inside asian gaming In Focus Untapped potential: Macau sports betting

Online Gaming Two approaches to october 2015 social casino games 30 MOP

The Drought Spreads Chinese VIPs are disappearing across the globe

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COVER STORY Contents august 2015

Cover Photo: © Galyna Andrushko | Dreamstime.com

A Rough Ride 6 Betting Slip the sports wagering world is changing fast. But not in Macau, where it remains under a monopoly. Ending that on the Silk Road monopoly could boost revenue and enliven gaming floors. ONLINE GAMING Asian gaming is evolving away 28 Leading by Example two land-based casino operators describe their evolving from a VIP-centric business social casino strategies, and what others can learn from their model to a mass-market model experiences. driven less by gambling and A Wider Web more by tourism. A Las Vegas 34 model, in other words. Which is interesting on several levels, not least because Vegas itself is PwC examines new entrants and market convergence in the experiencing a fairly dramatic growing online casino gaming space. shift in this regard. CASINO MARKETING

14 Advocacy Versus Loyalty Brand loyalty in the casino industry is non-existent. Brand advocates, on the other hand, are everywhere, particularly in an increasingly wireless casino world. BRIEFS 42 Regional Briefs 44 International Briefs 46 Events Calendar EDITORIAL Tarred With the Same Brush

ntil recently, Asia’s aspiring casino destinations had declared their determination to follow in Macau’s footsteps. Now, they’re at pains to point out they’re on a different path. “The whole industry has been painted with the same brush, but we’re nowhere near the situation in Macau, where revenue is really falling,” remarked Philippine Ubillionaire Enrique Razon Jr, owner of Bloomberry Resort Corp., which operates the Solaire Resort and Casino at the burgeoning Manila Bay integrated resort cluster. In an interview with Bloomberg, Mr Razon said the Philippine casino market can grow without China through increased spending by mass and local gamblers. “The good thing now, in hindsight, is that our relationship with China is really not that good,” he said. “So we never had the business from China, which nowadays is probably a good thing.” Tensions between China and the Philippines sporadically flare up over the disputed Spratly Islands in the South China Sea, where China has begun building airbases, dredging sand and dirt to Chief Executive Officer create 2,000 acres of land where little more than rocky reefs existed before. Its biggest project is on Andrew W. Scott Mischief Island, which sits less than 150 miles off the Philippines’ Palawan Island but is 600 miles Founder and Adviser from China’s own Hainan Island. China has been ratcheting up tensions in the Spratlys, partly as a Kareem Jalal result of which the number of Chinese tourists to the Philippines fell by about 33% in the first quarter. Unlike Macau, where gaming revenue fell 36% year on year in the first nine months of 2015, Director revenue was actually up 16% in the Philippines in the first six months of the year, and state-run João Costeira Varela regulator Pagcor (Philippine Amusement and Gaming Corp.) expects growth could pick up in the Editor At Large second half. It seems investors were hoping for much headier growth, however, fueled by a flood of Muhammad Cohen high-rollers from China, which has failed to materialize amid an anti-corruption drive spearheaded by President Xi Jinping and worsening relations between the two nations. Contributors Even though revenue at Solaire grew 9.5% in the second quarter to 5.99 billion pesos, higher Paul Doocey, John Grochowski, James Hodl, Matt Pollins, I. Nelson Rose operating costs and expenses led to Bloomberry posting a net loss of 773.5 million pesos. The company’s stock price has fallen about 60% this year, making it the country’s worst-performing major Graphic Designer stock. Mr Razon added, though, that the company will continue pursuing premium players through Rui Gomes junket operators instead of doing it directly. Administrative Assistant “The environment will remain difficult and investors will remain skeptical as it’s hard to imagine where Latte Iao spectacular growth will come from for Philippine casinos without China, since that’s the region’s biggest source of gaming traffic,” said Astro del Castillo, managing director at First Grade Finance Inc. Photography Bloomberry’s planned investments in South Korea’s foreigners-only casino market, which is dominated Ike, Gary Wong, James Leong, Wong Kei Cheong by Chinese players, could also be impacted by continued weak demand from China. The company will probably know by December whether its bid to build a casino resort at the Incheon Free Economic Zone is successful, while a venture in Jeju Island may start making money next year, Mr Razon said. “This is the time to make good moves that will make you a lot of money down the road. We have Inside Asian Gaming is published by to adapt to the market, whatever that takes,” said Mr Razon. But the most important way to adapt to Must Read Publications Ltd evolving market conditions could be to look further beyond China. Bloomberry seems to be doing just 5A FIT Center that, and is now reported to be seeking a gaming permit in Argentina, where it would need to spend Avenida Comercial de Macau about $500 million to build a “respectable” casino, Mr Razon said. Macau Meanwhile, Macau’s beleaguered operators were given some cause for optimism following a Tel: (853) 8294 6755 2nd October report in Chinese-language newspaper Macau Daily that Li Gang, the director of the For subscription enquiries, please email Chinese government’s liaison office in Macau, had indicated that the Central government recognizes [email protected] gaming as the primary industry of the Macau economy and is studying possible measures to help lift it out of its current malaise. They’d have to wait, however, for further news on just what shape those For advertising enquiries, please email supporting policies would take. [email protected] or call: (853) 6680 9419 “Potential policy support from the central government may surprise on the upside, but the details will be critical to understand as previous government statements have not always resulted in any positive www.asgam.com impact on gaming revenues or visitation,” noted analysts from brokerage Sanford C. Bernstein & Co. ISSN 2070-7681 The current outlook, based on a median estimate of 12 analysts surveyed by Bloomberg, is for Macau’s gaming revenue to drop 32% this year. Analysts at Nomura came out with a prediction that revenue would slide a further 8% in 2016, marking the third consecutive year of declines. “Our 2016 fiscal Inside Asian Gaming GGR forecast suggests VIP revenues returning to 2008/09 global financial crisis levels,” they added. is part of Nomura did say, though, that it expected to see sequential improvement in mass-market gaming revenues for most Macau operators when official third-quarter figures were released in mid-October.

Kareem Jalal We crave your feedback. Please email your comments to [email protected] www.wgg9.com 4 inside asian gaming October 2015

FIneat Focureus Betting Slip

legalizing the estimated $400 billion US illegal betting market. Ending Macau’s sports betting That would bring Uncle Sam into line with Europe where sports betting is bigger and utterly ubiquitous, with major wagering monopoly could boost revenue brands dominating the sideline advertising and even blazoned across player kit. Daily fantasy sports, booming on websites such and enliven gaming floors as DraftKings and FanDuel, built $1 billion valuations, attracting investors such as Disney and Fox Sports, mainstream website imitators such as Yahoo, sports leagues as sponsors and sports fans by the millions forking out entry fees equivalent to Nevada’s By Muhammad Cohen sports betting handle in a pursuit that, but for a loophole in US law, would be called proposition betting. The revolution in sports wagering stretches far beyond the US. The digital age has made betting online and by phone app possible he sports wagering world is changing fast. Several as well as introducing new ranges of wagering. In-running (or in- US states are looking into legalizing sports betting, game) betting with odds calculated with the real-time precision potentially breaking the last wagering monopoly of of financial trading and provided by the likes of investment bank Nevada, where the sports book lounge—with TV Cantor Fitzgerald’s CG Technology, has revolutionized the sports monitors showing contests in progress and wagering wagering menu and is estimated to account for 75% of the betting by handheld devices—has become as much a Las Vegas staple as handle. eSports, featuring professionals playing combat games such Tthe sequined showgirl. North American sports governing bodies’ as Defense of the Ancients and League of Legends, are parlaying solid front of opposition to betting began to crack last November their massive viewership—League of Legends 2014 Finals had 30 on the New York Times op-ed page when National Basketball million global viewers, better numbers than this year’s NBA Finals Association Commissioner Adam Silver urged regulating and did on US TV—into conventional and fantasy betting, with mainline

6 inside asian gaming October 2015 In Focus

In-running (or in- game) betting with odds calculated with the real time precision of financial trading and provided by the likes of investment bank Cantor Fitzgerald’s CG Technology, has revolutionized the sports wagering menu and is estimated to account for 75% of the betting handle.

bookmakers coming on board. More than half of eSports betting since it extended the monopoly for a year, just ahead of the 30th June comes from Asia, a quarter from China, according to an Eilers expiration date. Research white paper issued in August. Across the globe, driven by intense competition among savvy entrepreneurs, sports wagering is DOUBLE PLAY racing ahead faster than Usain Bolt (at 0.25:1 to win) stretching for Gaming regulation experts agree Macau’s monopoly is a bad idea. the tape. “No tourist will take a taxi or walk miles across the city to place a bet But not in Macau. As in Hong Kong, sports wagering in Macau on tonight’s soccer game,” Macau gaming law expert Jorge Godinho remains under a monopoly. SJM Holdings affiliate Macau Slot takes says. “At a time when there is concern about the slowing revenue of bets on football (soccer to Americans) and basketball at 10 locations games of chance, sports betting seems to be the obvious easy way to around Macau, five in or around casinos operated by SJM or its raise additional revenue.” University of Macau Associate Professor satellites, as well as through phone and online accounts. Last year of Business Economics Ricardo Siu estimates sports wagering in Macau Slot delivered revenue of 736 million patacas ($92 million), casinos would double the current take. Considering what ending equivalent to less than 1% of the HK$78.2 billion bet on football alone the monopoly has done for casino revenue, that estimate appears with its cross-delta counterpart, the Hong Kong Jockey Club. Macau’s conservative. government seemingly finds Macau Slot’s performance acceptable The lack of sports betting in casinos costs Macau more than

“More variety of different games made available to players may be quite likely to elevate the atmosphere of the casino resort as an integrated entertainment venue, hence attracting different type of customers.”

October 2015 inside asian gaming 7 FIneat Focureus

“Having a sports book diversifies and completes our product offering in Solaire,” parent company Bloomberry Resorts’ Director of Investor Relation Leo Venezuela says. “By having this diversified and complete product offering, there is no longer any excuse for our customers to leave the property.”

just money, Mr Siu believes. “More variety of different games made than they’re likely to get under the government’s table cap. “Sports available to players may be quite likely to elevate the atmosphere book lounges fill up space, attract new clientele, plus keep clientele of the casino resort as an integrated entertainment venue, hence on the floor longer,” Mr Leppo says. “With limits on tables, they need attracting different type of customers.” to fill the space.” “Having a sports book diversifies and completes our product “The operator would need to evaluate the profitability of the space offering in Solaire,” parent company Bloomberry Resorts’ Director that the slot machines take up versus the space that a sports book of Investor Relation Leo Venezuela says. “By having this diversified would take up, if they are trading out space,” The Innovation Group and complete product offering, there is no longer any excuse for our CEO David Rittvo notes. “If they were to use previously underutilized customers to leave the property.” space on the casino floor, then the evaluation would be different. “The goal of the casino operator is for the customer to spend as Sports books represent an interesting opportunity to explore a new much time and money as possible there,” FoorballBet.com Chairman market in Macau, but like most of the other gaming products, it and CEO David Leppo says. His firm operates sports books in should be catered to the market.” casinos in Cambodia and Laos as well as online betting though its website. He says casinos and sports books complement each other, MORE JOY and expanding sports wagering in Macau “benefits everybody,” Sports wagering in casinos could provide some particular benefits particularly with new Cotai resorts built for hundreds more tables for Macau beyond filling floor space. “It’s disappointing that there are no really good sports books in Macau because I would very much like to put down a small wager and then spend a few hours watching a game,” says South China Morning Post Sports Columnist Tim Noonan. He believes sports book lounges would enliven the “almost joyless” atmosphere on Macau gaming floors and make them more welcoming. “The key element for a good sports book is it has to create a buzz, there has to be a fun vibe. They are, after all, the ultimate sports bars.” The Las Vegas version of these sports-fan fantasy lands include “movie theater size projection screens, lounge seating, ambience, even VIP seating with bottle service normally found in nightclubs,” Global Market Advisors Partner Andrew Klebanow, a Las Vegas resident, says. Sands China’s parent company Las Vegas Sands has state-of-the-art sports books in its Venetian and Palazzo resorts in Las Vegas, operated by CG Technologies, formerly Cantor Gaming.

