Inside Asian Gaming

INSIDE ASIAN GAMING | Oct 2007 28 ing as important as it is in computer games arcades, where when a game is not in use, spectacular screensavers loudly advertise both the games available on the terminal and the name of the game developer. In such a trading environment, the time from research to product launch could also potentially be much shorter. Games that aren’t a hit could simply be back-catalogued or deleted from the casino’s server to make way for new ones, without the need for the time and effort of building, shipping and then fitting new game-specific terminals for each generation of new games. Casino as Xbox The idea of comparing casino brands to game console brands may not be too far- fetched. Both are essentially platforms for content, while not actually owning the con- tent themselves. Their ability to differentiate themselves in the market relates to the ‘er- gonomics’ and ‘functionality’ they can offer, including everything from how physically comfortable players feel, to how stimulating they find the ‘interface’ between reality and the fantasy of the game. Hotel brands also act to a certain degree as content platforms and differentiate themselves via their ‘soft- ware’. Hotel chains offering similar accom- modation in terms of price and general ser- vice make a selling point of carrying certain satellite television channels, or strike deals with particular restaurant franchises to op- erate on their premises. Copyrights and wrongs In the race to add value through content, all casinos are to some extent constrained by the nature of their core product. Tradi- tional table games such as baccarat and sic bo are non-proprietary and operators have absolutely no licensing control or rights over them other than perhaps the style of the tables and the design of some of the equip- ment. Imagine a slots market where the ca- sino operators actually enter into exclusive agreements on games and perhaps even sub-licence them to rivals. Such arrange- ments would help mitigate slot makers’ re- search and development costs and create a new revenue stream for the casinos’ slots operations. And because casinos are carefully regu- lated and controlled environments with multiple safeguards against theft and fraud, there is less chance of that intellectual prop- erty (i.e. that game) being stolen and repro- duced illegally—unlike the market for home entertainment computer games. The pressure to squeeze extra value from Macau’s slot sector is certainly increasing, as slot revenue growth and its contribution to the total gross gaming take continues to lag behind the growth in slot machine supply. While the slot universe may be expanding in Macau, and the total slot take may be rising, the average win per machine is being dilut- ed. Under such circumstances, operators will be keeping a close watch on the best per- forming games and thinking about ways to leverage the performance of the best and to cut out the more sluggish performers. Ken Jolly acknowledges slots competi- tion is heating up in Macau. “We advise [casino] concessionaires as much as we can and give them support on what we think works on their gaming floor and what doesn’t work. We also make rec- ommendations on gaming products that would suit their marketplace.” Macau is a very small place, but has six casino licensees and a number of joint ventures expanding aggressively, making it “a very competitive market,” according to Mr Jolly. “Operators are monitoring and watching what everyone else is doing, and looking for their own niche.” Paltry in absolute terms Slot machine revenue is showing ex- plosive growth in percentage terms and is making a steadily greater contribution to Macau’s total gaming revenue, though from a woefully low base. In absolute terms, slots are still relatively insignificant in the overall gaming market. Government statistics show the total number of slot machines in Macau rose 91.3% between the fourth quarter of 2005 and the fourth quarter of 2006 (from 3,421 to 6,546 units). Slots’ contribution to Macau’s total gross gaming revenue rose from 2.7% (1.25 billion patacas) in 2005 to 3.6% (2.05 billion patacas) in 2006. By the end of the third quarter of 2007, the number of slot machines had risen to 11,510—a 39.7% increase on the previous quarter and 75.8% increase from the num- ber at the end of 2006. Slot revenue for the first three quarters of 2007 reached 2.45 billion patacas, representing a year-on- year increase of 19.4%, meaning slots have Slots Future