Inside Asian Gaming

47 International Briefs Macau Tops Vegas Leading leisure industry consultants estimate Macau will earn US$6.8 billion in gross casino revenue in 2006, compared with the Las Vegas Strip’s US$6.6 billion. Macau officially took the lead from the Vegas Strip as the world’s top-grossing casino gaming destination in the third quarter of 2006. Macau’s casino industry embarked on a spectacular boom follow- ing the liberalisation of the industry in 2002 and break-up of Stan- ley Ho’s 40-year casino monopoly. In 2004, the opening of the first new foreign-operated casinos and relaxation of travel restrictions on mainland Chinese wishing to visit the city led to a 44% year-on-year jump in the city’s casino revenue that year. The casino boom has also led to a rush of up to US$25 billion of investment – mostly from US interests – in Macau’s gaming and tour- ism sector.As the ambitious new properties open for business,Macau is set to further extend its lead over the Las Vegas Strip. Russian Casinos Sent to the Fringes Russian legislators passed a law to drive casinos and slot machines out of Moscow and other major cities, where they have proliferated in recent years. Under the law, Russia’s US$6 billion gambling industry will be exiled to four zones far from Moscow by July 2009. The law also bans gambling on the internet and at airports, supermarkets and other sites. The zones, which are in infrastructure-free wilderness, are in the Altai region in Siberia, the rainy Pacific coast region of Primorsky, the Kaliningrad area along the Baltic coast and an area in Russia’s south between Rostov and Krasnodar. The law also states that casinos must have a floor space of at least 800 sqm.Halls with gamingmachines must have at least 50 machines and a floor space of at least 100 sq m. Any gambling sites infringing the new rules will face closure from July 2007. Slot machines are cur- rently found in various locations across Russia, including airports, su- permarkets and apartment building lobbies. During the Soviet era, Russians had no legal gambling outlets other than a drab national lottery.With the arrival of capitalism came neon-decked casinos in the major cities. Russia’s recent oil wealth has led to a burgeoning gaming industry, but a public backlash is mounting. Russian casino operators say that while limitations are needed, restricting casinos to isolated regions could seriously harm the industry. Under the new legislation, no new gambling institutions will be allowed to open as of the new year, and by summer only those with assets worth more than $23 million will be allowed to continue oper- ating, forcing many smaller operations to shut down. Philadelphia Casinos on the Way The Pennsylvania Gaming Control Board in December cleared the way for Philadelphia to become the largest US city with a casino. The board chose from among 13 groups of casino giants, politically con- nected investors, celebrities and nationally known developers when it awarded five licenses for stand-alone slot parlours. WinnersincludegroupsledbyChicago-basedbillionairedeveloper Neil G.Bluhmand the Connecticut-basedMashantucket Pequot Tribal Nation,eachofwhichplanstobuildonPhiladelphia’sriverfront.Detroit- based casino developer Don H. Barden won the single license up for grabsinPittsburgh,whereheplanstobuildinthecity’sstadiumdistrict. The gaming board rejected an application by Trump’s Atlantic City- basedcasinocompanyforacasinoinnorthwestPhiladelphia,andapro- posal by St.Louis-based Isle of Capri Casinos Inc to build a casino next to Pittsburgh’s aging Mellon Arena and pay for a new US$290-million arena for the Pittsburgh Penguins of the National Hockey League.Also rejectedwasahotlycontestedproposalbyagroupledbyConnecticut- based Silver Point Capital for a casino near the Gettysburg battlefield. The board awarded 11 permanent slot licenses, each allowing as many as 5,000 machines. Six licenses are earmarked for the state’s horse-racing tracks. Governor Ed Rendell rejuvenated a 25-year drive to legalize ca- sino-style gambling in Pennsylvania by claiming that slot revenue would help reduce property taxes and revive the state’s declining horse-racing industry.The law, passed in 2004, authorized as many as 61,000 slot machines at 14 sites. New Regs for Italy and Spain Gaming regulators in Italy and Spain have passed legislation to lib- eralize land-based and internet betting, prompting a flood of license applications from foreign operators. In Italy,the government is auctioning off 17,000 licenses for sports and horse racing betting at shops and other outlets. Sports betting will also be permitted online. More than 30 companies – many of them bookmakers, including Betfair,William Hill and Unibet – have already received licenses to of- fer remote gaming. Remote wagering on skill games and person-to- person betting exchanges is also being regulated. The Spanish federal government has enacted legislation allowing sports betting in shops, retail outlets and online, and regional gov- ernments were given the ability to impose conditions as they see fit. Unlike Italy, Madrid has established a fixed