Will skill-based slots appeal to younger Asian generations?

The emergence of skill-based slots and a better understanding of how to tailor machines to local markets is presenting manufacturers and operators with the opportunity to challenge the dominance of the table game in Asian casinos and attract a new type of player.

For many years it has been received wisdom that slot machines will only ever represent a drop in the ocean of Asian casino revenues. While slots bring in almost twice as much money as table games in Nevada, in Macau they account for around 4 percent of takings. There were 13,018 machines in Macau in 2014, down 22 percent on the 2012 high of 16,585 according to Statista, but up on the 11,856 recorded in 2008.

There are also signs slots are beginning to make a serious impact on the bottom line. Singapore’s Marina Bay Sands reported a Q2, 2015 slots handle of $3.06 billion, representing almost a quarter of total gaming turnover. The figure compared favourably to Las Vegas Sands’ Vegas slots handle of $558 million, although the hold was around half its US equivalent, highlighting the tighter margins slots tend to operate on in Asia to draw in players.

Meanwhile, The Venetian Macao reported a Q2, 2015 slots handle of $973.2 million, down 27.7 percent year-on-year due to Macau’s problems but encouragingly more resilient than total casino revenues, which declined 31.7 percent over the period.

“You have to conclude that the Chinese gambler has been weaned off his aversion to slot machines,” said Warwick Bartlett from Global Betting and Gaming Consultancy. “He still prefers baccarat, but the growth in slots has been remarkable considering there were only two slot machines in Stanley Ho’s original Lisboa casino.”

Those days are long gone and suppliers and manufacturers are now alert to the potential opportunity. Wells Fargo analysts Cameron McKnight and Robert J. Shore said Asian-themed games continue to gain popularity, pointing to the recent success of Scientific Games’ “88 Fortunes” title. They also noted that International Game Technology, one of the few manufacturers to invest notable R&D into Asian-themed products, has seen strong growth this year and expects even more in 2016 and 2017.

To make an impact in the market, it is important to understand the difference in player mentality, and how that can be leveraged into success on slots. According to Desmond Lam, an associate professor of marketing at the University of Macau and an expert in Chinese gaming culture, players in the region tend to be more collectivistic and prefer more interaction during game play than those in the United States, making slots a far tougher sell.

“Winning is important and table games are the preferred tools to do so,” Lam told AGB. “Slots are seen to be toys for entertainment and fun, and have a low payback percentage versus certain table games like baccarat.”

Walter Bugno, CEO at IGT International, agreed that Asia has traditionally had a strong affinity for table games and that for slots suppliers to succeed in the region, a local approach is essential. “The lesson we have learned in development of slots for Asia is to create market-attuned games specifically for players there, versus adapting content from other regions,” Bugno told AGB. “We believe that with our market-attuned content and the strong relationships that we have established in the APAC region, that we are well-positioned for growth.”

For several years manufacturers have made a concerted effort to produce slots aimed specifically at the Asian market.

But branding is not the only consideration. Bugno said IGT looks to create content with the appropriate maths models, volatility and design to resonate with the region’s players. He picks out Singapore and the Philippines as key markets which have tended to display a greater emphasis on slot play, adding that Macau’s downturn has by default created a more mainstream gaming environment which could benefit the slot market.

However, it is important to understand, and accept, that table games will remain the primary part of the casino mix in Asia. “We need new slots players as existing table players are unlikely to switch to slot,” Lam said. These new players are likely to be younger players, and Lam added that innovation will be key to keeping them away from the tables.

“The younger generation in Asia has grown up very comfortable with technology and may potentially adopt gaming on machines. I think there exists opportunities for creative electronic gaming machines and, possibly, skill-based slots,” Lam said.

While skill-based slots do provide an intriguing opportunity in Asia, the overarching concern is that these younger players, presented with a wealth of gambling opportunities ranging from eSports to daily fantasy, won’t look up from their smartphones long enough to venture into a casino in the first place. As such, at least until Asia’s gambling centres make more progress broadening their appeal into the entertainment sector, skill-based slots are unlikely to be the game-changer many have touted them to be in the United States.

The innovation can still drive growth in the region, and Bugno said IGT will work closely with regulators to determine how to introduce skill-based products to Asia. The firm’s heritage positions it well to succeed should the concept gain traction. “Given that the player in Asia is motivated to influence a game’s outcome, the skill-based gaming concept is certainly an interesting prospect for the region,” he said.

But Lam also urged caution on skill-based slots, noting that for most of the region, it remains far more lucrative to use floor space for an extra table rather than a bank of slots. “In the near to midterm, I don’t see mass adoption of slots as the preferred game in Asian casinos,” he said.

While that may be the case, evolving gaming habits and continued product innovation nonetheless present a genuine opportunity to manufacturers and operators alike.