Scientific Game

Seeking a Macau Playmate

A bunny-filled casino could soon be hopping up in Asia’s hottest gaming destination

Thursday, 26 April 2007 16:40
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Playboy Enterprises Inc, the Chicago-based company whose early incarnation brought us the world’s most famous men’s magazine, along with bunny girls and the instantly recognisable bunny logo, is still actively seeking a gaming partner in Macau.

Playboy spokeswoman Linda Mariscano told Inside Asian Gaming: “We are seeking to set up businesses with a gaming element in several locations. We’re not prepared to say more than that at this stage.”

The obvious home for a Playboy operation in Macau would be a site licensed to Melco PBL Entertainment, the joint venture between Hong Kong-listed Melco and Australia’s Publishing and Broadcasting Ltd. Garry Saunders, who worked as President of Playboy’s gaming division from 1997 to 2001, was appointed Executive Vice President and Chief Operating Officer of Melco PBL Entertainment in January.

 

Likely landing sites

Either City of Dreams (the Cotai complex being directly developed by Melco PBL) or Macao Studio City (the entertainment and gaming complex being built by partners including Singapore’s CapitaLand and Hong Kong’s eSun Holdings, but with gaming licensed to Melco PBL) the frontrunners for a Playboy operation.

Playboy’s caution about naming its prospective Macau gaming partner could be the product of hard experience. One of the other cities Playboy is looking to open a casino in is London, and this is a politically sensitive issue – albeit a rather dated one. In 1981, the British authorities withdrew the gaming licence of Playboy’s profitable London club after Ladbrokes, a rival betting company, claimed gamblers had been extended credit in contravention of regulations. That experience proved a turning point in Playboy’s first love affair with gaming. Eventually, the company closed its other casino operations and concentrated on merchandising and media publishing.

 

New directions

After the arrival of the Internet, however, Playboy teamed up with its nemesis Ladbrokes to set up a sports betting and casino gaming operation in cyberspace, though under US federal law its current operation, playboycasino.com, is not allowed to take bets from US residents.

In the quarter century since the London mishap, the company’s founder, Hugh Hefner, has continued to attract column inches in the newspapers, while his daughter, Christie, has kept a slightly lower profile and quietly got on with returning Playboy Enterprises to profitability through a slick branding and merchandising strategy that has offset the historic decline in sales of the flagship magazine. The turnaround included a moderately successful foray into video and pay television.

The complexion of the business changed again last October when the company made a spectacular return to gaming with a Playboy complex in Las Vegas reportedly costing US$55 million, and featuring a casino, nightclub, store, lounge and two-storey luxury suite in a new tower at the Palms Casino Resort.

 

Low-risk licensing

The Las Vegas operation is a licensing deal. The gaming operator gets to use the Playboy name and branding by paying a licensing fee, with little financial risk to Playboy.

The company also opened a venue in Shanghai last year. It features a seven-storey complex featuring restaurants, lounges, a cabaret, disco, spa and boutique, though being on the mainland it isn’t allowed to have a casino.

In the fourth quarter of 2006, Playboy reported licensing income of US$5.9 million – a 16% year-on-year increase, based on revenues that were up 21% at US$8.9 million. Playboy said the improvement had been driven by the first returns from the Palms Casino Resort venture.

Linda Havard, Playboy’s Chief Financial Officer and Executive Vice President, Finance and Operations, said recently: “We think that the potential value creation with no capital investment for the company is significant.”

The company would now like to repeat that success, and sees Macau as an obvious choice of venue. The Playboy brand is already present in Macau gaming halls through slot machines produced under license by US manufacturer Bally.

The question is, whom will Playboy choose as its Macau Playmate?

The company would be an attractive partner for a number of operators for a number of reasons. Firstly, the Playboy brand and Playboy logo is hugely popular in China and the rest of Asia. In 2003, The Far Eastern Economic Review named Playboy as the most popular brand in Asia. Playboy merchandising in the form of T-shirts, mugs, wallets and even underwear can be seen in shops across China. This brand recognition would make Playboy an attractive partner for any one of the Las Vegas-based operators, whose brands are well known in the West, but only just starting to make inroads in China.

 

Playboy’s China appeal

Secondly, although Playboy magazine is banned in mainland China because the authorities regard it as pornographic, mainlanders do not seem to have the same concerns as Westerners about political correctness and the objectification of women represented by bunny girls and the Playboy lifestyle. This would allow a Playboy casino operation to be marketed as a much more mainstream, upscale product than the niche product it is generally regarded as in the West. International beauty pageants are often viewed as dated or sexist in the West, but are now getting huge audiences in Asia.

Jeremy Goldkorn, editor of Danwei.org, a Beijing-based website on mainland media and marketing, says: “Playboy is usually translated into Chinese as ‘huahua gongzi,’ which literally means ‘play boy.’ This is a highly aspirational name for many Chinese men – it combines money with sex and sexual attractiveness in a way that many Chinese men are not yet as cynical about as they are in the West.”

 

Safe partner needed

Given that Playboy has a casino partner in Las Vegas, it will need to choose a Macau partner carefully to avoid any difficulties with the Nevada Gaming Commission (NGC).

The received wisdom is that any link with Stanley Ho could cause Playboy problems with regulators.

Links with Dr Ho’s children, however, look to be a different matter. Pansy Ho recently passed the first hurdle after the NGC deemed her a fit and proper person for Las Vegas operator MGM to partner with on its new resort in Macau. This could leave the way open for Lawrence Ho, who now has his own licence after he paid Steve Wynn US$900 million for a sub-concession last year, to do a deal with Playboy to bring the brand to City of Dreams or Macao Studio City.

Gaming analyst David Leibowitz of Burnham Securities in New York, suggests a number of options are perfectly feasible for Playboy. He says: “Pansy Ho to date has been successful with her joint venture with MGM, so it’s an open question at this time whether or not the [Playboy] arrangement in Macau could be done with Stanley Ho. It could just as easily be done with Las Vegas Sands Corp or one of the other operators.”

 

Prone to hop away

Mr Leibowitz believes that if too many obstacles were placed in Playboy’s way in Macau, the company would probably consider other options. “If there were questions about licensing or getting the appropriate licences in any given venue – based on the number of opportunities in the world of gaming today, Playboy would clearly seek the path of least resistance. Given the strength of the name not just in China but in much of Asia, the decision to move forward would be first and foremost on whatever regulatory assurances are needed, and that would be followed up by where Playboy could obtain the strongest license.”

Mr Leibowitz adds that Playboy’s management has indicated several times during earnings conference calls with analysts that they are looking to expand their participation in the gaming industry, but he says there’s nothing to suggest a contract has been signed yet.

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