ISMS' Sam Arnold tells Simon Liddle why copied software is harming the industry.

For a number of manufacturers, the used machine business has come to represent something of an inconvenience. For others, it’s a direct threat to their business. There are allegations - and in some cases, evidence - of breaches of intellectual property, which challenges the integrity of the industry and poses a major problem for manufacturers and operators alike.

International Slot Machine Sales’ founder and managing director, Sam Arnold, however, is keen to set the record straight.

Over the past 12 years, ISMS has established itself as one of the leading global suppliers of used slot machines. The company has become a regular fixture at the majority of trade shows around the world and, while others across the tradeshow floor may simply be discovering potential new leads, ISMS is usually doing business.

That the used machine trade has become linked to illegal activities is to the detriment of everyone involved and is especially damaging to those, such as ISMS, who do not engage in these practices.

"Our company has a very strong policy worldwide, through all of our subsidiary companies in every country, that we have never and will never reproduce or copy any manufacturer’s intellectual property," Arnold said in an interview with InterGaming. "That’s a very clear point that is adhered to by all of our employees and all of our factories worldwide. We’ve very strong and very strategic partnerships with many manufacturers and we would never put ourselves in a position regarding any product that comes out of company that has copied software."

ISMS has offices in New Zealand, Australia, the UK, South Africa, Hong Kong, the US, Russia and Argentina, and in addition to warehouses in Australia and New Zealand, the company maintains facilities in Macau, Latvia and Panama.

"We’re in a fortunate position," Arnold continued, "we have many offices around the world, our buying power and our global corporate structure puts us in a position where we’re buying a lot of machines out of Australia, Asia, the US and Europe. We have no need to copy any software.

"I have witnessed the failure of many companies worldwide that have sold used equipment containing copied software and who have been drawn into litigation cases with manufacturers that have cost everybody millions of dollars. I have watched these companies fail; some of them were successful companies - successful probably only because they were copying software.

"I’ve watched and I’ve learned and as the managing director of our group I have made it very clear to all of our employees that we will not entertain the copying of any intellectual property."

Aside from the risk of jeopardising the relationships it has worked hard to establish with manufacturers, ISMS refuses to engage in such practices because these activities place operators - most of which may not be aware that software is being copied - in an extremely difficult position.

"We have many customers who can’t afford to risk their businesses by receiving product that is dodgy," Arnold said. "I’ve seen manufacturers in different countries attempt to seize machines and I’ve seen them attempt to close particular casinos down. This is potentially a big problem because casino owners can’t afford to close for any amount of time and they can’t afford to lose machines that are making them money. If you’ve got a machine in your casino you can’t afford to have it taken away because there’s something dodgy in it.

"I’ve seen it happen in a couple of countries and these are the innocent victims. You have a casino owner operating a machine he thinks is fine and then a particular manufacturer comes by and involves the police and other agencies and the machine is removed. It costs the casino owner a lot of money, and that’s his business and he’s the innocent victim. So with some of our competitors copying games - not all of them because there are many good companies - it’s put us in a stronger position because a lot of our clients can’t afford to have their businesses put at risk by having dodgy product. And they know from our guarantee that they’ll never get that."

The strength of the used machine market is evidence of the demand from emerging markets for less expensive, yet high-quality equipment. As Arnold states, ISMS is therefore fulfilling an important role within the development of such markets by helping them reach maturity. His company is not positioning itself to compete directly with major manufacturers.

"When you look at a new company that is just starting up - they’re not a financially strong organisation. They’re not a company that can afford to go out buying tens of millions of dollars of equipment but they’re a company that has the potential to do so in two or three years’ time," he explained. "What we say is we’re a building block; a small casino owner can buy from us used, original product and can put that machine into their casino, operate it for two years and make a good profit out of it. They are then in a financial position to buy new products from the manufacturers.

"Because of our size, our infrastructure, our global offices and our subsidiary companies, our collective buying power allows us to buy a lot of machines at a better price - our collective buying power enables us to buy 5,000 or 8,000 machines at any one purchase. This means we can break the machines down into smaller quantities and supply the market at a better price than anybody else. With our global offices it means we can offer a lot of local support and build local partnerships.

"Our price, our product and our local knowledge and support are all elements in why our relationships are so strong with our clients."