Inside Asian Gaming

INSIDE ASIAN GAMING | February 2008 32 Cover Story of bets dramatically increases productivity of a dealing table while preventing fraud and errors. Paradise is the only gaming machine manufacturer to have secured profit sharing agreements with Macau casino licensees, while all other suppliers are restricted to either lease or purchase agreements. Paradise currently has profit sharing agreements with two of Macau’s six licensees, SJM and Galaxy Entertainment Group. Mr Park says those agreements were struck thanks to the company’s “local connections,” especially those of Chairman and CEO Jay Chun, who “has tremendous experience in Macau and knows everybody in the field here.” Paradise bears all installation, maintenance and tech support costs, as well as paying the salaries of promotional staff for LIVE Baccarat. In return, SJM and Galaxy provide the venue and dealers and give Paradise a share of net wins from the terminals. Paradise unveiled the largest e-table casino in the world in Macau on December 28. The Paradise Casino, which houses 280 of the company’s LIVE Baccarat terminals, operates under the license of Stanley Ho’s Sociedade de Jogos de Macau (SJM), and brings the number of terminals deployed around Macau by the company to 540—the company has an additional 160 terminals placed on a profit sharing basis at a Philippine Amusement and Gaming Corporation (PAGCOR) venue in Manila. According to Mr Park, the company’s target is to have 1,200 terminals installed across Macau by the end of 2008, including an additional 100 terminals at the Paradise Casino. The Paradise Casino is located on the third floor of the Kam Pek site, which was previously home to the flagship outlet of Melco PBL’s Mocha Slot, before Melco PBL acquired its own local casino license, forcing Mocha out of the SJM-owned site for regulatory reasons (Mocha previously operated under SJM’s license). If all goes to plan, Paradise hopes to also take over the first and second floors of the Kam Pek site in the near future. Mr Park points out that as Paradise demonstrates the value proposition of its product and its bargaining power with casino licensees increases,it has now been able to command a greater share Sharing is winning Installed LIVE Baccarat terminals by property Operator Property No. of Terminals SJM Paradise Casino at Kam Pek 280 Jai Alai Casino 120 Mona Lisa Casino at Lisboa 80 Greek Mythology Casino 40 Galaxy Waldo Casino 20 Total 540 of the gaming revenue generated by its terminals.Whereas Paradise previously received a 31% share of net wins on its machines at SJM venues (with 40% going to the government as gaming tax, and the remainder to SJM), the company receives 40% of net wins on the 280 terminals at the new Paradise Casino at Kam Pek. SJM has been steadily switching its profit sharing agreements with all its 40:40:20 partners—40% to the government, 40% to the property owner, 20% to SJM—to a new 40:55:5 arrangement,whereby SJM only takes a 5% cut, but the property owners must assume all labour costs. Paradise expects to switch to that arrangement in the near future. Paradise is in a unique position to benefit from assuming labour costs, as the major value proposition of the LIVE Baccarat system is a more than 90% reduction in labour costs. Dealer costs in Macau have been spiralling since the government liberalized the local gaming industry in 2002 leading to an explosion in the number of tables, while the government has maintained a strict ban on casinos hiring foreign workers as dealers. The lower labour costs allow LIVE Baccarat to offer a minimum bet of just HK$20 (US$2.6), compared to the HK$100 minimum on normal baccarat tables. Given the relentless increase in the number of regular baccarat tables around Macau, Mr Park says:“Some people ask ‘won’t they have