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Peace Breaks Out

Newsdesk by Newsdesk
Tue 15 Sep 2009 at 16:00
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Macau cartel to squeeze slots sector?

Media reports on the 1.25% VIP commission cap agreed recently between Macau casino operators have naturally focused on how it will benefit those operators’ bottom lines.

Another interesting question receiving less attention is what impact price fixing agreements will have on other service and equipment suppliers in Macau.

Slots and slots systems suppliers have already spoken privately of a trend toward discounting and revenue share agreements with operators on new equipment rather than capital expenditure up front.

The recently formed Chamber of Macau Casino Gaming Concessionaires and Sub-concessionaires could be an extra factor in increasing the downward pressure on equipment supplier revenues.

The chamber is far more than a talking shop. It’s a forum allowing the operators to share information, compare notes and, if deemed necessary in the interests of the Macau industry, fix prices. Were this principle to be applied by the operators to the slot supply sector, it could have a dramatic impact on the business model for those suppliers in the Macau and East Asia market.

Any cap on the prices operators are willing to pay for original slot equipment and systems support in Macau could reduce the incentive for the suppliers to develop market-specific products. Why put all that time and effort into market-specific product designed to appeal to Chinese players if the market is not willing to pay a premium for the privilege?

Under those circumstances we could see a return to the situation that existed back in 2004-05. At that time many Western manufacturers were focused mainly on tweaking existing cabinets and games originally developed for core markets in North America, Europe and Australasia.

Under those circumstances the competitive advantage available to large suppliers through their ability to create market-specific product via large R&D departments could become a costs albatross, leaving the Macau market in the hands of smaller, more nimble suppliers with lower cost bases.

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The IAG Newsdesk team comprises some of the most experienced journalists in the Asian gaming industry. Offering a broad range of expertise, their decades of combined know-how spans multiple countries across a variety of topics.

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