Inside Asian Gaming

INSIDE ASIAN GAMING | March 2008 8 neglect of the slots at his properties and the perception that gaming machines under the monopoly regime were bound to be rigged to offer meagre payouts, to cultural explanations such as the supposed preference of Chinese to engage in intense face-to-face battles against the house, and their belief that they can influence outcomes at the tables by spottingpatterns andpicking lucky cards or numbers, whereas they leave their destinies to unfeeling computers when playing slots. New market Macau’s visitor arrivals soared 40% in 2004,neatlycorrelatingwiththe44%increase in casino revenue for the year. Slot revenue, however, jumped a more spectacular 171%, though against a woefully low base. The rise in slot revenue barely registered in absolute terms (a US$50.5 million gain compared to the US$1.6 billion increase in overall casino revenue), but it marked a clear milestone. Mocha Clubs founder—and Stanley Ho’s son—Lawrence Ho commented that casinos in Macau previously only contained slot machines in order to “look more like a casino.” Having languished for years, the slot market became the only unequivocally new market to emerge in Macau in 2004. Transformative products tend to generate big returns in absolute terms much more quickly in existing markets than in new ones.By virtue of starting at a near-zero base, it takes time for new markets to establish critical mass—even with the Internet boom, although the number of users rose dramatically in absolute terms from the outset, it took much longer for most online firms to earn revenues on a par with their brick-and-mortar peers. This issue of Inside Asian Gaming features much discussion of the potential of online gaming, which intuitively appears certain to overtake land-based gaming in the future, but has a long way to grow—the combined revenue of all the world’s online casinos was estimated at less than a third of Macau’s casino revenue last year. There are clear parallels between the online gaming industry and Macau’s slot market, which also has a long march ahead of it. Last year, slot revenue accounted for 4.3% of total casino revenue. Though still a far cry from the 70% share in downtown Vegas, it is a clear improvement from 0.8% in 2003. Macau only had 814 slot machines in Cover Story