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Passage to Asia

Newsdesk by Newsdesk
Tue 27 Jun 2017 at 10:33
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Having traditionally focused the bulk of its energies on the US casino market, International Game Technology (IGT) is on a mission to boost its global footprint with Asia at the top of the list.

By Ben Blaschke

It’s not often that a company with annual revenue of US$5.15 billion can reasonably call itself a sleeping giant. Yet that’s exactly the status global gaming conglomerate International Game Technology (IGT) is angling for in Asia amid a renewed push to boost its global presence.

“This is our coming out,” explains the company’s Chief Executive Officer, International, Walter Bugno.

“It’s exciting for us because we’re coming from a little bit behind the pack. We have traditionally not put a lot of dedicated focus on Asia and now we’re starting to.”

In May, after IGT announced a 10% year-on-year decline in consolidated revenues for 1Q17, Wells Fargo analyst Cameron McKnight predicted better times ahead for the company with some highly anticipated new game releases – including “The Voice” and “Sphinx 4D” – to drive low-single digit growth through the next six months in its traditional North American stronghold.

But he also noted that IGT’s best potential growth catalysts would likely be found overseas via “international market share gains” in Macau and Australia among other jurisdictions.

“The new IGT is a global lottery operator and gaming technology supplier, with only a quarter of revenue from North American slots,” McKnight said. “We like IGT’s diversification.”

As Bugno explains, IGT is “coming from a little bit behind the pack” in Asia, where the likes of Aristocrat – which holds 60% of the slots market in Macau alone – and Scientific Games have long been established. But that gap also presents enormous opportunity.

“This year is the first time we’ve started to bring a lot of new content which has been developed specifically for the Asian market,” Bugno says. “We have some structural changes in regards to studios and people that are focusing solely on Asia.”

The seeds of IGT’s Asian expansion were sown in 2015 when IGT merged with gaming software and services provider GTECH in a US$6.4 billion deal – the largest ever in the gaming industry’s manufacturing sector.

The merger served a range of purposes, including estimated annual cost savings of US$230 million, relocation of the company’s headquarters to tax-friendly Britain and the chance for IGT to diversify its product range amid slumping sales.

“When we merged IGT with the gaming part of GTECH, Spielo, the international component of the business became much more important because Spielo was basically the opposite to us,” Bugno says.

“IGT had traditionally been a US-focused business but Spielo was an international business, even though it also had some distribution in the US. As we started putting more dedicated resources and focus onto the international market, Asia by default emerged as a key market where we recognized we were underweight, that there was an opportunity.

“At the same time, we knew we needed to develop Asian games for Asian markets rather than trying to export games here and that’s a process that takes a couple of years. You don’t always get it right the first time either, so we’re going through that process at the moment.”

On the ground, IGT plans to utilize its current studios in Sydney and Beijing to produce Asian content exclusively, with Bugno describing them as “locations that are bred into the Asian way of thinking.”

Also boosting the company’s Macau penetration is its patent partnership with local casino systems manufacturer LT Game. Under the terms of the agreement, signed in April 2016, IGT will distribute LT Game’s live and electronic table game systems in the US and Canada while LT Game will serve as a distributor for IGT’s slot machines in Macau.

“We’ve already deployed the product in the US but the focus for us in these first 12 months since we entered into the agreement has been to take the intellectual property and focus on product development – bringing the next generation of products into other jurisdictions which have different requirements to what they have in Macau,” Bugno explains. “It’s a good opportunity. We think there is an exciting 2018 ahead of us.”

Macau aside, IGT’s Asian ambitions are broad.

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“In most of the Asian markets we’re starting with a lower share – certainly compared to Aristocrat – so every market is an opportunity for us,” Bugno adds.

“Some are easier than others but there are opportunities in the Philippines, we’re doing quite well in Singapore, Vietnam is a great opportunity and Malaysia continues to be a very important market for us with our relationship with Genting.

“We’ve opened a lot of doors with our [casino] systems where we have a presence in all of those jurisdictions and if we bring good content then all of those slot opportunities will open up too. In the Asian market there are 50,000 to 60,000 slot machines and 16,000 of them are in Macau so that’s obviously an important jurisdiction, but there are other big ones too and we’ll try and play in all of them.”

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