The Multiplier Revisited

A recap on Octo Chang’s April 2007 analysis of side betting in the Macau VIP market

The multiplier is in essence a private arrangement between junket agents and their customers, governing the size of the bets placed. Most commonly, it occurs in two basic forms, with essentially the same outcome.

The first is when the agent agrees with players that whatever the value of chips placed on the table, the real ante is multiplied by an agreed number. For example, if the customer placed a HK$1,000 bet and the agreed multiplier is 10, then the “real” bet is HK$10,000.

The second common form of Multiplier is when the “real” bet is agreed to be denominated in a different currency to that of the actual chips placed. For example, the customer places a HK$1,000 chip on the table, but agrees with the junket operator that the bet is in reality denominated in US dollars, so the “real” bet is US$1,000, which represents a multiplier of 7.8 times.

Convenience

Such arrangements are particularly convenient because the majority of junket customers in Macau hail from Mainland China and do not—and in any case can not—bring money with them, but rather rely on credit extended by junket agents. When a customer requests $1 million credit, the junket agent merely requests the casino to provide $100,000 worth of chips, with the implicit understanding between the junket agent and customer that a ten times Multiplier is in effect. In the first scenario, where The Multiplier is ten times, the result is that the government and casino licensee’s share of revenue is reduced to a tenth of what it should be, or in Macau’s case, a mere 4%.

Under the 40:40:20 revenue sharing arrangement pioneered by Stanley Ho, the government and VIP room/junket operator each get 40% of gaming revenue, and the casino license holder the remaining 20%. When a 10x Multiplier is in effect on the nominal value of bets placed, the junket operator’s margin goes from 40% of revenue to 94%, while the government’s take is reduced from 40% to 4% and the casino license holder’s share from 20% to 2%.

Believe it or not, The Multiplier has been around for quite a while, even before the liberalization of Macau’s casino industry. It is also fairly common in other countries, though the potential benefits to junket agents are obviously greater in Macau, given the city’s high gaming tax rate.