“The key element for a good sports book is it has to create a buzz, there has to be a fun vibe. They are, after all, the ultimate sports bars.”

8 inside asian gaming October 2015 In Focus

Making Book

FootballBet.com Chairman and CEO David Leppo has been a bookmaker for decades, first in Santo Domingo and Mexico, now in Asia. In addition to online wagering on football and a full suite of international and US sports, FootballBet.com has nine locations in casinos in Cambodia and Laos. “A presence in the casino is a natural channel for sports books to customers,” Mr Leppo says. “It’s a self-marketing product. The operator benefits from the relationship with a percentage of bet profit [earned in the casino] and from those clients betting online. They can see the numbers generated through their portal.” FootballBet.com has a land and internet gaming license from North Cagayan Gaming and Amusement Corporation in the Estimates of the Asian sports gaming market Philippines. “Unfortunately, licensees in the Philippines are not recognized anywhere else except in the Philippines,” Mr Leppo says. are all over the map. Some put it around $70 “Currently, there are no Asia regional licenses.” That forces online billion. Global online players such as Bet365 betting into a “gray area” legally. and Pinnacle are big in the region along with Estimates of the Asian sports gaming market are all over the map. Some put it around $70 billion. Global online players such as Asia-focused MaxBet. Bet365 and Pinnacle are big in the region along with Asia-focused MaxBet. Online sports wagering is closely tied to online casinos. “We’re finding online casino gambling a natural segue to sports propositions from goals to red cards to corners. “It’s not two, betting,” Mr Leppo says. Macau’s slowdown has boosted revenue in three, four dimensional, it’s 20 dimensional,” Mr Leppo says, in both categories. Chinese “want to gamble, but do it online now that comparison to pre-kickoff wagering. In-running wagers are based on it is harder for mainlanders to get into Macau,” he says. constantly updated real time algorithms. Big operators may compile The biggest Asia sports betting action is on European football. their own algorithms, while smaller companies use specialists such So-called sports lotteries, such as Singapore, that require players to as Bet Radar and Don Best. pick the winners of a pre-selected slate of games tend to encourage FootballBet.com accepts bets up to US$100,000 on major tier players to graduate to real sports betting, where they can choose their events, $10,000 on lower tier events. “If we’re overloaded on one own action, according to Mr Leppo. side, we’ll trade off the excess if moving the line or odds does not For FootballBet.com, he says 75% of the betting comes from entice business to come in on the other side, no different than a in-running wagering during games, betting on a vast menu of commodities broker,” Mr Leppo says.

The Venetian lounge features a 100 x 10 foot (30.5 x 3.05 meter) observe that illegal sports betting is happening now online, without video screen capable of showing one event or divisible into up to Macau casinos in the mix. 42 separate ones, plus a separate screen dedicated to racing. The Sports book lounges in casinos will extend Macau’s destination lounge has 118 personal betting stations with computer screens and appeal, Mr Klebanow suggests. “First, it broadens the demographic takes wagers on all major race and sporting events. Most operators mix of gaming customers by attracting people who may not be offer wagering on handheld device provided by the lounge or on your attracted to a casino by traditional games of chance.” The sports own phone from your seat at the bar or anywhere within Nevada, bettors skew younger and male, and can also broaden the casino’s restricted to that state by geolocation software. ethnic mix. An expansion of sport betting in Macau would have similar “Today Macau does not do a very good job in attracting gamers restrictions to ensure that operators don’t take bets from China or from India, primarily because Indians do not feel particularly other jurisdictions where sports wagering remains illegal. Macau comfortable at Macau’s baccarat tables,” Mr Klebanow says. “Indians Slot (and the Hong Kong Jockey Club) currently operate phone and are rabid sports bettors, particularly on cricket. Sports betting would online betting restricted to players physically within the territory. allow Macau casino operators to target the gamers in that country with Proponents of sports betting contend geolocation blocking works; a suite of sports wagering products unavailable in their home country.” skeptics say there’s always a way around to beat the software; realists Gaming analysts said the FIFA World Cup last year helped start

October 2015 inside asian gaming 9 FIneat Focureus

The Venetian lounge features a 100 x 10 foot (30.5 x 3.05 meter) video screen capable of showing one event or divisible into up to 42 separate ones, plus a separate screen dedicated to racing. The lounge has 118 personal betting stations with computer screens and takes wagers on all major race and sporting events.

fantasy sports, mainly as a form of social gaming on sports news websites, with an estimated 46.2 million players, according to Eilers Research Partner Adam Krejcik. The fantasy game changed as an unintended consequence of the US Unlawful Internet Gaming Enforcement Act, passed in 2006 to prevent offshore processing of US players’ online gambling transactions. The law, enacted to curb online poker and traditional sports betting, included provisions to allow fantasy sports leagues to continue operating as games of skill with predetermined prizes. By 2009, daily fantasy sports appeared, with rules similar to the season- long games. Some states have moved to ban DFS for money, but the constituency that won the fantasy sports exemption in the first place has only expanded thanks to DFS. Estimates of DFS players range up to 8.9 million; Eilers research suggests 3.9 million unique paying DFS players at present, or 8% of the total fantasy sports universe. Dream Teams “We estimate $3.7 billion in entry fees—equivalent to sports wagering handle—for DFS in calendar year 2015, which compares to expected Nevada sports betting handle of about $4 billion, of which Las Vegas accounts for around $2 billion,” says Mr Krejcik, Daily fantasy sports are making sports betting who spoke to overflow crowds at the Global Gaming Expo in Las mainstream in the US, getting ahead of policymakers and the gaming Vegas last month, and at the International Association of Gaming industry to let sports fans test their skills as team owners using the Advisors conference in Vancouver in June. Revenue is based on a actual performance of real professional players. Sports bodies that rake model, similar to poker, “so it’s all about liquidity and volume,” shun betting on their contests have nevertheless embraced daily Mr Krejcik explains. Entry fees typically range from $2 to $20. For fantasy sports (DFS). golf, fantasy competitions run over the course of a tournament with In fantasy sports, players create their own teams, usually points awarded for statistics such as birdies, deductions for bogies, within a budget, and their athletes are rated based on their and an additional award for standing at the end of the tournament. statistics in selected categories. The phenomenon emerged from less formal arrangements during the mid-1980s in the US with TWO HORSE RACE Rotisserie Baseball, named for the restaurant where a group of Leading DFS companies FanDuel and DraftKings currently hold New York media types met and formalized their version of season- a combined 95% market share, Eilers estimates. FanDuel, the long fantasy play. The idea soon expanded to other sports, but overwhelming market leader through last year, has $362.5 million in baseball, with its wealth of individual player statistics that are backing from affiliates of media companies Comcast, TimeWarner widely available, and daily play, is still a huge component. Leagues and NBC Sports and venture capital all-stars like KKR. DraftKings often include an entry fee, with the top teams receiving prizes has raised $426 million from the likes of Fox Sports, sports at the end of the season. The growth of the internet expanded franchise owner and broadcaster MSG, Major League Baseball

10 inside asian gaming October 2015 In Focus

Macau’s revenue decline. But with sports betting in casinos the World on big screens with other fans, making bets, buying drinks and meals Cup and other events on the sports calendar create opportunities as they enjoy the scene. for promotions to encourage bettors to come to Macau and wager Given the legal situation, Macau operators are cautious about legally. “In the United States casinos use the Super Bowl [the broaching the issue of sports betting. “The company would certainly American football championship game] as the basis for creating a evaluate the opportunity should it materialize at some point,” Las party weekend,” Mr Klebanow says. “They invite their best players to Vegas Sands Senior Vice President for Global Communications and the property and build a weekend event around the game. Formula Corporate Affairs Ron Reese says. The Macau government has the One racing, football, cricket, rugby, all have large appeal in Asia and ball on sports wagering. Putting sports betting licenses in play could championship games and tournaments allow the casino to create unleash new waves of excitement on casino floors and a new stream parties built around those events.” of revenue. It looks like time to take a shot. Mr Rittvo adds that the opening weekends of America’s college and professional football seasons, as well as NCAA college basketball’s championship tournament known as March Madness Editor at large Muhammad Cohen also blogs for Forbes on gaming throughout Asia bring big crowds to Las Vegas betting lounges. It’s largely a mass and wrote “Hong Kong On Air,” a novel set during the 1997 handover about TV market crowd that comes for the atmosphere of watching a big game news, love, betrayal, high finance and cheap lingerie.

integrate it into their product offering and how to monetize it.” “DFS players are not hard core gamblers, in fact most do not go to Vegas or visit a casino more than once a year,” Mr Krejick says, citing an Eilers DFS player survey released in July. “The number one reason players cite for participating in DFS is excitement/thrill factor and [that it] makes games more fun to watch/engaging. Very few said they do it for monetary reasons.” DFS offerings remain largely focused on the majorN orth Leading DFS companies FanDuel and DraftKings currently hold a combined 95% market share, Eilers estimates. American sports—baseball, American football, basketball and hockey, plus US soccer, NASCAR racing and mixed martial arts on DraftKings. “It’s largely a North American centric experience right now, but no reason for it not to take off in overseas markets,” Mr (including an exclusive partnership), the National Hockey League Krejcik says. and Major League Soccer, and Eilers believes it passed FanDuel “Fantasy sports has made a little bit of a splash in Asia,” this year. Eilers estimates each privately held company has a $1 FootballBet.com Chairman and CEO David Leppo says. He expects billion valuation. the trend to take hold in the region over the next three to five years. Yahoo’s entry into the field this year has been “underwhelming,” Mr “If there is a way to tap into some of the international basketball Krejcik says. Eilers is also skeptical about Amaya/PokersStars taking leagues, soccer [football] leagues and cricket leagues, then the meaningful market share from the top two. CBS Sports joined the fray markets would grow substantially,” The Innovation Group CEO in August, hoping to exploit DFS interest during the US professional David Rittvo says. And don’t forget Japanese baseball. football season. At a G2E press briefing, American Gaming Association CEO Geoff Freeman characterized DFS as a “gray area” in the current regulatory environment. “If it’s legal, our casinos need to be involved,” Mr Freeman said, adding that casinos see DFS “not as a threat, but as a partner we hope to work with in the future.” Global Market Advisors Partner Andrew Klebanow says, “Casinos in the US are still trying to understand this phenomenon, how to

“The number one reason players cite for participating in DFS is excitement/thrill factor and [that it] makes games more fun to watch/engaging. Very few said they do it for monetary reasons.”

