Inside Asian Gaming

INSIDE ASIAN GAMING | July 2011 36 games is very much higher than on live table baccarat. Live baccarat has a much higher entry price than slots (typically a minimum on mass tables of at least HK$100), but much lower house advantage, therefore the rate of stake attrition for those players economically eligible to play baccarat is much slower. Australia’s Productivity Commission looked at the issue of low denomination play in slots and made precisely the point that it’s the velocity of play that matters. Australian jurisdictions have a maximum bet limit, and a number do not allow notes to be used in slot machines—only coins. “EGMs have the potential for high intensity play, at a very high cost per hour, which may not be well understood by players (a broad consumer issue),” said the Commission in its June 2010 report. Tackling problem gambling in Macau both among local players and low-income visitors from China is currently a focus of Macau government policy, according to sources spoken to by IAG . A plan has been mooted to shut down some of the locals-focused slot clubs with machines denominated in the local currency— patacas. Were very low denominations to be eliminated in slot clubs and casinos alike in Macau, there would be some cost implications for the industry in terms of retooling and re-equipping the slot floors. On newer machines, denominations are often configurable by the operator either remotely via a server, or via a firmware upgrade or adjustment done at the machine. On older machines, the lowest credit buttons can be disabled and masked, effectively bumping up the denom. Several industry sources say that currently in Macau a small number of slot players using high denomination machines are providing the majority of the revenue—mirroringtheVIP-focusednature of the live table market. That suggests the revenue implications of banning ultra-low denomination machines may be minimal. The debate does, though, raise another important issue in relation to the Macau gaming industry—the lack of written regulations for slot and electronic table play, as highlighted in IAG ’s story in May about DICJ changes to electronic sic bo game payouts. The lack of a contractual relationship between the DICJ and equipment suppliers and the accompanying lack of clear rules on permissible products has sales revenue and development cost implications for casino equipment suppliers. They can typically face either very long waits to get new products approved in Macau—even if the equipment has been passed as compliant for other major gaming jurisdictions—or have to change the configuration of equipment at short notice, as with the recent case of sic bo payouts. To put the Macau slot denomination question into a global perspective, twoHong Kong cents was 0.00257 of a US dollar as IAG went to press. In the Singapore integrated resorts (IRs), the lowest slot denominations are typically S$0.05 to S$0.10. That’s equivalent to HK$0.28 to HK$0.56 per bet, or US$0.04 to US$0.08. However, when purchasing power parity (PPP) of the US dollar to the Chinese yuan is considered, using The Economist newspaper’s famous ‘Big Mac Index’ (how much it costs in real and PPP terms to buy a McDonalds Big Mac hamburger in key cities around the world), then two Hong Kong cents is a market appropriate (in pure marketing terms) entry price point for slot gambling in the Macau economy. Nevertheless, there are other issues specific to slot play in Macau that the DICJ might like to look at before it thinks about coming down hard on low-denomination machines. The first is that there is no jurisdictional minimum ‘return to player’ level (the percentage of total slot wagers the machines must give back to consumers as a whole). Ask many industry professionals what the Macau slot RTP is, and they will tell you “85%”. But that’s not written down as a regulation anywhere—it’s at best merely an understanding between the industry and the regulator and is not technically enforceable. Singapore, by contrast, has a statutory minimum 90% RTP on its casino slots. Some observers argue that consumers’ interests are currently protected by the mechanism of market competition. As one industry source told us: “Personally, I think too much is made of the relevance of RTP to players. In the 40-plus years STDM operated its monopoly here, there was no mandated RTP, and there was no competition to ensure that returnswere reasonable. Macaunowhas competition, and I expect the operators are running many of their machines ‘loose’; i.e. with relatively high RTP. RTP can be disguised effectively, anyway, by the volatility built into games.” If the DICJ really wants to protect consumers—and the majority of gamblers in Macau are not defined as behaving pathologically as far as IAG is aware—then it might be better to focus on creating an ‘at risk’ register for problem gamblers and publishing slot regulations, rather than worrying about trying to exert price point pressure by banning low-denomination play. Loose but fast?—Maximum betting can be expensive even on low denomination slots Macau Policy