GGRAsia – Slot makers call for profit sharing to be allowed in Macau

Slot makers call for profit sharing to be allowed in Macau

Nov 14, 2019 Newsdesk Latest News, MGS Entertainment Show 2019

Manufacturers of electronic gaming machines say Macau’s Gaming Inspection and Coordination Bureau should consider allowing profit-sharing agreements between slot-machine suppliers and casino operators. In addition, they also call on the Macau casino regulator to speed up approval of new products.

The comments were made during a panel session – held on Wednesday, day two of the MGS Summit – on how electronic gaming machines could help the Macau casino industry to diversify its offer to customers. The conference is part of the MGS Entertainment Show 2019, being held at the Venetian Macao until Thursday.

In the first three quarters of 2019, Macau gross gaming revenue (GGR) from slot machines was just under MOP11.3 billion (US$1.4 billion), up 1.2 percent year-on-year. “Earnings have been going up, but slowly, so Macau remains a relatively small market for slots,” said Ken Jolly, Scientific Games Corp’s managing director for Asia.

Slot machines accounted for just 5.1 percent of Macau’s overall casino revenue in the January to September 2019 period, official data show. In the United States market, that figure stands above 50 percent, said Jay Chun, chairman of Hong Kong-listed gaming equipment maker Paradise Entertainment Ltd.

The small market plus the high overheads mean “casino operators have become a bit gun-shy” on buying new electronic gaming machines, said Aristocrat Leisure Ltd’s sales and business development director for the Asia Pacific region, Lloyd Robson.

That fear would be off the table if Macau allowed profit sharing agreements between electronic gaming manufacturers and casino firms, said Mr Chun. “When you [as a casino operator] invest in a slot machine, you never know if it’s going to be a success; profit sharing would give casinos a guarantee,” he explained.

‘Coming soon’

Such agreements are common in other regulated casino markets around the world. These deals often allow casinos to place new electronic machines on their gaming floors without spending a cent by sharing the profit generated with the supplier, said Interblock’s Asia-Pacific president Michael Hu. On the other hand, it would provide manufacturers with “stable monthly income to invest on research and development,” he added.

Mr Hu said that, by going from casino suppliers to partners, gaming equipment manufacturers would also be more involved in ensuring product success. For instance, he said, if a game was underperforming, it could be more easily replaced under a profit-sharing agreement.

Replacing poorly performing games or simply updating older electronic machines could however be a challenge regulatory-wise in the Macau market, manufacturers said.

“Sometimes when I walk across a gaming floor in any Macau casino, it seems the most popular brand is ‘Coming soon’,” said Michael Cheers. That was a reference to signage put on slot machines that are waiting for regulatory approval to be switched on.

The number of machines in Macau that appear to be out of work or on a transition mode is “quite high,” said the IGT sales director for Asia, adding this made slot machine areas less appealing for players.

Although he praised the “high technical standards” enforced by the Macau regulator – also known as DICJ – Mr Cheers called for “ways to expedite the approval process” of products.

Scientific Games’ Mr Jolly mentioned some casino operators having “four or five” game changes on hold, still pending regulatory approval. This, he said, restricted companies’ ability to rapidly respond to market changes.

Aristocrat’s Mr Robson said electronic gaming machines could face a wait of up to three months on the casino floor before they received regulatory approval to go online. He said that was “a bit of a disincentive” for the overall industry to invest in innovation and in new, disruptive products.