October 2015 inside asian gaming 11 12 inside asian gaming October 2015 October 2015 inside asian gaming 13 CASINO MARKETING

Advocacy Versus Loyalty

If you think being an advocate for a brand rguably, casinos cater to the most promiscuous customers of any industry and Las Vegas provides all and being loyal to a brand is one and the the evidence one needs to support this assertion. The same, then you are not a casino marketer. typical Las Vegas tourist will visit six casinos during a two-and-a-half-day average stay. They will carry Brand loyalty in the casino industry is non- player loyalty cards for every one of those properties, and most willA play hard to earn enough points for some sort of entitlement existent. Brand advocates, on the other redeemable during their brief stay. Biloxi, Atlantic City and Macau hand, are everywhere, particularly in an customers are no different. There is no loyalty. increasingly wireless casino world For the card carrying, rated player, how and where the entitlement—points and comps—is eventually earned and redeemed is inconsequential. In commodity centric environments like Las Vegas, Atlantic City and other gaming destinations, a room By Michael Perhaes is a room, and slot machines and table games don’t differ from place to place. “I’m going to gamble at six different properties; if I can earn a free room at Excalibur, then play roulette at Paris, who cares?” That’s ‘loyalty,’ casino destination-style. This is not to say that loyalty programs as a mechanism for retention and trip generation are not effective. Of course they are, particularly for regional operators. But loyalty programs do not Michael Perhaes is vice president of marketing for Wind Creek Hospitality necessarily encourage brand advocacy. Does earning a room or (formerly PCI Gaming), the hospitality meal comp mean that something is good or memorable or worth enterprise of the Poarch Band of Creek sharing with friends? Not necessarily. Indians. Operating three casinos and And what about those eccentric players that remain loyal yet two luxury resort hotels in Alabama, refuse to sign up for the programs or insert their player cards WCH also owns a controlling share in greyhound racing tracks in Mobile into a machine? In their case, the term ‘loyalty program’ is a and Pensacola, Fla., as well as a poker misnomer. Although we’ve managed to enlist about sixty percent room/ horse track in Gretna, Fla. of our customers into our loyalty program enterprise-wide, a He can be reached at mperhaes@ significant portion refuse to join or use the cards when they play. windcreekhospitality.com. Their reasons are mysterious, with many claiming that the act of inserting the card into the machine somehow enables the casino

14 inside asian gaming October 2015 CASINO MARKETING

“We need to deploy a more aggressive apparatus to track prolific posters and bloggers, and reward them in kind. Acknowledging the brand advocate and rewarding them for the potential of referred business is not a risk, and may be as lucrative as rewarding customers through players’ club programs.”

to alter the outcome of the game. I have engaged in numerous, processes for recognizing brand ambassadors and advocates, but passionate conversations with many of these customers, attempting these efforts are still too ‘beta,’ and all mostly tease. The software in vain to convert them to card-carrying, card-using members of our developer that figures out an API linking Facebook activity to a loyalty program, ‘The Club,’ but to no avail. These unrated players customer’s CMP account will upend casino marketing. are a superstitious lot, but they’re still ‘loyal,’ even if they refuse to We need to deploy a more aggressive apparatus to track prolific be recognized as such. posters and bloggers, and reward them in kind. Acknowledging the But what about those patrons out there generating conversational brand advocate and rewarding them for the potential of referred currency on behalf of your casino through Facebook, Instagram and business is not a risk, and may be as lucrative as rewarding customers good, old-fashioned word-of-mouth—aren’t they practicing brand through players’ club programs. advocacy? These individuals without argument represent the most If an advocate on Facebook shares an experience at our casino valuable contributors to your brand reputation and theirs is the only with 300 of her friends, what is the value of that post? What is the market voice that matters. mechanism for measuring conversion rates of these shared posts? I’ve conducted quarterly advertising effectiveness surveys Are we willing to roll the dice, and take a guess that 300 Facebook on behalf of my casinos for two years. Consistently, 50% of our ‘likes’ will generate three room reservations or three players customers are hearing about our properties and our promotions generating $750 in casino wagers? And if so, how do we recognize or through word-of-mouth, not through traditional media channels such reward the advocate? as TV, radio or out-of-home advertising. These brand ambassadors It’s a reasonable question to ask in the shadow of an advertising help spread the word and are priceless contributors to our bottom media strategy that essentially executes the same Hail Mary pass. If we line (and yours) and yet no one has yet figured out the mechanism buy billboards along the interstate, how many of those eyeballs we’ve for recognizing these valuable advocates. Why is that? We recognize captured translate into paying customers? What’s the conversion that conversational currency is born from the experiences we create rate? This is not about measuring the effectiveness of advertising or at our properties, experiences that are worth talking about, and worth determining its value. It’s about discovering the true worth of social sharing online. Ultimately these experiences translate into posts on media-empowered advocacy, recognizing their contributions and Facebook and Instagram, often shared and… then what? developing actionable programs to reward them appropriately. After We see hints of measurement mechanisms and potential all, these advocates are building your brand.

“This is not about measuring the effectiveness of advertising or determining its value. It’s about discovering the true worth of social media-empowered advocacy, recognizing their contributions and developing actionable programs to reward them appropriately.”

October 2015 inside asian gaming 15 Cover Story

A Rough on the Ride Silk Road

Macquarie Securities issued a report in September that forecasts China’s VIPs have gone China’s percentage impact on Asian gaming revenue growth near- to mid-term to slow to the low single digits at best. That’s more bad missing from Las Vegas ... news for Macau and Singapore and quite possibly for the Philippines, South Korea and Australia. All are counting on wealthy gamblers Will the masses step up to from the PRC to sustain returns on billions of dollars in new and proposed investment in resort-scale casinos. The crux of Macquarie’s research is that Asian gaming is evolving replace them? away from a VIP-centric business model to a mass-market model driven less by gambling and more by tourism. A Las Vegas model, in other words. Which is interesting on several levels, not least because Vegas itself is experiencing a fairly dramatic shift in this regard. As this is playing out across Asia, analysts expect the mass hina’s high rollers, so noticeable by their absence market’s contribution to gaming revenues will continue to climb. from Macau the last year and a half, are taking their Currently, it is approaching 50% from 36% or so just five years ago, disappearing act on the road. according to Macquarie. In line with this, non-Chinese Asians’ share In Singapore, whose two multibillion-dollar resort of the mix will become more prominent as well, growing by double- casinos were conceived in large part to cash in on free- digits over the next couple of years, Macquarie believes. The boom in spending VIPs from the world’s second-largest economy, demand Chinese outbound travel will be another big positive. Although these Cfrom Chinese gamblers is “deteriorating,” as Morgan Stanley put it new tourists represent a much broader demographic than the tycoons in a recent client note. This is nothing new. Tepid revenue growth and provincial satraps from southern China who transformed Macau has been the story in the Lion City for a couple of years. But it has in the space of a decade into the largest casino market, in terms of earnings under increasing pressure. In the second quarter, gaming revenue, in the world—they won’t be stuffing drop boxes at baccarat revenue went into decline. The bank believes the market could tables at anything near those levels. contract in 2015 by as much as 4%. What all this implies in the face of an estimated 50% increase

16 inside asian gaming October 2015 Cover Story

in gaming capacity region-wide over the next three to four years is government crackdown on corruption, graft and capital flight that less certain. Despite the much higher margins operators enjoy on has wealthy gamblers anxious to avoid behavior that might attract mass play, Macquarie believes the surge in new supply “will lead to official scrutiny—the same factors that have hit Macau so hard and significant returns deterioration. … Our bottom-up analysis suggests are changing the game across Asia. a 510 [basis point] decline in net margins and 130 bps decline in EBITDA margins” through 2017. THE NAME OF THE GAME CLSA last month released a report zeroing in on exactly this but You look at visitation, air traffic, tourist spend and hotel occupancy concluded that the region remains “undersupplied” and thus can and revenue and there is much to be said for the Las Vegas Strip’s “comfortably” absorb the addition of some 30 new casinos over the recovery from the damage inflicted by the Great Recession. Hotel, next five years. They represent a whopping 80% increase in capital food & beverage and retail and entertainment all set revenue records expenditure against gaming revenue growth which CLSA estimates in fiscal 2014. In August, passenger volume through McCarran at roughly 22%. Still, the firm says, “With an increased focus on the International Airport surpassed 4 million (up 7.2% against the mass market, especially in Macau, we expect Asian gaming industry same month last year) for the second straight month. That hadn’t EBITDA to double from US$9.5 billion to US$18.7 billion.” happened since before the recession. Total visitation through the first But, as Macquarie warns, returns will come down—in Macau eight months of 2015 is 2% ahead of last year’s record of 41.2 million. from an average of 34% on existing casinos to 21% or so for the new Spending at the slots and tables hasn’t really reflected this, resorts under construction or soon to open on Cotai, according to however. In only four of the last eight years has total gaming revenue CLSA. But as their analysts note, “That 21% comfortably exceeds the performed better than the year before. Only in three years on the slots average cost of capital as well as the global average ROIC for major side. Revenues slid again, by 2.1%, in calendar 2014. But leaving that projects in the U.S. and Australia.” out for the moment, even the prior four years of increases weren’t What’s interesting, as alluded to above, is how closely Las Vegas enough to restore the total take to pre-recession levels. is mirroring these trends, not as “major projects” go—the Strip hasn’t Table game revenue has been the exception, and that’s because seen the opening of a resort built from the ground up since 2010—but the boom that market liberalization sparked in Macau touched off a in terms of the enormity of China’s impact on gaming revenue. mini-boom in baccarat on the Strip. Which is not surprising. “The What’s happening now, though, is that impact is waning vast majority of the play is from Asia,” as analyst Chris Jones of Las because the Chinese economy is slowing down, and it’s harder Vegas-based Union Gaming Research notes. “The largest segment to move large sums of money out of the country in the wake of a certainly is Chinese.”

What’s interesting is how closely Las Vegas is mirroring trends in Asia, not as major projects go— the Strip hasn’t seen the opening of a resort built from the ground up since 2010—but in terms of the enormity of China’s impact on gaming revenue.

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In 2010, baccarat wagers on the Strip broke the $10 billion mark, and the game surpassed $1 billion in win for the first time, supplanting blackjack as the biggest money-maker in tables. For the first time in memory, table games generated more annual revenue than slots.

