LT Game is the only gaming technology supplier to secure profit sharing agreements with Macau casinos.
The company is now set to follow up its innovative LIVE Baccarat system with the world’s first baccarat-based progressive jackpot
Upstart casino gaming systems supplier LT Game is 82% owned by Hong Konglisted LifeTec Group. which, until recently, was engaged primarily in the biopharmaceuticals business. LifeTec’s stock price has recently been on a roll thanks to the performance and prospects of its gaming arm – the price has tripled over the past six months. To reflect its new success and focus, Lifetec will rename itself Paradise Entertainment Ltd.
LifeTec has earned the envy of other leading gaming industry suppliers. In its latest earnings call, Shuffle Master expressed a desire to replicate LT Game’s profit sharing agreements with two Macau casino licensees – erstwhile monopoly operator Stanley Ho’s Sociedade de Jogos de Macau (SJM) and Hong Kong-based Galaxy Entertainment Group. LT Game Executive Director Aaron 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.”
Still, despite its connections, LT Game would have been restricted to either lease or purchase agreements – as are all other suppliers – if its proprietary LIVE Baccarat system did not offer a major value proposition to casinos. The system has the potential to shave over 90% off labour costs, according to Mr Park.
The first LIVE Baccarat terminals were installed in May last year at the Greek Mythology Casino, which operates under the license of Stanley Ho’s Sociedade de Jogos de Macau (SJM). The largest LIVE Baccarat venue is at the Mona Lisa Palace at Casino Lisboa – the LIVE Baccarat hall occupies the entire third floor of the venue with 120 terminals arranged in a theatre-style seating configuration. LT Game announced its agreement with Galaxy in April this year, installing 40 terminals at Waldo Casino that month to bring the number of terminals in Macau to 280.
LT Game is “moving aggressively to have 800 terminals in place by the end of the year,” claims Mr Park. The company provides the terminals and bears all installation, maintenance and tech support costs, as well as paying the salaries of promotional staff for LIVE Baccarat, while the casino operator provides the venue and dealers. LT Game receives a 31% share of net win – i.e. after the 40% government tax on gross gaming revenue. Those net wins have reached an average of HK$1,000 (US$128) per terminal per day, which, according to Mr Park, allows LT Game to recoup its capital expenditure in just a few months.
By providing LIVE Baccarat terminals to casinos at no cost, Mr Park argues LT Game offers operators a “risk-free opportunity to see if these machines work for them.” The company has also recently reached agreements with Malaysia’s Genting Group and the Philippine Amusement and Gaming Corporation (Pagcor) to supply 40 live terminals each to the casino at the Genting Highlands Resort and a Pagcor property in Manila.
Prior to the liberalisation of Macau’s casino industry in 2001, table-loving Chinese gamblers were averse to playing on gaming machines. In order to lure Chinese gamblers to slot machines, Macau casino operators, led by Mocha Slot, installed electronic versions of popular table games such as sic bo, baccarat and roulette. These electronic table machines, known as multi-terminal games, offer a hybrid between tables and slots, and are a fairly new innovation globally.
Initially, multi-terminals accounted for the bulk of Macau gaming machine revenue, but gradually, players started trying out the traditional slot machines located next to the multi-terminals, and following a migration over the past three years, Macau gamblers now spend more on regular slots than on multi-terminals.
LIVE Baccarat, like Shuffle Master’s Rapid series of table games (including Rapid Roulette and Rapid Sic Bo, available in Macau), employs electronic terminals in order to process bets – dramatically increasing the productivity of a dealing table while preventing fraud and errors – but maintains a live dealer. Live video of the dealt hands are streamed to the individual terminals, and also displayed on large LCD screens in front of the banks of terminals. Mr Park claims players prefer the hybrid system with a live dealer to purely electronic terminals: “As opposed to looking at a computer generated animation, they feel a live dealer is more fair and believable.” Inside Asian Gaming visited the LIVE Baccarat locations around Macau and observed that players at the LIVE Baccarat terminals did appear more engaged than those at fully electronic terminals.
