Macau needs policy change to foster local talent: MGEMA

The Macau government needs to change its policies to nurture the local gambling equipment manufacturers, as it is losing a golden opportunity to develop the industry and create quality jobs for residents, the head of the industry association said.

Macau Gaming Equipment Manufacturers’ Association chairman Jay Chun told AGB in an exclusive interview that he would like to see the current ban on revenue sharing between operators and gaming equipment suppliers amended to make it possible for smaller local suppliers to develop their products.

At present, Administrative Regulation 26/2012 makes clear that gaming revenue sharing arrangements between a gaming concessionaire/sub-concessionaire and a gaming manufacturer are not allowed and may result in the revocation of the gaming manufacturer’s approval granted by the regulator, the DICJ.

Chun, who is also the chairman of Paradise Entertainment, said the association has carried out research and found that if revenue sharing were allowed, for every two, or maximum three machines involved, it would be possible to create one job opportunity at the same pay as a dealer.

“This industry is one of the biggest opportunities to bring industry back to Macau, for companies to grow up and export their product again,” he said. “It’s much better than just being a dealer, why reserve dealer jobs for locals, as that could be cheap labour. Operators can cut labour costs and the Macau people can work more normal hours,” he said, pointing to the 24-hour operations of the casino floors, compared with an 8-hour working day in a factory.

At present, dealer jobs in Macau are reserved for locals, with casinos only allowed to import labour for other service-related positions. The policy has added to already high employee costs in the territory, which has virtually no unemployment.

Chun said the potential for the local gaming manufacturing industry is huge and with the right talent could be expanded to cover newer and developing tech products, not necessarily focused on pure gambling.  

Slot machines have historically taken a backseat to table games in Macau, accounting for just MOP11.38 billion ($1.41 billion) in revenue last year, compared with MOP118.9 billion for VIP baccarat and MOP76.9 billion for mass market baccarat. However, figures show that slot machine revenue was less volatile than table games and had been steadily been gaining in popularity up to the 2014 downturn.

Efforts by suppliers to create products specifically tailored to the Chinese have played a big role in generating more interest, but the market is still dominated by the large international suppliers, such as Aristocrat Leisure and Scientific Games.

Electronic table games on the other hand have been the fastest growing area of the machine market in Macau, with live dealer games proving highly popular. Paradise’s LT Game unit has the largest market share in this area. In just four years, revenue from live multi-games has surged from MOP311 million in 2011 to MOP2.35 billion in 2016.

Players appear to be attracted by the fact they are able to get the experience of the live table game in a more private setting, while they are popular among operators as they reduce the number of dealers needed on the floor.

Chun says he expects slots to continue to gain in popularity, especially among the younger generation of Chinese players, who may have generated their wealth from the IT industry, or at least been highly exposed to new technologies.

However, to appeal to this clientele, Macau needs more innovation.

“Slots have been recovering better than the mass market in general, so we have seen them edging ahead for revenue, but they still aren’t as popular here as they are in Las Vegas,” he says. “That means we have an opportunity for innovation; there’s room for something new to take hold in the slot machine landscape.”

“Aspect Gaming, another one of our members, is doing some great game designs to try to appeal more to the Chinese customer.”

Chun said the main theme of this year’s Macau Gaming Show is Smart City: Smart Economy, which will focus on both gaming and non-gaming technologies. He said the show aims to promote new entertainment offerings and innovation in the gambling sphere. Though he acknowledges that it may take time to persuade the operators to take a bet on something new, rather than sticking with what is tried and tested, with skill-based games for example struggling to make inroads.

ESports, however, are proving to be more popular.

“That may bring opportunities for different types of games that are similar in some ways. I can’t tell you how successful one type of game might be or not be, but I do think there’s lots of opportunity for moving beyond traditional slot machines.”

One of the criticisms frequently levelled at the Macau market when it comes to introducing new games onto casino floors is the slow pace for regulatory approval. Chun said he now believes there is more clarity in that process, but what is perhaps lacking is reciprocity between Macau and other jurisdictions.

For example, he said LT won’t get a machine certified in Macau unless the company is sure that product is only going to be in the local market due to the lengthy and complex regulatory process. That’s added time and expense for a smaller local manufacturer. On the other hand if it is certified in the U.S. or Australia, it can be introduced into multiple jurisdictions. 

Macau’s gambling revenue is now firmly on an upward trend, led by the VIP sector after three years of declines. Chun says Macau isn’t going to change overnight into a family friendly leisure destination and is likely to be viewed first and foremost as a gambling hub for many years to come.

That said, he believes the industry is moving in the right direction and despite the 35 percent surge in Q3 VIP revenue, he doesn’t think Macau has reverted back to a high-roller dominated, junket-driven destinations.

“We’re not going backward to the Macau of 2013. We’re evolving with the times,” he said.