license fee and a limited number of licenses. But license holders can open as many shops and outlets as they please. The UK’s major bookmakers are well-placed to take advantage of the opening markets. Gala Coral already operates an Italian-lan- guage Internet site and a betting shop in Genoa. Ladbrokes entered into a joint venture agreement with Italian firm Pianeta Scommesse in August 2006 and bought three betting shops in Turin in November. Meanwhile, William Hill is finalizing a joint venture with Spanish firm Codere after the European Commission announced last week that it would not oppose such a partnership. Italy had, until recently, resisted the notion of allowing foreign companies to offer internet betting and gaming products to its citi- zens. The Italian Ministry of Economy and Finance had gone so far as to order the country’s internet service providers (ISPs) to block access to the websites of foreign betting operators in February 2006. But when foreign betting operators complained Italy’s policies violated European Union free trade laws, the country became one of nine Member States against whom the European Commission launched infringement proceedings. Harrah’s Agrees to Buyout Offer Following two months of negotiations focusing on price and regula- tory risk, Harrah’s Entertainment – the world’s largest casino operator in terms of capacity – in November agreed to a buyout offer from two private equity groups for US$17.1 billion excluding debt.The deal will bring iconic properties such as Caesar’s Palace in Las Vegas under the ownership of Texas Pacific Group and Apollo Management, both of which are new to the gaming industry. TPG and Apollo agreed to pay Harrah’s shareholders US$90 per share, or 11%more than the US$81 per share offer they made in early October. The price was driven higher by competition from Penn Na- tional Gaming, which mounted a rival bid worth US$87 per share in November, and tough negotiation by Harrah’s. Harrah’s chief executive Gary Loveman will continue to head the company, but TPG and Apollo will need to gain government approval for the deal, with stringent US background checks of casino directors and owners expected to take at least a year. In order to allay investor concern about the regulatory process, TPG and Apollo pledged to make a small interest payment to Harrah’s investors for each day beyond March 1, 2008, that passes before the transaction is completed. Boyd Gaming Corp is tipped as the next potential target in the growing list of casino operator takeovers. Boys is particularly attrac- tive because of the 63 acres of land it owns along the Las Vegas Strip. It will own a further 24 acres on the Strip following a land swap with Harrah’s early this year. Boyd owns or operates 17 casinos and other gambling facilities in Nevada, Indiana, Illinois, Louisiana, Mississippi and New Jersey. Playtech Signs Deal with PartyGaming UK-listed gambling software maker Playtech announced on January 2 it had struck a deal with PartyGaming to power gaming Web sites that PartyGaming has agreed to buy from Empire Online and Inter- continental Online. “Under the terms of the four-year agreement, the online gaming websites currently operated by Empire and Intercontinental will re- main exclusively on the Playtech platform,” Playtech said in a state- ment. It added:“These websites will continue operating as usual and will also provide the added advantage of cross-selling opportunities to the current PartyGaming player database.”The deal between Play- tech and PartyGaming is conditional on the successful acquisition of Empire by PartyGaming. The Web sites being acquired by PartyGaming include Noble- Poker.com, Clubdicecasino.com, EnterCasino.com, MissBingo.com, FairPoker.com and MagicBoxCasino.com. In the wake of the US ban on online gaming, PartyGaming has shifted its focus to Europe, the Middle East and Africa, and is actively looking at ways to enter the lucrative Chinese market. Playtech’s li- censing deal with leading Chinese gaming group Sino Strategic In- ternational (SSI) could pave the way for a profitable relationship for PartyGaming too. Playtech is to provide SSI software for a number of games for China including mahjong, Do Di Zhu and Choi Da Di. Meanwhile, if PartyGaming moves into China, Playtech is now well-placed to provide the software for its sites. Atlantic City Delays Casino Smoking Vote The City Council in Atlantic City, New Jersey, delayed a December 29 vote to ban smoking in casinos to give the properties more time to prepare for the ban. A new, amended proposal will be voted on January 24, and is ex- pected to pass. The amended proposal would go into effect on April 15, while the previous measure would have taken effect in a month. While casino workers welcome the ban, casino operators have threatened legal action. The ordinance would make Atlantic City the biggest gambling spot in the US to bar smoking.Las Vegas,Biloxi,Mis- sissippi, and most Indian casinos allow smoking. New Jersey banned smoking in most indoor public places, includ- ing bars and restaurants, a year ago, but exempted the powerful ca- sino industry. 46