Before that, table games were struggling to climb out of the the world, 2003’s Strip baccarat wagers of $1.8 billion turned into $4 economic downturn of 2001-2002. Baccarat, which had been in billion, revenue soared 36%, 35% the year after that, 25.5% in 2006. decline four straight years, was viewed as something of a novelty When the recession hit and gaming revenues plummeted, game, a plaything of the international high end, available almost baccarat volumes largely held up, and this is interesting, too, because exclusively, then as now, at the largest resorts. At the end of 2003, it also appears to point back to Macau. The Chinese government at there were 81 tables where you could play it, comprising all of 3% of that time had tightened restrictions on travel to the city in the wake the Strip’s table inventory. Revenues were falling at an average rate of a number of gambling-related scandals involving executives of of 9.5% a year. But it was the largest driver of win after blackjack, state-owned enterprises. In 2009, VIP revenue growth dropped to good for $359 million in 2003 on relatively low volumes that were 8% after three years of double- and triple-digit increases, topped by working at the time to skew the game’s inherent volatility way in a 51% burst in 2007. The global financial crisis has to be factored in favor of the house. That mattered enough in a market where tables too. In any event, total revenue growth also fell to single digits. That were in the doldrums generally to worry operators about their ability had never happened since the market was opened to competition. to compete with the rest of the world, and the industry’s powerful And Vegas got the spillover. In a year when total Strip table volume lobby prevailed on the Nevada Legislature to scrap a longstanding fell by 2.5%, baccarat wagers jumped $1.4 billion, a 20% increase, regulation requiring all games to be played in public. and that took the edge off the recession and led a 9% recovery in Then Sands Macao opened and everything changed. Gaming table revenues the following year, 4% overall, despite a third down revenue in Stanley Ho’s sleepy casino enclave on the South China Sea year for slots. leapt 44% in 2004 on a 34% surge in VIP baccarat. Halfway around In 2010, Macau was the largest casino revenue market in the

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A local condominium developer is marketing EB-5 visas to Chinese investors interested in a piece of the Lucky Dragon, a boutique casino with 200 hotel rooms slated to open in 2016 as ‘an authentic Asian cultural and gaming experience’.

world for five years running, and VIP, which accounted for 72% of York for a giant racino, Resorts World New York City, which opened in it, enjoyed its best year for revenue growth ever, blowing past 2009 2011 at Aqueduct racetrack in Queens, and at the time was lobbying by 70%. Las Vegas Sands, MGM and Wynn Resorts were raking aggressively for a luxury casino in downtown Miami. Early in 2013, the it in in Macau. Baccarat wagers on the Strip broke the $10 billion company bought 87 acres at the north end of the Las Vegas Strip for mark. Inventory had grown to 241 tables at 17 casinos, and the game $350 million and announced plans for Resorts World Las Vegas, the surpassed $1 billion in win for the first time, supplanting blackjack world’s first top-to-bottom Chinese-themed gaming resort. as the biggest money-maker in tables. For the first time in memory, tables generated more annual revenue than slots. Moreover, better VISAS FOR SALE than 40% of table revenue was coming from less than 10% of table To get an idea of the impact of Genting’s announcement, it had been supply. In recession-era Vegas, baccarat had become the name of almost three years at that point since a greenfield resort opened the game. on the Strip—that was The Cosmopolitan, a five-star showplace This was not lost on Lim Kok Thay, billionaire chairman and CEO that has struggled mightily to make money in the casino, turning of Malaysia-based resort conglomerate Genting. A decade before, its first quarterly profit only this year. When it debuted at the end Genting had entered the U.S. market with its purchase of Miami-based of 2010 as a repossessed asset of Deutsche Bank’s (private-equity Norwegian Cruise Lines. The company later won a license in New giant Blackstone bought it last year for less than half its $4 billion

Asian gaming is evolving away from a VIP- centric business model to a mass-market model driven less by gambling and more by tourism. A Las Vegas model, in other words.

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development cost), analysts predicted there wouldn’t be another of that never got built. But Crown is back as part of a joint venture with its kind for at least a decade. Los Angeles-based investment group Oaktree Capital with plans to The site for Resorts World Las Vegas kind of says it all. The seller, erect a luxury casino hotel at a cost of upwards of $1.9 billion, Alon Vegas-based Boyd Gaming, had owned and operated the Stardust Las Vegas, it’s called, at the Frontier site. there before blowing up the venerable resort to make way for a $4 On Sahara Avenue, along a less traveled area west of Las Vegas billion extravaganza called Echelon that was scrapped when the Boulevard, a local condominium developer is marketing EB-5 visas recession hit, leaving parts of a windblown superstructure that—like to Chinese investors interested in a piece of the Lucky Dragon, the vacant land next door where the old Frontier was torn down for a boutique resort with 200 hotel rooms slated to open in 2016 as the abortive Plaza Las Vegas, and across the street where the shell “an authentic Asian cultural and gaming experience” featuring a of the Fontainebleau stands, 68 unfinished stories high—haunts 19,000-square-foot casino offering baccarat, sic bo, pai gow and the north end of the Strip with memories of that era of “irrational fan tan and promising feng shui-friendly VIP rooms. Las Vegas is exuberance,” as it’s characterized now, that collapsed in 2008. considered economically depressed, which under the EB-5 program James Packer’s Crown Resorts lost around $1 billion in the crash means investors willing to commit $500,000 or more to the city on investments in the Fontainebleau and a megaresort of its own may qualify for legal residency. Industry veteran Andrew Klebanow,

Macau peaked in 2013 at $45.2 billion in gaming revenue, 60% of it VIP. It was the high water mark for baccarat on the Strip. Revenue totaled $1.58 billion that year, a 16.6% increase over 2012. It would fall 6.4% in 2014.

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A release accompanying Resorts World’s groundbreaking gushed about “rich cultural attractions, varied cuisine, and jaw-dropping entertainment from China’s many diverse regions and ethnic groups” as well as “an infinite variation of entertainment themes from the longest continuous civilization in the world”.

a partner in Global Market Advisors, a consultancy specializing in chasing after a smaller pie, when you divide it up among places like gaming, was quoted last year as saying 85% of EB-5 investors are the Philippines, Australia, Singapore, South Korea, so on a combined Chinese. He said they put $100 million into the completion of the basis this is keeping the competitive pressure on.” city’s Downtown Grand Hotel & Casino and were part of $150 million As Brent Pirosch, who heads the Global Gaming Group of of Asian money staking the SLS Las Vegas, which opened last August brokerage CB Richard Ellis, puts it, “It’s not just Las Vegas or Macau. at the site of the old Sahara. We’re seeing a worldwide phenomenon.” “They’re a group with deep experience in Chinese VIP play, and The crash in stock prices in the summer and the devaluation of I suspect they’ll be successful,” says Mr Klebanow’s partner Steve the yuan in August haven’t helped. June’s 57% decline in baccarat Gallaway. revenue capped a second quarter that saw the Strip’s take from the Lucky Dragon completed the exterior of its hotel in September. game fall 33.7% compared with the same period in 2014. July was In May, more than two years after Resorts World Las Vegas was down 20.8%, August was down 24%. More than $1 billion in volume announced, Genting broke ground with Nevada Gov. Brian Sandoval was shed over those three months. Play was down 14% through hefting one of the golden shovels alongside Mr Lim in a ceremony August on a trailing 12-month basis, according to CBRE’s research. accompanied by a traditional Chinese lion dance. Hold was off almost 1.4%. “So those two things combine for pretty Elsewhere on the Strip, baccarat players were pulling in their horns. significant revenue declines,” says Mr Pirosch. Of course, a lot can change, no doubt a lot will, between now LAS VEGAS STILL and the scheduled opening of Resorts World Las Vegas’ first phase Macau peaked in 2013 at $45.2 billion in gaming revenue, 60% of it in 2018. There will be 1,000 hotel rooms, the initial installment VIP. It was the high water mark for baccarat on the Strip. Revenue of a planned 3,000-3,500, a 4,000-seat theater, retail shopping, totaled $1.58 billion that year, a 16.6% increase over 2012. It would restaurants and nightlife venues, an aquarium, an observation deck fall 6.4% in 2014. and a 100,000-square-foot casino. There has been mention of a When the cracks first appeared in the Macau VIP edifice last water park, a multiplex cinema, expansive MICE facilities and other May, it looked as if Vegas might benefit much as it had in 2009. It attractions in subsequent phases. Media reports early on described was a strong month for table games across the board, especially a wonderland of Disney proportions replete with a Great Wall, a for baccarat, which accounted for almost 50% of the total take on panda habitat and replicas of the famed life-sized clay warriors an 88.7% increase year on year, boosted by abnormally high hold. unearthed near the tomb of China’s first emperor. Genting has Hold normalized to 12.3% in June (11.98% is the historical average been vague on details, which is not uncommon at the early stages statewide as tracked by the Center for Gaming Research at the of a major resort project, and this one is pegged at $4 billion at University of Nevada, Las Vegas), and revenue was up a whopping full build-out. A release accompanying the groundbreaking gushed 155%, and Macau’s loss was showing itself to be very much a win for about “rich cultural attractions, varied cuisine, and jaw-dropping the Strip. July was up 16%, but that was the last month of gains in entertainment from China’s many diverse regions and ethnic 2014, for baccarat and for tables, the latter falling behind slots on a groups” as well as “an infinite variation of entertainment themes percentage basis for the first time since 2008. from the longest continuous civilization in the world”. This would “It’s the general economic malaise and the crackdown on not be unfamiliar territory for Genting, which hosts a Universal corruption and softness in the economy. [Players] are not as Studios theme park at Resorts World Sentosa in Singapore and comfortable spending as they have in the past,” says Union Gaming’s is bringing a 20th Century Fox themed attraction to its Genting Chris Jones. “The visitation is there but not the spending.” He adds, Highlands resort in Malaysia. “The most important thing to realize is that we saw some pretty Spokesman Michael Levoff told the news Web site VEGAS spectacular growth, like Macau, double- and triple-digits. It’s foolish Inc., “Genting has a loyal customer base from China, the United to think that would continue. And you have more and more people Kingdom and countless other countries. … Thanks to these existing

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relationships, in combination with an innovative product and Las When you’re talking about capital costs in Vegas’ global reputation for world-renowned entertainment, we will grow the overall market and increase the number of visitors.” the range of $4 billion, says Brent Pirosch Observers largely agree. Mr Jones, for one, points to Genting’s of CB Richard Ellis, “You need a lot of success in Singapore, Malaysia and New York and sees a company decidedly oriented toward mass over VIP. He believes the Las Vegas gaming to support that. You have to have focus will be on the domestic market, notably the Asian-American a plan for executing that. You have to have community, and they’ll focus on “mass out of Asia”. “North America is high on the Chinese/Asian list for outbound a plan for everybody. It’s a fallacy that travel, and Genting knows this. … Most of the Strip focus is on the you’re building for just the high end…” Chinese high end, not the grind Chinese customer, so there is an opportunity.” He says it’s important to bear in mind that “The model in Las Vegas isn’t the same as the model in Macau.” In 2014, gaming generated less than 37% of total Strip revenues, light years away from the 95% or more characteristic of Macau. The “writing on the wall,” player Resorts World Las Vegas will be relying on. Ultimately, it Mr Jones says, “is you don’t want to over-focus on gaming. That’ll comes down to how much you believe in Las Vegas, and you’d be be what we’ll see with these properties. I think we’ll see it play out hard-pressed to find many in the industry who don’t. Mass actually more with Crown, which will be disproportionately focused on non- is enjoying something of a rebound on the Strip in the midst of gaming, and I think that is exactly where they should be focused.” baccarat’s decline. Revenues in the sector are up 2% in the trailing 12 Still, says Mr Pirosch, when you’re talking about capital costs in months through August, 4% year to date. Slot revenues surged 9% the range of $4 billion, “You need a lot of gaming to support that. in July and 12% in August. You have to have a plan for executing that. You have to have a plan “The rest of the market, the mid-market, is doing OK,” notes Mr for everybody. It’s a fallacy that you’re building for just the high end. Pirosch. “The increases are in domestic play. We’re seeing it in the You have to provide an experience for the everyday folks, whether regional markets as well along with a slow and steady improvement it’s shopping, dining, whatever. There are 100 to 200 people total in the national economy. On the Strip it means revenue that’s shared driving all that baccarat revenue. You don’t build 4,000 rooms for by a greater portion of the market. It points to a pretty healthy state those guys.” of affairs.” Mr Gallaway says, “The important thing to remember is it’s As Mr Gallaway puts it, “It’s not going anywhere, it’s still Las owned by Genting. So it’s going to bring a new database of players. Vegas. As great as Macau is in terms of gaming revenue, Las Vegas is It’s going to grow the market.” still the far better experience. It is still the premier gaming destination As in Asia, it comes down to a belief in the strength of the mass in the world.”

