The evolution of slot machines has brought us to a point where bonuses are no longer just a nice little extra, an added attraction. Events, animation and sound effects that didn’t exist less than two decades ago have become an integral part of why people play the games.

It’s interesting how Wynn Macau’s decision to deploy 50 electronic table game (ETG) seats earlier this year raised an eyebrow or two around Macau, with one knowledgeable observer expressing surprise that Mobil Five-Star rated Wynn was “joining the down-market, low-end mass.

“You could infer that maybe there is some struggle going on. … Are they losing market share?”

To which one response immediately suggests itself—it’s simply smart management to acknowledge the tidy business that low rollers have become in Macau. Market or customer “segmentation” is a term with wide currency these days and for good reason.

“After gaining more experience, casinos now have gradually built up their customer databases and gained a better grasp of customers’ preferences,” explained J.P. Morgan’s Kenneth Fong. “Over the past few years, casinos gradually introduced products targeting different mass segments, and these include electronic table games.” This “allows casinos to subdivide customers into distinct homogenous segments that share similar characteristics,” he added, “and helps companies prioritize marketing campaigns and tailor different service levels. This can help companies to extract maximum value from both high- and low-profit customers or increase their share of wallet.”

As MGM China Chief Executive Grant Bowie explains it, “What we’re all trying to do is get the range between the top-performing and lowest-performing tables closer together.”

 

ELECTRONIC EDGE

With its 3 percent annual cap on new table supply, the government certainly has added some urgency to this quest. Part of the attractiveness of ETGs as a response is that only the live dealer version designed for theater- or “stadium”-style installations counts against the cap, depending on the number of seats (every 50 or 60, it’s not clear). So a 200-seat installation linked to three live games might count as three tables or it might count as four.

“The advantage is you have one game with 50 seats, so in effect you replicate a normal manual table game with a hell of a lot more bettors,” noted David Green of Macau-based Newpage Consulting, an advisor to governments and the industry on regulatory and other issues.

It’s why e-tables are fast becoming “the preferred method of gaming directed at the lower end,” said Grant Govertsen of investment analysts Union Gaming Research Macau. “We have noticed most operators embarking on efficiency exercises that ultimately pull live-dealt traditional table games from the lower-end mass market and reallocate them to VIP or higher-yielding mass market segments,” he said. “In turn, and in order to accommodate lower-end mass-market play, these customers are being pushed towards ETGs as the best option to play at low stakes.”

Necessity has played a similar role in establishing Singapore’s sizable business in ETGs. Like Macau the city-state is capacity-restricted, each of its two IRs, Resorts World Sentosa and Marina Bay Sands, limited by law to 15,000 square meters of gaming space and 2,500 machine games. Fertile ground for what the technology has to offer, and not surprisingly, there are more than 1,200 ETG positions in the market divided about evenly between the two properties. Thus they account for about 25 percent of the machine market, which proportionately is much larger than Macau’s as it generates close to one-third of total gaming revenues.

There is something else that strongly recommends the technology: the speed of play.

“Hands per hour, I suspect, is much higher than a traditional game,” said Green. “You can afford to drop back a little [on bet limits] if you’re getting the velocity. And my impression of ETGs is they’re velocity games.”

An ETG can turn over a hand in 30 seconds, theoretically 120 hands an hour, as opposed to maybe 30 an hour on a traditional table. (A VIP room hand can drag on for four or five minutes.) At HK$200 per hand at the e-table (not counting simultaneous bets on multi-games) versus $500 per hand at a conventional table it’s the difference between $24,000 in drop and $15,000. At a 1.24 percent house edge that’s $298 in win per ETG player per hour versus $186 at a regular table. A nine-seat baccarat table fully occupied with the $500 bettors earns the casino a hypothetical $1,674 an hour.

A 50-seat ETG installation filled with $200 players, which may count as only one or two tables under the government cap, garners the casino $14,900. These lower rollers also cost less in terms of comps and other perks. “Obviously, the fact that they’re proliferating in the market says they must have significant advantages over table games,” Green said.

“Anywhere we’ve seen [ETGs] in Asia they’ve tended to do quite well,” added Govertsen, “so it’s no surprise that we’re seeing more and more of them, or even that more exclusive, premium-mass, VIP-centric properties like MGM and Wynn are getting on the ETG bandwagon. It’s affirmation that ETGs are part of the Macau gaming fabric.”

 

GROWTH MARKET

Currently, there are more than 4,000 ETGs spread across the 35 casinos either in LT Game’s stadium-style live-dealer configurations, single- and multi-game, or in banks of five to 10 seats linked to automated games. The latter the government treats as slots, each betting terminal counted as a single device. Govertsen, for one, believes the market will grow to 5,500 over the next five years. “With fewer and fewer tables being released by the government,” he said, “we’ll continue to see these e-tables flourish.”

This would appear to provide plenty of elbow room for competition, and so there is, but in the automated space only. Interblock, Aruze and SHFL Entertainment all participate there. In the lucrative live-dealer segment, LT Game holds a monopoly by virtue of a patent on the technology that is recognized only in Macau. These “theater” or “stadium”-style installations are similarly popular with players in Singapore. But roulette, not baccarat, is the game of choice, accounting for 64 percent of seats. Multi-games (roulette and sic bo) are somewhat less popular, accounting for only about 10 percent, according to Union Gaming’s research.

LT has no presence in Singapore. It’s SHFL’s games that dominate, unconstrained by patent litigation with LT that has hampered their spread in Macau. SHFL’s share of Singapore’s ETGs is estimated at 48 percent (more than 70 percent at Marina Bay Sands), and the company is estimated to have about half the market in the surrounding region as well, and these markets are expected to grow by 1,500 positions or more with MGM Grand Ho Tram opening in Vietnam this quarter and Entertainment City Manila and a second NagaCorp casino in Phnom Penh coming on line over the next few years.

Slovenia’s Alfastreet runs a close second after SHFL with an estimated 40 percent of the market. Novomatic, Aruze and Interblock also have some share. This is worth mentioning because at a 25 percent premium to slot win averages, a rough benchmark believed to hold true in Macau, it’s a robust business for all concerned.

Company reports don’t break out ETG performance in either market, but they are considered slots under Singapore regulations, and it’s no coincidence that Singapore boasts some of the highest averages in daily win per slot to be found anywhere. Marina Bay Sands, whose results are published by listed parent Las Vegas Sands Corp, reported US$616 in daily unit win in 2011, before deducting for discounts, on an average of 2,366 machines. The latest figures available as of this writing show daily unit win at MBS holding at a creditable $630 through the third quarter of 2012 in what has been a down year for both MBS and Sentosa.

Extrapolating from this performance it’s possible that Singapore’s e-tables are booking in the neighborhood of $800 per seat per day, maybe more, which at Marina Bay Sands might have been good for about $44.2 million in the third quarter of last year, or more than one-third of its total slot haul in what is arguably the most lucrative machine gaming market in the world pound for pound.

In Macau, at the end of 2012 there were approximately 1,300 terminals in stadium installations in Sands China’s five properties and in Melco Crown’s City of Dreams. There were another 2,200 or so spread around town in various automated stand-alone configurations, with sic bo actually enjoying the largest single-game share, according to Union Gaming. The live multi-games generated MOP895 million in revenue last year (US$119 million), up from MOP153 million in 2010—and it all belonged to LT Game. sM
 

 Reprinted and excerpted with permission of Inside Asian Gamingmagazine.