Goodbye, casino business. Hello...Arena Football?

Back in 2012, when he was CEO of Foxwoods Resort Casino, the massive Connecticut gambling complex, Scott Butera knew he needed a career change. He was in the midst of trying to renegotiate the company's Byzantine debt arrangements—while also trying to turn around its operations, which were rapidly declining as gamblers decamped to newly built and more convenient casinos.

An Arena Football League game featuring the new LA Kiss, which is owned by members of the rock band Kiss.
Source: Michael Voorhees | Arena Football League
An Arena Football League game featuring the new LA Kiss, which is owned by members of the rock band Kiss.

"We had a very successful restructuring there," he said, but added, "It's a tough market. Gaming is going to have to transition in many ways."

Two-and-a-half years and a half a billion dollars in debt reduction later, Butera, a former Division III defensive end, has left Foxwoods for a job that may seem to involve even more risk: He's trying to bring arena football to profitability and cultural relevance.

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This month, Butera will begin his new job as president of the Arena Football League, which started in 1987 and is now battling to prove—again—that it can have a stable, lasting presence in the world of American sports. Top stars like a pre-NFL Kurt Warner were once paid six-figure salaries in the arena game, but the sport's strong following in select cities was never enough to make the overall league into a viable business.

The league went into bankruptcy in 2009, and has since emerged with a leaner business model. Player salaries are down to around $800 per game, plus performance bonuses. The AFL's headquarters, which once had more than 50 employees, now houses only about a dozen. That might seem like a riskier and less desirable gig than running a big-name casino like Foxwoods—but given the state of the gambling industry of late, it might not be.

Steve Wynn: Internet gambling bad idea
Steve Wynn: Internet gambling bad idea   

The casino industry, coping with competition from online gambling and perhaps more real-world facilities than the market can bear, has been hit by a series of high-profile bankruptcies, layoffs and closures. Even overseas gambling meccas like Macau, China, have been forced lately to deal everything from a slowdown in the Chinese housing market to legal pressure from Beijing.

U.S. casinos have tried to diversify by doing things like reaching out to millennials or luring customers to non-gambling attractions.

"There's been a proliferation of gaming," Butera said. "It's gotten very saturated, so casinos have to turn to non-traditional businesses to make up lost ground. It works—but to what degree? Usually it doesn't replace the gaming revenue, because that's your highest-margin business."

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A gambler on a slot machine doesn't cost much in terms of labor costs, Butera explained, but a person who primarily brings revenue to hotels or meals side of the business is inherently a lower-margin customer. Some casinos have successfully reinvented themselves—in Las Vegas, non-gaming revenue now exceeds gambling revenue—but regional casinos still get most of their revenue from frequent gamblers.

"We have way too many casinos for our own good," Butera said. "It's very hard in gaming to trump convenience." That leaves resort-casinos—which market themselves as destinations in and of themselves—battling declining revenues, with few good options.

"Arena football has really had this mystical ability to survive kicks to the head and knife wounds to the stomach." -Jim Foster, founder of Arena Football

On the other hand, Butera thinks that there should be a place in the market for arena football. "We live in a football-crazed country. The league offers a great product. The NFL is becoming very expensive, and I think there's a home for something that's more of a value," he said.

The key, he says, will be getting the game in front of the public with marketing and publicity. He wants to see the league get more publicity on TV highlight reels and in the sports magazines and websites. And he's considering ways to make the games more entertainment-oriented events, perhaps with innovative smartphone experiences.

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The AFL can point to some early signs of a turnaround: For the 2014 season, average attendance at regular season games was up 3.5 percent to 8,585; the ArenaBowl, the league's 27th annual equivalent of the Super Bowl, attracted 18,401 spectators.

Bearish bet on casinos
Bearish bet on casinos   

The LA Kiss, owned by two members of the iconic, proto-metal rock band, are heading into their second season in the league. The location, the brand, and a reality show on AMC have helped that team overcome a 3-15 record in its inaugural season to achieve strong season ticket sales for next year.

"Arena football has really had this mystical ability to survive kicks to the head and knife wounds to the stomach," said Jim Foster, the game's inventor. "The million-dollar question is, 'How do you get it to be a sustainable business?'"

Part of the answer may lie in Las Vegas, the epicenter of the industry Butera just left. Perhaps inspired by the early buzz surrounding the LA Kiss, former Motley Crue front man Vince Neil plans to launch his own team, the Las Vegas Outlaws, next season. With Vegas' gaming revenue down 3.7 percent in August, the city and the Outlaws may need each other.