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Leading by Example

Two land-based casino operators describe their evolving social casino strategies, and what others can learn from their experiences

By Paul Doocey

y any measure you care to mention, the social casino games market continues to impress. The marketplace—which is perhaps best defined as social and mobile networks offering free-to-play casino- style games in which no actual real-money wagering takes place but profit can be produced by players purchasing game Badd-ons and advantages—has grown to become a worldwide The World Series of Poker and Slotomania are two of the social gaming products industry that currently generates annual revenue in the $2.5 billion to offered byPlaytika , a division of Caesars Interactive Entertainment. $3 billion range, according to statistics supplied by various research firms. One of these companies, SuperData Research, estimates that consumer spend on casino-style social games will reach the $4.2 billion mark by the end of 2016. Reportedly, 800 million individual action; after all, what property couldn’t use a boost in revenue and users currently participate in some form of social casino gaming patronage from a growing pool of younger players? Yet despite this each month, with the lion’s share of play coming from the 21-34 and potential, a large number of U.S.-based casino operations remain 34-54 year old age groups. mostly on the sideline when it comes to creating a social presence to Sporting these types of numbers, it would seem natural for land- exploit social games play. Some dip their toes into the marketplace by based casino operators of all shapes and sizes to want in on the offering their websites up to third-party social casino providers such as

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DoubleDown Casino, a highly successful social games platform offered by International Game Technology (IGT). Other operators—citing concerns over cost, limited returns, potential cannibalization of the land- based player base, lack of buy-in from the brick-and-mortar operations team and so on—have decided the best approach is no approach at all and steer clear of the social gaming scene, at least for now. However, there is a growing group of land-based casino operators that have decided the best approach is to establish their own social casino brand and platform. Among the companies that have taken this step are Foxwoods Resort Casino in Connecticut, Empire City Casino in New York, Thunder Valley Casino Resort in California, and Dover International Game Technology’s DoubleDown Casino is one of the world’s Downs Hotel & Casino in Delaware, just to name a few. For brick-and- leading social casino sites, and is offered by IGT to operators looking for easy entry mortar operators looking to follow in these properties’ footsteps, there into the social games space. is an early and vital strategic decision that must be made—will the new social gaming entity be primarily used as a marketing and loyalty tool with the ultimate goal of bringing more patronage to land-based facilities, or as a standalone enterprise designed to generate real- external companies. We talked to IGT, Bally, the various European money revenue from the highly-competitive social games space? online gaming providers… we kind of kicked a lot of tires. We also Indeed, this was the question faced by two companies that visited a lot of social gaming sites, there is really no better way to jumped early into the social gaming marketplace—American Casino get educated than to go to any of the sites and just beat them up; & Entertainment Properties, the operator of The Stratosphere download the apps and see what everyone is offering.” Casino, Hotel & Tower, Aquarius Casino Resort and two Arizona ACEP also held a series of internal discussions and meetings with Charlie’s properties, all based in Nevada; and Caesars Interactive teams from each of the brick-and-mortar properties to get their views Entertainment, a publically-owned and independently operated on what they wanted from a social gaming perspective. “We met with affiliate of Caesars Entertainment Corporation, the $7.5 billion brick- them to establish some parameters and goals,” Mr Driscoll said. “We and-mortar casino company. Executives from both these companies have three different patron models with our land-based properties— discussed the paths they took and shared the lessons they learned locals with Arizona Charlie’s, tourists with The Stratosphere and a along the way at a social casino session held at the Casino Marketing combination of both with Aquarius—and each had a different goal & Technology Conference, which took place in July at the Rio All-Suite with social gaming. One of the GMs just wanted higher head count in Hotel & Casino in Las Vegas. the building and thought [social gaming] was a good vehicle for that. Some were looking for higher yield patrons; others for more diverse MARKETING EXERCISE types of patrons. All were looking for us to provide insight on how to American Casino & Entertainment Properties (ACEP) opted for convert social players to websites or buildings.” the marketing and loyalty approach to social casino gaming, but it What became quickly apparent to Mr Driscoll and other ACEP was not a decision they came to lightly or easily, according to Alec executives was that there was no appetite to become a big player Driscoll, director of gaming development for ACEP. in the for-money social games or online casino space. “One of the “When we decided to launch a social gaming site back in 2011… things we really decided to steer clear of was chasing the for-money we quickly realized we needed to become better educated,” Mr online business as it became legal state to state,” Mr Driscoll said. Driscoll said. “So over the next 18 months we met with a lot of “We did not want to chase it and end up putting shops in each of these jurisdictions. In the end we decided to go for a more channel approach to social—to appeal to our existing and known players and to prospect for new local players to go to our properties.” American Casino & Entertainment Properties promotes its social casino That decision made, ACEP decided it was not economically offerings on all established marketing channels, including the websites for its worthwhile to build their own social casino platform and games from land-based properties. scratch, so they went the white label route. “From a tech standpoint, I think it is smart to own whatever aspects of the social casino platform you can,” Mr Driscoll said. “But the reality is that probably not everyone in this industry is going to build a robust online gaming platform and do it to specs and regulatory approval. For us speed to market was everything, so we thought it was much easier to just white label some existing technology.” To that end, ACEP contracted with then-Amaya Poker and unveiled its acePLAYpoker.com social poker site in 2013. When the company decided to expand its online game offerings to become a full social casino site, it did so with technology and products from Bally, which is now part of Scientific Games. Thus far, ACEP has been very pleased with its social gaming

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results. The acePLAYpoker.com site attracts players from all 50 states and 70 countries around the world, but 48% of users are within driving distance of ACEP properties. This player base has a 30/70 split between carded, known players and the much larger group of untracked visitors. There is also a 30/70 split between male and female users. “We started out as a poker site that was very much dominated by male users in the 25-35 year range,” Mr Driscoll said. “I can tell you that has shifted significantly for us as we added slot and table games, to really bring more of what you would see in your MGM Resorts International offers access to online social casino games from MyVEGAS through its M life loyalty rewards program. traditional casinos. We still skew a little younger, but the female audience is what is absolutely driving our volume of play.” Visitors to the site play in excess of one million hands of poker each year, with the site taking in $30 million in annual rake, although no real money is involved since this is a free-play site. The more As for lessons to impart to those looking to walk in ACEP social traditional casino games bring in $200 million in wagers. “People casino shoes, Mr Driscoll offered the following: are playing on the site and they are playing significantly,” Mr Driscoll Pay attention to crossover marketing opportunities. The key to said. “Although we currently only offer free-play for prizes such as a successful social casino gaming program is to get those players entertainment and F&B options, it indicates people are willing to to come to a land-based property and vice-versa. ACEP essentially spend money online if we decide to monetize the site.” piggybacked a social casino message on existing marketing And it appears the social gaming website is driving play to ACEP infrastructure for land-based properties—ACEP’s social games site brick-and-mortar properties. Campaigns run through the social got mentioned on the company’s various casino websites and in games channel have driven 100,000-120,000 visits to land-based consumer e-mails, signage, marquees, in-room tents, room keys, properties each year, according to company statistics. “We average even placemats at the buffet. ACEP also advertised its acePlaypoker double the conversion rate of direct marketing e-mail and other offering on gamer websites such as Bluff and All-in. The primary traditional mediums,” Mr Driscoll said. “So using games and awards vehicle for marketing brick-and-mortar options to social site players as enhancements seems to be a very smart play. We average about has been day-to-day tournaments where winners get prizes and 8% conversion while our traditional direct marketing does half that.” special privileges when they visit one of the terrestrial properties. What’s more, these social gaming visitors to brick-and-mortar Listen to your players. ACEP surveys its social games players facilities appear to be bigger spenders. “The average daily theoretical every six months on topics ranging from real-money social gaming of a social casino gamer to a casino is 40% higher than a typical new opportunities to their brick-and-mortar wagering preferences. “We visitor,” Mr Driscoll said. “To put that in perspective, for the 120,000 asked our users if they want a greater variety of social games on trips we helped to generate, the land-based properties are looking at the site and 77% said yes,” Mr Driscoll said. “To me that is a clear $8 million in theoretical.” indication where we should take the site and also gives us a chance

There is an early and vital strategic decision that must be made—will the new social gaming entity be primarily used as a marketing and loyalty tool with the ultimate goal of bringing more patronage to land-based facilities, or as a standalone enterprise designed to generate real-money revenue from the highly-competitive social games space?

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It appears the social gaming website is driving play to ACEP brick-and-mortar properties. Campaigns run through the social games channel have driven 100,000- 120,000 visits to land-based properties each year, according to company statistics.

World Series of Poker franchise for its parent, Caesars Entertainment. “CIE was formed with a very simple goal which was to create a vessel that would effectively monetize Caesars Entertainment’s world class portfolio of brands and bring them into the digital space. I and a lot of my colleagues at that time thought that that would materialize first in the form of regulated, real-money U.S. online gaming. Clearly, that was not the case.” According to Mr Cadena, Caesars stumbled into the social casino gaming world when it acquired Tel Aviv-based Playtika in 2010, which happened to be a case of purchasing the right company at the right time. “Driven by smart phone technology and apps and the proliferation of mobile devices worldwide, social gaming just took off,” Mr Cadena said. “It offered an immense opportunity for [social to monetize games to offer them more fun experiences. We asked casino] monetization and growth.” users if they were regulars to a land-based property and 82% said CIE’s plan was to grow both organically and through an aggressive no, that tells us we’re reaching a new audience. We asked how many merger and acquisition strategy. To that end, CIE purchased Buffalo hours a week they spent on social virtual gaming and 93% spend Studios, a California-based company, in 2012, in order to obtain and more than one hour a week and 50% up to five hours. That is a lot of market its leading social bingo application. In 2013, CIE ended a white time and probably more time than they will spend in our buildings. To label agreement and acquired social poker assets and a development get access to this customer is very important to us.” studio from Canada-based Electronic Arts. That allowed CIE to enter into a very lucrative social poker business by leveraging its World PROFIT MOTIVE Series of Poker brand. The company’s most recent purchase was in Unlike ACEP, Caesars Interactive Entertainment (CIE) took a more February 2014, with the acquisition of Pacific Interactive and its top commercial bent when it was formed in 2009. grossing House of Fun online social slots franchise. “We are first and foremost a standalone, for-profit social and CIE has since consolidated all these purchases under its Playtika mobile games business,” said Pierre Cadena, vice president corporate umbrella, which according to company literature is the world’s development for CIE, which also operates a nascent real-money leading social casino publisher, with a 21% market share. “Our online gaming/poker business in Nevada and New Jersey and the [social casino] strategy has been quite unique and not necessarily

