Inside Asian Gaming

September 2015 inside asian gaming 37 gaming machine manufacturer Sega Sammy Holdings. The resort, dubbed Paradise City, is located in a special economic development zone on Yeongjong island, the site of Incheon International Airport, the main gateway for foreign arrivals, located about 30 kilometers from Seoul. Groundbreaking took place in November with an anticipated 2017 opening at an initial cost of US$750 million. Paradise Chairman and CEO Phil-lip Chun, the son of the company’s founder who took the reins from his father in 2005, is confident Paradise City will stand out among the crowd. “Paradise will differentiate from new foreign players with ‘Korean-ness,’” he says, expecting to capitalize on hallyu , the Korean pop culture trend sweeping Asia. “The main content Paradise will be showing to our guests will be Korean culture such as K-pop and other entertainment content.” Korea’s foreigners-only casino market will remain constrained ahead of the new integrated resorts coming online from 2017 onwards. Even then, skeptics such as Seoul-based gaming analyst Steve Park at Kore Company argue the country’s new “mini-IRs” will prove too small to compete regionally. Paradise City, with its initial complement of 160 gaming tables, 388 electronic table games and 350 slot machines, will become by far the country’s largest foreigners-only casino come 2017, but will hardly measure up to the IRs in Macau and Singapore. There are several bulls, however, including Standard Chartered analyst Philip Tulk, who believes IRs in Incheon will produce a cluster attractive to foreign visitors. A second project already approved on Yeongjong is a similarly priced joint venture led by US casino operator Caesars Entertainment, which plans to break ground this year and open in 2018. Two other ventures could join the cluster come 2019, with a Request for Proposals process having started last month for two additional foreigners-only IR licenses, after the concept phase drew 34 applicants. There’s also a chance they could all morph into more than mini- IRs. At final build-out, most of the proposed Incheon projects have investment targets in the billions of dollars, though clearly, it remains to be seen whether any of them are realized. Even Paradise City envisions doubling its investment in its second phase. Paradise’s five casinos, in Seoul, Incheon, Busan and the two in Jeju, achieved a 47.4% share of the country’s foreigners-only casino market in the second quarter with gaming revenue of 143 billion won ($120 million), down 17.1% from a year earlier as the outbreak of Middle East Respiratory Syndrome in South Korea kept tourists at bay and Chinese VIP play was impacted by Beijing’s ongoing corruption crackdown. Gross profit was down 37% to KW30.3 billion. As Japan’s push to legalize casinos inches closer to realization, SEGA SAMMY HOLDINGS is positioning itself as a frontrunner to secure one of the gaming licenses that could soon be on offer. In a bid to cut its teeth in casino development and operation, the Japanese pachinko manufacturing giant broke ground last year on the first phase of a highly touted integrated resort it is developing in South Korea with that country’s Paradise Group on Yeongjong Island, a special economic zone located near the port city of Incheon and the country’s main international airport. A 2017 opening is planned for the US$1.7 billion Paradise City, as it’s known, and plans are to capitalize on China’s booming market in outbound tourism with a hotel, a casino with 120 table games and 700 slots and electronic gaming machines and an array of non-gaming attractions, including retail shopping, entertainment and MICE facilities. SEGA SAMMY stated a desire as far back as 2007 to invest in casinos in Japan should the opportunity arise, and in 2012 purchased a resort in Miyazaki Prefecture. Two months after that acquisition was announced, Chairman Hajime Satomi reasserted the company’s intentions, saying, “Of course, [a casino] is what we have in mind.” SEGA SAMMY generated 367 billion yen (US$3.1 Hajime Satomi Chairman, President and CEO SEGA SAMMY HOLDINGS billion) in total revenue in the financial year ending 31st March. Although it already ranks as one of Japan’s biggest companies based on recurring income, a casino license would propel it much higher. SEGA SAMMY was created in 2004 when Sammy Corporation bought a controlling interest in ailing video game giant Sega. The 72-year-old Mr Satomi, who heads the combined group, founded Sammy in 1975 and built it into one of the biggest suppliers of pachinko and pachislot machines in Japan (its major rival in the market is Sankyo Corporation). In the current fiscal year ending 31st March 2016, Sammy expects to sell 265,000 pachinko machines and 220,000 pachislots. The company is also developing innovative games for the casino industry through its recently established subsidiary SEGA SAMMY CREATION. The first of these—splashy, outsized, carnival-style takes on baccarat, sic bo and big wheel—were unveiled last year, with the sic bo game having gone on to be installed at The Venetian Macao.