A regular baccarat table in Macau sees roughly 500 hands (blended average over the past few years) dealt over a 24-hours period, with three dealers working eight hour shifts. “Since our games are timed, we can play 1,000 hands per day on a LIVE Baccarat table,” says Mr Park. Furthermore, each dealer on the LIVE Baccarat system currently handles two tables simultaneously (scaleable up to three tables, so that three dealers working over a 24-hour period on the LIVE Baccarat system can deal up to 3,000 hands). In addition, while a normal baccarat table seats six to nine players (an average of 7.5), each LIVE baccarat table is linked to separate sections consisting of up 25 terminals (20 in the current configuration). All told, a dealer on the LIVE Baccarat system is theoretically capable of handling up to 20 times more players than one at a traditional baccarat table – hence the impressive labour cost saving.
Mr Park stresses the value of reducing labour costs given Macau’s worsening labour crunch and the ban on employing imported workers as dealers. He points out that SJM is in the process of altering its revenue sharing arrangements with its joint venture partners, reducing its 20% share of gross gaming revenue (GGR) in exchange for the partners assuming labour costs. Pre-liberalisation, dealers were paid 5,000-6,000 patacas (US$625-750) per month. Staffing costs then were probably only around 7-8% of GGR, with other overheads adding up to maybe 13-14% of GGR, leaving SJM with a net of around 6-7% profit. With the arrival of competition and increased demand for dealers, SJM’s labour costs alone now probably account for 15-17% of GGR. “The major component is the labour cost component,” says Mr Park, which is why SJM is now asking a mere 5% in “franchise fees” and will cede 15% GGR as well as casino management control back to the JV owners on the main hall business, in return for the owners accepting all costs.
The greatly reduced 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. The maximum bet, however, is restricted to HK$10,000 per section of 20 terminals. In other words, the total of all bets – banker, player, tie and the side bet on the progressive jackpot – on each section cannot exceed HK$10,000. Thus, if one player places a HK$9,000 bet, all the other players in the section combined can only bet HK$1,000. This creates a sense of urgency for players to place bets before the limit is reached.
Mr Park explains the maximum bet is set so low because the system is still being tested and in order to reduce volatility of wins and losses, given the relatively small installed capacity. “From our perspective, we have 280 terminals. There are 20-25 terminals per section, which roughly corresponds to only 10- 14 of our version of tables.”
The max bet is increasing, however – it previously stood at HK$8,000. As more terminals are put in place, the maximum bet can be raised, at which time Mr Park expects net win per terminal to increase considerably.
Progress on progressives
LT Game has just launched a progressive jackpot as a side bet on LIVE Baccarat. The company’s trademarked Paradise Jackpot is the world’s first baccarat-based jackpot, which pays out when specific card sequences are dealt during a LIVE Baccarat game. The “Paradise Jackpot” pays out 100% of the pool when the five cards constituting a Royal Flush are dealt, while fixed payouts are also available for four of a kind, three of a kind and banker or player pairs. LT Game has filed patent applications in the US and Macau for the rules and system of LIVE Baccarat and Paradise Jackpot.
Baccarat is hugely popular in Macau, and progressive jackpots – “we call it the ‘life changing jackpot’” says Mr Park – hold great allure for Chinese gamblers. Last year, Macau casinos generated about US$6 billion in baccarat revenue, suggesting that even assuming a modest-sized side bet, a baccarat-based progressive jackpot could accrue to the millions of dollars and gain a huge following in Macau.
LT Game is in the process of linking the jackpot on LIVE Baccarat across the SJM venues it is located at – the linking is expected to be completed imminently, pending resolution of technical issues by Macau’s monopoly internet service provider, CTM.
LT Game has also developed a system to implement the Paradise Jackpot on regular baccarat tables. Mr Park assumes a side bet of HK$20 on mass market tables and HK$200 on VIP tables. “We believe we’ve got a hit product. Over time we would have a penetration for the majority of all baccarat tables in SJM and Galaxy. We think we can get 800 mass market tables and 300 VIP tables at SJM and Galaxy properties by the end of the year,” he predicts. “If for each game 50% of players place the side bet, the pool will grow by about half a million a day. The potential payout will take about one month or even longer. I wouldn’t be surprised if the jackpot goes up to 50 million. Even if 30% of people bet on the progressive each game, the numbers are staggering,” he adds.
For Mr Park, the Paradise Jackpot is a no-brainer, and offers “a win-win for everyone.” Casinos would gain a side bet offering an added attraction for players and an alternative revenue stream to the traditional banker, player and tie bets. LT Game, meanwhile, plans to cover all CAPEX associated with the Paradise Jackpot, in exchange for a share of a potential goldmine.