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in line with that of a traditional land-based our games monthly and six million unique casino operator’s; where the goal is to users that play our games daily.” effectively leverage social and mobile gaming CIE has reaped the rewards of this growing opportunities to engage users remotely and consumer popularity. According to Mr Cadena, drive foot traffic to the land-based property,” Mr CIE’s social and mobile games revenue has Cadena said. “Our No. 1 objective in social and skyrocketed from $54 million in 2011 to $586.8 mobile games is to acquire as many users as we million in 2014, which is a compound annual can on key platforms like Facebook Canvas and growth rate of over 100%. IOS Android… and effectively get those users to “Playtika’s secret sauce and competitive convert and be paying customers of ours.” advantage is less about product and more And that is just what CIE and its Playtika about our ability to market, monetize and subsidiary have accomplished. Although it “We are first and foremost convert,” Mr Cadena said. “We monetize 31 is playing in the same space as monetized a standalone, for-profit cents per daily active user; which is two to three social casino offerings from giant game times greater than the average of general social companies such as Zynga and Big Fish, social and mobile games games. In terms of conversion—the percentage online real-money providers such as 888 and business,” said Pierre of unique users that actually deposit money and bwin, even various game vendors such as IGT pay to play your games—we achieved a 4.3% and Bally, Playtika has held its own and then Cadena, vice president conversion rate last quarter, up from a 1.8% some—owner of four of the 15 top grossing corporate development conversion rate in 2013. Meanwhile king.com, games on Facebook Canvas, five of the top 75 the makers of Candy Crush, convert at a 2.5% games in the iTunes store, and four of the top for Caesars Interactive rate; and Zynga at a 1.7% rate.” 50 grossing games on Android. As of mid-July Entertainment. Other companies wishing to emulate CIE’s 2015, Playtika’s Slotomania game was the 8th path to social casino success are in for a very highest grossing game on Google Play and stiff challenge. “It is not necessarily a strategy 13th highest grossing game on IOS, in the that can be replicated easily by other land- same ballpark as non-casino oriented social based casinos,” Mr Cadena admitted. “We game blockbusters such as as Clash of Clans and Game of War. spent hundreds of millions of dollars over the course of four years to “We are fortunate enough now, four years into our strategy, to effectively get where we are today. We have effectively chosen to drive really have a very significant user base where we can get a tremendous our social casino business for profit rather than to drive foot traffic amount of economies of scale,” Mr Cadena said. “We also have the to the property. Our social casino strategy may not necessarily fit the benefit of being able to cross promote very high LTV (life-time value) needs of most casinos.” users across a number of our different game genres of slots, bingo and poker. We now have 19 million unique users that come and play Reprinted with permission from Casino Journal.

Caesars Interactive Entertainment’s most recent purchase was in February 2014, with the acquisition of Pacific Interactive and its top grossing House of Fun online social slots franchise.

October 2015 inside asian gaming 33 Online Gaming

A Wider Web

PwC examines new entrants and all-encompassing entertainment experience looking to maximize customer value. However, capital requirements are high—ranging market convergence in the growing from millions to billions of dollars for each facility. Over the past two decades it has evolved into the online space, fueled by emerging online casino gaming space technology and impacted by changing regulation.

EVOLUTION OF A SECTOR As the dot-com era emerged in the late 1990s, innovation in technology and an essentially undefined regulatory landscape in the online space allowed the casino industry to expand into online gaming. This led to the clear establishment of two key segments in he global casino gaming industry is undergoing an online gaming: real money and social gaming. interesting period of transition. Innovation in mobile Real money gaming: Real money gaming is played on virtual technology and social media platforms have fueled this casinos that offer traditional style casino games through websites, online gaming momentum and created lower barriers of social networks, and mobile applications. Regulation varies by entry for new entrants, in what traditionally has been a jurisdiction. Similar to the traditional casino model, users can wager “brick-and-mortar” sector. real currency on games directly against an online operator. TWe expect a continued strong level of deal activity in the industry Social gaming, the newest market segment, Social gaming: driven by these disruptions from new players and from existing allows users to play traditional casino games for free through competitors positioning themselves to capture market share. It will capped virtual currency provided at sign up or on a recurring basis. be critical for deal makers to follow a disciplined approach to their No regulation exists, allowing companies to reach users in real deals to capture the value of these opportunities. money restricted areas. Revenue is earned when customers choose So what is the casino gaming industry? The sector has long to pay for additional virtual currency or other bonuses and locked been dominated by brick-and-mortar casinos which provide an upgrades. According to Morgan Stanley, the average conversion

34 inside asian gaming October 2015 October 2015 inside asian gaming 35 Online Gaming

Zynga, a top social gaming developer, made a push for real money gaming through its acquisition of Spooky Cool Labs.

rate of customers (percent of players who spend money) is around two percent. Historically, growth and investor entry into traditional casino Global Casino Game Market Growth gaming has been a challenging proposition, given the high fixed costs and barriers to entry associated with the traditional brick- and-mortar casino. The online casino space has been a game changer, allowing for market entry via lower capital requirements with the enticement of higher growth rates, compared to land- based casinos. The result: New and existing competitors entering this space. As seen in the following graph, social online gaming growth has declined, but is still projected to outpace land-based growth through 2017 and real money online gambling growth through 2016.

DRIVERS OF CHANGE What are the real drivers fueling this sector transition? The answer is technology evolution and regulatory change. To start, higher growth rates in online gaming have primarily been due to the innovation in technology-driven social media platforms, mobile technology and smartphone use. As these drivers continue to evolve, the industry is expected to react accordingly. Social media: Online casino game operators have developed casino platforms on high-traffic social networks such as Facebook to ride the momentum of social network user adoption and gain access Source: Eilers Research; h2 Gambling Capital

The online casino space has been a game changer, allowing for market entry via lower capital requirements with the enticement of higher growth rates, compared to land-based casinos.

36 inside asian gaming October 2015 October 2015 inside asian gaming 37 Online Gaming

Online casino game operators have developed casino platforms on high- traffic social networks such as Facebook to ride the momentum of social network user adoption and gain access to more users.

to more users. According to Globalwebindex, 80% of internet users gaming market. According to the National Conference of State use Facebook and on average spend two hours on social networks Legislatures, seven other states have introduced online casino gaming per day. Time spent may be diversified with increased options in bills this year to continue to expand the U.S. market. Entrance of just social gaming via these popular platforms. one new state can result in access to thousands of new customers. A smartphone world: According to Ericsson, smartphone subscriptions in 2010 were 0.5 billion and are estimated to increase M&A OPPORTUNITIES 12x to 6 billion by 2016. Similar to the social network distribution The online casino gaming market growth prospects have resulted in channel, game operators have developed casino platforms on mobile an increased appetite for new and existing gaming companies to enter applications that enable streamlined user gaming. and increase market share using M&A as a vehicle. As seen in the Ease of access to mobile devices increases the potential market chart on page 40, in select M&A online gaming related transactions, of consumers for online gaming. convergence across the sub-sectors has been a common trend over Online gaming is heavily influenced by external regulation and controls. Monitoring, predicting, and understanding legislation and the impact of regulation changes can be a key to success and has been a significant driver of change in this market. Regulation of real money gaming varies by jurisdiction around the world. Countries are becoming more aware of real money Deals involving multiple brand purchases can gaming and have established regulation to capture tax revenue. cause confusion to the market if not positioned Approximately 60 countries license online casino gambling in some correctly. Market analysis and stakeholder form, while 17% of countries have bans in place, and a further 41% are unregulated. Asia and the U.S. remain two of the larger untapped buy-in is a critical first step to ensuring real money gaming markets due to unfavorable regulation while “NewCo” has the right brand strategy. Europe has a more mature online game market, according to a report from keycasino.com. Regulations can be beneficial in providing certainty and structure to risk adverse competitors, but increases operating costs to maintain appropriate compliance controls. Companies that take advantage of the unregulated social market, to establish high market share in restricted real money gaming markets such as Asia, may be best positioned to upsell and win real money game opportunities when and if more favorable legislation passes. A look at the U.S. landscape: Starting in 2013, online casino gaming in the United States became legal in New Jersey, Delaware, and Nevada after a high profile Department of Justice crackdown on poker sites in 2011. While favorable domestic legislation shifts have garnered the attention of major international casino gaming operators, they continue to be hesitant in committing too much capital given the perceived risks. The bounce back in legislation is positive news to the online

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the past five years and will likely continue as these drivers become brick-and- mortar casinos) may have become the most diverse of the more prominent. sub-segments across the online providers, through acquisitions of Buyers varied over a wide range of verticals including traditional application providers (MacroView Labs), B2B real money platform casino, real money gaming operators, lotteries, horse racing, land- technology (Jadestone Group), and social (DoubleDown, Product based suppliers, game developers, and private equity. The market Madness). Layering suppliers’ proven land-based game content is addressing the fragmentation of the sub-sectors, and acquiring that can be converted to real money and social gaming on top of full solutions to cross market segments and enable more efficient the acquisitions, makes this segment a serious threat. Lottery operations. The game developers are the most fragmented segment acquisitions of top suppliers (WMS, IGT) allowed for additional due to low capital requirements to form startups, opening the door cost and revenue synergies through merging back office and field/ for increased M&A opportunities. customer service operations. Caesars acted as one of the few brands to move outside the Social gaming developers (which develop social games to host traditional casino online segment (use of third-party-hosted on operator platforms) increased content and user base through tuck platforms) through its acquisitions (Playtika, Pacific) to enter in acquisitions of smaller social gaming developers. Cross marketing social gaming. of games and pushing acquired content through existing distribution Real money gaming operators (which host self-owned and third- channels can provide significant revenue synergy. Zynga, a top social party branded casino platforms for real money games on websites) gaming developer, made a push for real money gaming through its merged through large deals (Party Gaming and bwin, 888 and bwin. acquisition of Spooky Cool Labs. party) to increase distribution capabilities, pool player networks, and Overall, real-money operators defended top market positions, lower operating costs through cost synergies, have found success while social became fragmented with multiple competitors across through M&A. segments. Real-money outsiders may have to acquire an established Land-based suppliers (which traditionally manufacture games for operator in order to become a market leader.

