship
management.
 Active Data Warehousing is the next phase of decision making
intelligence and extends the support provided by the traditional
Data Warehouse. (Teradata)
 Allows thousands of users to access and query the system at
the same time
 Helps you to:
– get closer to customers
– optimize your supply chain
– accurately track asset movement
– plan and manage successful promotional campaigns
– automate your sales force

“As you might guess, Harrah's loves gambling—just not when it comes to managing their
relationships with their customers.”
Information Technology (Cont.)
 Player Contact System (PCS)
– Manages/optimizes relationships with most profitable customers
 Total Rewards System
– designed to build a central loyalty program that can be utilized throughout
Harrah’s Properties.
– offers subscribers a card that accumulates credits based on that
customer’s participation within any Harrah’s resort.
– allows customers with more credits to get shorter lines and greater levels
of service within the resort, thus giving customers incentives to increase
spending.
– The rewards program has data on more than 28 million participants
– 48,000-employee company with 2004 revenues of $4.5 billion.
 Payoffs
 Harrah’s same-store sales rose 18 percent in 1999, the year of
Total Rewards’ expansion.
 Gaming from card-using customers rose 5.6% in 2003.
 The company’s net income grew 23 percent from 2002 to 2006
to $538 million.
 Since the program’s huge expansion in 1999, Harrah’s has
seen Total Rewards gain around 1 million new members each
year, for a total of 9 million members in 2006.

"We’ve been able to increase our share of customers’ gaming budgets from 36
percent in 1998 to 45 percent today," says Dave Norton.
Competitive Advantage

 Switching Costs
– The Total Rewards program
 Data
– Active Data Warehousing
 Alliances
– Teradata
– Caesar's

"The information from the rewards program is the lifeblood of our

organization, guiding our marketing and the analysis of our business," says
Dave Norton, Harrah's SVP of relationship marketing.