Online Casino M&A Activity

Timing Buyer Company Type Target Company Type Value*

2010 888 Holdings Real Money Operator Mytopia Social game developer $24M 2011 Bally Technologies Systems MacroView Mobile platform developer Undisclosed 2011 Caesars Entertainment Traditional Casino Playtika Social game developer $180M 2011 PartyGaming Real Money Operator Bwin Online game provider $1.8B 2012 IGT Land Based Supplier Double Down Social game developer $500M 2012 WMS Land Based Supplier Jadestone Group B2b platform integration, game publisher Undisclosed 2012 Aristocrat Land Based Supplier Product Madness Social game developer $40M 2013 Zynga Game Developer Spooky Cool Labs Real money social game developer Undisclosed 2013 Scientific Games Lottery WMS Manufacturing, online gaming $1.5B 2013 Apollo Private Equity AGS Manufacturing $240M 2014 Bally Technologies Manufacturing Dragon Play Social game developer $100M 2014 Scientific Games Manufacturing Bally Technologies Manufacturing, systems, online gaming $5.1B 2014 Caesars Entertainment Traditional Casino Pacific Social game developer $90M 2014 Gtech Lottery IGT Manufacturing, systems, online gaming $4.7B 2014 GSN Game Developer Bash Gaming Social game developer $165M 2014 Imperus Social and Real Money Diwip Social game developer $100M 2014 Churchill Downs Horse Racing Big Fish Games Social game developer $885M 2015 AGS Land Based Supplier RocketPlay Social game developer Undisclosed 2015 888 Holdings Real Money Operator Bwin.party Online game provider $1.4B*

*Deal announced, but has not closed

40 inside asian gaming October 2015 Online Gaming

As the casino gaming sector continues to evolve with the changing technology and regulatory landscape, companies may increase the odds of successful future M&A transactions by employing the strategy of rapid, thorough due diligence.

CHALLENGES TO ADDRESS service providers may result in conflicting commercial agreements M&A opportunities may also bring challenges. These challenges in place that can result in high breach penalties. Proper due diligence can be better understood and mitigated through due diligence on potential contract risk should be fully understood and factored and integration planning. Awareness of common challenges within into the purchase price. the casino gaming sector is key to successful due diligence and planning efforts. Capital investment: Level of effort and the required capital investment to port casino game content to new and existing operator Back office scalability: Back office platforms are often dated distribution channels must be quantified. Exhaustive inventories of and lack scalability. Back office due diligence can be conducted to games that a company acquires may require significant time and evaluate the target’s systems and scalability, to ensure that such effort to transfer to existing distribution channels (mobile, social capabilities will align with the acquirer’s growth plans. network, etc.), as well as large one-time investments in new capital infrastructure. Talent retention and cultural considerations: Acquisitions focused on casino game content and developer resources require As the casino gaming sector continues to evolve with the culture assessments for cross-border transactions, as well as talent- changing technology and regulatory landscape, companies may retention strategies to ensure continuity post transaction. increase the odds of successful future M&A transactions by employing the strategy of rapid, thorough due diligence, and by Brand transition: Deals involving multiple brand purchases can executing on detailed integration planning with strong executive cause confusion to the market if not positioned correctly. Market sponsorship. Following these strategies should allow companies to analysis and stakeholder buy-in is a critical first step to ensuring enhance their social gaming positions and move fast to capture real “NewCo” has the right brand strategy. Following brand decisions, money online market share, as the sector continues on this exciting careful planning and execution of customer, employee and vendor path of evolution. communications helps ensure the right positioning in the market.

The regulation factor: M&A in the real money gaming sub- Paul Kennedy is principal M&A advisory/delivering deal value and Bart Spiegel is sector will have regulatory implications, with complexity varying partner, entertainment, media and communications deals for PwC Deals practice, by jurisdictional scope. Regulatory compliance requires expertise which advises entertainment, media & communications (EMC) companies and (external or in-house) and may result in detrimental impacts on deal EMC-focused private equity firms on key M&A decisions. This article was printed value if not planned for properly. with permission from PwC from its recently released study, “Eye on the prize: U.S. entertainment, media and communications deal insights.” PwC’s Deals group can be reached at http://www.pwc.com/us/en/industry/entertainment-media/ Contract assessment: Mergers of companies with the same publications/emc-deal-insights.jhtml

October 2015 inside asian gaming 41 REGIONAL BRIEFS

Basic Law Consultative Committee, according to Sands China. The Harvard University graduate was a member of the National People’s Congress from 1997 to 2012, the company said.

Weike Teams Up With Casino Game Maker Weike Gaming Technologies, a leading Asian gaming manufacturer has signed an exclusive agreement with Las Vegas-based Casino Game Maker Inc. Under the terms of the agreement, Weike will be an exclusive distributor for a range of Casino Game Maker’s electronic gaming products throughout Asia. Wilfred Wong Weike is committed to providing Asian operators gaming solutions that will generate strong revenue growth. Casino Game Maker’s strength in new technology, innovative gaming platforms Sands China Appoints Beijing Insider and designs will complement Weike’s own portfolio of gaming to Run Macau Ops devices and systems. Weike CEO Sneah Kar Loon said “We are very Sands China Ltd. hired a Beijing insider to help run its Macau excited with our collaborative partnership, being able to distribute casino business, breaking from a tradition of having non-Chinese Casino Game Maker products and look forward to unlocking more executives helm those operations as the company braces for stricter value for the Asian operator. Additionally, we are very impressed policies and as gambling-license renewals loom, reports Bloomberg. with Casino Game Maker’s technology and vision and are excited to Wilfred Wong, who was a 15-year veteran of China’s top lawmaking be working with Andrzej and his team.” body the National People’s Congress, will replace Rob Goldstein as “Casino Game Maker president and chief operating officer on 1st November. Mr Goldstein, is delighted to introduce its also president and COO of parent Las Vegas Sands Corp., has served innovative Valhalla Platform those roles at the Macau unit since earlier this year. to the Asian operators in “I suspect that having an influential Chinese person at the helm cooperation with Weike Gaming of the ship would be a distinct positive as it relates to concession Technologies,” said CGM renewal, not to mention any other approvals along the way,” Union President Andrzej Surmacz. Gaming Group analyst Grant Govertsen said in an e-mail. “We found Weike’s solid There’s a growing risk Macau could withdraw some casino reputation and proven record licenses as the permits come for up renewal as soon as 2018, a of success in the Asian market few years before they expire, Daiwa Capital Markets analysts wrote as a perfect fit in our desire to in June. The stakes are high as Sands China plans to open its $2.7 roll out our latest technologies billion Parisian Macao project in 2016 amid a downturn in the to grow our business.” city’s gambling industry that has caused second-quarter profit to Based in Las Vegas, Casino plunge 30%. Weike CEO Sneah Kar Loon and Game Maker, Inc. specializes Macau’s Chief Executive Fernando Chui said in August the CGM President Andrzej Surmacz in gaming solutions for land- government expects to complete its mid-term review for the gaming based casinos with expertise industry by year-end. The city’s six casino operators hold gaming in platform and game design, licenses whose 20-year concessions expire from 2020 to 2022. compliance review, system integration and EGM manufacturing. Sands China “will definitely” have its casino license renewed CGM’s goal is to empower all game designers to become actively after the large investments it has made in Macau, and may even get involved in shaping the casino floor of the future by providing a better deal in terms of taxes or required payments, according to them with a robust game development platform, the latest design Chris Kwai, an analyst at China International Capital Corp. technologies, open source tools, and support and services needed Las Vegas Sands Chairman Sheldon Adelson, who took over as to get their games on the casino floor. the CEO of Sands China earlier this year after former Macau chief Edward Tracy retired, had said in May the company would like to hire an executive who’s Chinese for Macau, and someone who has Interblock Names New dealt with officials in Beijing. “We reached outside the gaming industry to find an executive Asia Pacific Product Manager who is highly educated, distinguished and ethical,” Mr Adelson said Luxury gaming manufacturer Interblock has appointed Brad in a statement. “Wilfred has a unique combination of private- and Glencross as Product Manager for Asia Pacific. Mr Glencross has public-sector experience we think will be invaluable to the company more than 20 years of product management experience, including at this point in our history.” nearly 15 years in the Asia Pacific gaming industry. Mr Wong, who is currently chairman and CEO of Hsin Chong Interblock Senior Vice President of Asia Pacific Cameron Louis Construction Group Ltd., has served in various positions appointed said, “We are pushing forward quickly throughout the Asia Pacific by the China government including as a member of the Hong Kong region, including opening a permanent office in Sydney, new

42 inside asian gaming October 2015 REGIONAL BRIEFS

installations in the Macau market, signing a three-year, 200-station Bay, told the Philippines stock exchange that the reopening of the recurring revenue deal, and installing at three beta sites. As part Jeju casino marks the first phase of the $15-million multi-stage of our growth strategy, we are building an entire sales and support refurbishment of Jeju Sun Hotel & Casino that began in May. The team for the region, and we are thrilled to welcome Brad to that second phase will be completed by December. team. His wealth of knowledge and experience will be crucial to the Bloomberry is keen on expanding in South Korea because of the company globally and to our customers throughout the region.” country’s thriving tourism market and proximity to China. “There are Most recently, Mr Glencross was Technical Director for LT so many Chinese and despite the downturn in their economy, the Game International, responsible for all international markets impact will not obliterate the visitation of Chinese nationals to other outside of Macau. Previously, he was with Shuffle Master countries,” Bloomberry said in an e-mailed response to queries. Australia Limited, where he served as Product Manager and “If you’ve been to Korea, you will appreciate that Chinese love to as Product Development Manager for Electronic Table Games go to Korea to shop and play. This is not VIP but mass-to-premium Systems, as well as Technical Engineer. He has also served as mass market.” System Support for Bytecraft and as System Analyst/Training A world heritage site of the United Nations Educational, Scientific Office/Product Manager for Bounty Limited. and Cultural Organization, Jeju Island is a popular vacation spot Mr Glencross also holds numerous certifications inI nformation for Koreans, Chinese and Japanese. It attracted 2.3 million foreign Technology. tourists last year, 1.8 million of which were from China. Interblock is in a strong growth period in the Asia Pacific, Jeju Sun Hotel & Casino was formerly known as T.H.E. Hotel steadily growing its footprint across the region in recent years, & Vegas Casino, one of seven casinos on Jeju Island. Bloomberry and recently installed its first electronic table games in New announced in March the signing of an agreement to buy a stake in South Wales. the hotel and casino. Bloomberry owns 96.23% of Jeju Sun Hotel & Casino, 10% of which is held directly and 86.23% through subsidiary Solaire Korea Co., Ltd. NagaCorp Q3 Revenue Jumps 58% Bloomberry’s foray comes at a time when analysts are warning that China’s slowdown could hurt the prospects of the Philippines’ fledgling integrated resort industry, which was kicked off by Bloomberry’s Solaire. “With China’s weakening currency, it will become more expensive for Chinese gamers to come to Manila,” said COL Head of Research April Lynn L. Tan. Noting “[t]here’s a lot of concern in the market,” Alexander Adrian O. Tiu, senior equity analyst at AB Capital Securities, Inc., said by phone: “We only have three players and two big players are entering the market in the next three to four years.” NagaWorld “The target people are not going to the Philippines. What we’ve expected is not happening. It’s a delicate market.” The Philippines’ other existing and upcoming casinos are City Cambodian casino operator NagaCorp says business is up nearly of Dreams Manila, a joint venture of retail magnate Henry Sy and one-half in the first nine months of 2015. Macau-based Melco Crown Entertainment; Resorts World Manila, a NagaCorp, which operates NagaWorld, Cambodia’s largest partnership of Alliance Global Group, Inc. (AGI) and Genting Group; casino, reported gross gaming revenue increased 47% year-on- Bayshore City Resorts World, the second AGI-Genting project; and year in the first nine months of the year to $400 million, a gain of Manila Bay Resorts of Japanese billionaire Kazuo Okada. nearly $128 million over the same period of 2014. Furthermore, the trend appears to be accelerating, with Q3 revenue up 57.8% to $144.5 million. Jeju Sun Hotel & Casino NagaCorp’s aggressive courting of Macau junket operators paid off with year-to-date VIP turnover up 46% to $5.94 billion and revenue up 52% to $193.4 million. The more profitable mass market business saw table buy-ins rise 16% to $404.5 million and electronic gaming machine bills-in increased 11% to $986.1 million, resulting in total mass gaming revenue of $206.4 million, a 43% increase over the same period last year.

Bloomberry starts first overseas operation Bloomberry Resorts Corp. kicked off its maiden venture overseas with the reopening this month of its recently acquired casino on Jeju Island in South Korea. Bloomberry, the owner of Solaire Resort & Casino in Manila

October 2015 inside asian gaming 43 INTERNATIONAL BRIEFS

In a letter earlier this month to the chairman and the ranking member of the House Committee on Energy and Commerce, Ms Titus said it was “critical” Congress “investigate this growing industry.” Ms Titus, whose district includes the Strip and downtown casinos, said she is concerned daily fantasy sports are skirting the 2006 Unlawful Internet Gambling Enforcement Act, which prohibits financial transactions associated with online wagering. “Many experts in gaming law believe that the (daily fantasy sports) business model violates the Unlawful Internet Gambling Enforcement Act,” Ms Titus wrote. Nevada gaming regulators asked the state’s attorney general’s The VIP sneak peak of the Tigre de Cristal casino office, which advises the Gaming Control Board and Nevada Gaming Commission, to analyze the legalities of the activity. While the Control Board hasn’t taken a formal position on daily fantasy sports, regulators have cautioned casino and sports book operators Lawrence Ho’s Russia Casino Opens to keep their distance. Several operators have said the activity is Lawrence Ho’s Tigre de Cristal casino held its soft-launch this gambling. month, becoming the first casino in Russia’s Primorye gaming zone Ms Titus’ letter came a day after FanDuel and DraftKings—the to open to the public, reports CalvinAyre.com. two largest daily fantasy sports operators—took steps to repair The oft-delayed casino has missed many previous opening public damage after a DraftKings employee won $350,000 in a targets but over one thousand guests—including government FanDuel contest reportedly by using inside information. officials, business types and those lucky enough to wrangle a Both websites said they had banned their employees from special invite—attended the 8th October soft launch ahead of the competing in daily fantasy sports contests and brought in outside full opening scheduled for 12th November. Following the VIP sneak law firms and former prosecutors to investigate and review their peak, the doors were thrown open to the public. internal controls. Primorye, located 50km from the port city of Vladivostok on “Players on all (daily fantasy sports) sites likely assume that Russia’s east coast, is one of six official gaming zones in which consumer protections are in place to prevent some players from Russian authorities allow casino gambling to take place. However, having such an advantage,” Ms Titus wrote. “Unfortunately, many outside of properties in Krasnodar and Altai, there were no other learned the hard way that they were losing money to competitors active casinos until Tigre de Cristal opened. Konstantin Shestakov, utilizing access to information to upend the competitive balance.” director of the Primorsky region’s tourism department, said Tigre de Cristal was already “greater than all existing [Russian] casinos by volume.” Phase 1 of the property boasts 67 gaming tables (42 mass Gaming Revenue Down in Nevada market, 25 VIP), 769 electronic gaming machines, two restaurants, For Straight Third spa facilities and a 121-room hotel. Phase 2 is expected to open Gaming revenue in Nevada and along the Las Vegas Strip fell for the in 2018, adding more hotels and gaming options in addition to third straight month in August although other areas of Clark County entertainment, retail and dining facilities. reported double-digit increases. Tigre de Cristal will have the Primorye market all to itself for the The Nevada State Gaming Control Board said casinos statewide next couple of years. Rival properties from the Royal Time Group, collected $908.2 million from gamblers in August, a decline of Nagacorp and Diamond Fortune won’t begin opening until late almost 1.4%. Strip casino revenue declined 4.7% to $527.4 million. 2017 at the earliest, but Primorye officials expect all these properties The Strip declines were due to baccarat, where revenue of to be fully developed by 2022. $126.5 million fell 24.1% over the same month a year ago. Baccarat Tigre de Cristal is owned by G1 Entertainment (formerly known wagers of $872 million declined 16%. as the First Gambling Company of the East), in which Lawrence Ho’s Summit Ascent Holdings holds a majority stake. Taiwanese gaming device maker Firich Entertainment holds the next biggest The Las Vegas Strip slice, while local Russian partners control the rest.

Dina Titus Calls For Hearings on Legality of Daily Fantasy Sports Nevada Congresswoman Dina Titus has added her name to the list of congressional representatives requesting hearings be held on the legalities of daily fantasy sports businesses that have come under fire over cheating allegations and concerns the industry is largely unregulated, reports the Las Vegas Review-Journal.

44 inside asian gaming October 2015 INTERNATIONAL BRIEFS

Analysts said they expected volatility to continue in the Strip’s to IGT Advantage 9.x system integrated with sbX application, baccarat business given a likely slowdown in Chinese players. which features Floor Manager and a range of bonusing and play- “On the whole, the August results were uninspiring,” said Stifel enhancing applications. Nicolaus gaming analyst Steven Wieczynski. “At this point, given “IGT systems applications will help us deliver customized the swirling macroeconomic uncertainties in China, we expect the entertainment experiences and access to resort amenities that truly Strip baccarat business to remain under pressure indefinitely.” make our guests feel special,” Wynn Las Vegas president Maurice Overall table game revenue fell 16.4% on the Strip. Slot revenue Wooden said. on the Strip increased 12.1%. Renato Ascoli, chief executive of North America gaming “We note that the summer is skewed toward the leisure and interactive at IGT, added: “We are pleased to provide our segment,” said Wells Fargo Securities gaming analyst Cameron comprehensive system solutions and applications to complement McKnight. “In our view, the softness in gaming volumes is reflective IGT’s leading floor share of games at Wynn Las Vegas. of the current leisure customer increasingly younger, international “IGT systems are designed to optimize floor efficiency and and nightlife-oriented versus gaming focused. drive player engagement, and Wynn Resorts can leverage our The collapse on the Strip during the month was offset by unique applications to provide guests with unparalleled gaming increases in other areas of Clark County. experiences and personalized service.” Downtown casinos grew revenue 15%—the market’s 11th increase in the last 13 months. Mr McKnight said a “clear renaissance” is taking shape in downtown. North Las Vegas A$8BN Aquis Project Revived was up 21% and the Boulder Strip market grew almost 30%. Mesquite was the only other area in Clark County that reported a gaming revenue decline in August, with totals falling 1.9%.

Britney Spears Premieres Her Aristocrat Slot Game International superstar Britney Spears recently took her show from the stage to the casino floor to premiere Aristocrat’s Britney Spears Slot Game at Planet Hollywood Resort & Casino in Las Vegas. Rendering of the planned Aquis Great Barrier Reef Resort According to the property, the slot machines have already become an overnight success on the casino floor The A$8 billion integrated resorts planned for Cairns appears to be with lines forming day and night. back on track following stalled negotiations with the Queensland The Britney Spears Slot Game government. appears on Aristocrat Technologies’ State Treasurer Curtis Pitt announced last month that the team newest stage, The ARC Double cabinet behind the Aquis Great Barrier Reef Resort project had signed with the surround sound iChair. The an agreement to re-enter the government’s integrated resort newest addition to casino floors development (IRD) process. across the country features Britney’s Mr Pitt said investor Tony Fung had withdrawn from the process most popular top-charting hits, in February following stalled negotiations with the previous Liberal including “Hit Me Baby One More National Party government. Time,” “Toxic,” “3,” “Oops I Did It He said the latest development was a vote of confidence in the state. Again” and “Crazy”. The game has “Following the election, the Palaszczuk government sought to two base features, four entertaining engage in positive discussions with Mr Fung and we welcome his bonus features and a $10,000 single company’s commitment to re-entering the IRD process,” Mr Pitt said. site progressive jackpot. “The IRD process is a rigorous way to protect the community’s interests and also evaluate Aquis’ credentials and financial capacity to deliver this project.” The proposed development is planned to start with a $3.5 billion IGT Secures Systems Agreement stage and once the resort is fully operational it could create up to with Wynn Resorts 16,000 jobs, Mr Pitt said. International Game Technology (IGT) has agreed a deal with Wynn The development, to be built at Yorkeys Knob, north of Cairns, Resorts to install a suite of systems applications at a number of is meant to include 7,500 hotel rooms, a convention and exhibition properties owned by the casino operator. center, two casinos, a golf course and an artificial lake and lagoon. Under the agreement, IGT systems applications will be installed “We remain committed to the Aquis Yorkeys Knob project at the Wynn Las Vegas in the US state of Nevada, as well as the as part of our overall strategic investment plans for Australia,” Wynn Palace in Macau and Wynn Everett in Massachusetts upon Mr Fung said. completion of their construction. The government will ask Aquis for a detailed proposal in the The server-based systems installation will include an upgrade near future.

October 2015 inside asian gaming 45 Events Calendar

20|22 October 2015 2|4 February 2016 European iGaming Congress & Expo ICE Totally Gaming Arena Berlin, Berlin, Germany Excel London, London, England

EiG is one of the major events for the online gaming Showcasing compelling innovation and expertise, ICE industry, providing a forum where gaming CEOs from Totally Gaming proclaims itself the largest and most around the world mix with start-ups, regulators and new comprehensive B2B gaming exhibition in the world. entrants for three days of serious business and networking. Bringing together international operators and suppliers www.eigexpo.com from the betting, bingo, casino, lottery, mobile, online, social and street gaming sectors over three days, ICE Totally Gaming promises new opportunities for visitors and exhibitors alike. 17|19 www.icetotallygaming.com November 2015 Macao Gaming Show 22|24 February 2016 The Venetian Macao, Macau World Game Protection Conference M Resort Spa Casino, Las Vegas, USA The Macao Gaming Show prides itself on having a diverse selection of exhibitors displaying products and The World Game Protection Conference (WGPC) is an services from both the gaming and non-gaming sides annual 3-day international conference and expo focused of the industry. Alongside the wide-ranging display entirely on casino game protection. Experts and industry of latest industry innovations will be a conference, leaders are on hand to discuss the latest casino scams the Macao Gaming Summit, at which speakers will and surveillance technology, as well as game protection discuss both land-based and online gaming business and surveillance best practices. opportunities throughout Asia, regulatory issues and www.worldgameprotection.com gaming best practices. www.macaogamingshow.com 27|29 April 2016 20|21 January 2016 Global iGaming Summit & Expo Fantasy Sports Trade Association Hyatt Regency San Francisco, San Francisco, USA Winter Conference Established as the leading event focused on the future Bellagio Resort and Casino, Las Vegas, USA of iGaming in North America, GiGse attracts over 700 delegates to examine the legislative progress, FSTA is not just for companies that directly support commercial strategies and partnership opportunities for the fantasy sports player with statistical services, player all the key stakeholders to enter iGaming and achieve information, and league organization. The association’s first-mover advantage in this lucrative market currently current members also include some of the world’s largest undergoing a significant regulatory change on a state-by- sports content/information and service companies. state basis. www.fsta.org/?page=fstaevents www.gigse.com

www.asgam.com 46 inside asian gaming October 2015