Bally Technologies tailors its Asian slots offer property by property
Bally Technologies’ global profits rose in the fourth quarter of the financial year ended 30th June 2009 despite a slowdown in group revenue. Although Bally’s revenue from slot equipment and systems fell 17% year-on-year during he quarter, its operating margin actually rose 2%, from 23% to 25%.
It appears to be a vindication of the company’s approach to sales in Asia Pacific and beyond. Cath Burns, Managing Director, Vice President Asia Pacific explains to Inside Asian Gaming (with additional insights from Kurt Gissane, Associate Director, Business Development and Operations, Asia Pacific) why Bally continues to improve its performance in Asia Pacific despite a global downturn.
IAG: What progress has Bally Technologies made in the Asia Pacific markets in the last 12 months?
Cath Burns: We continue to grow in a measured, steady way. Even with the slowdown we’ve seen in Macau, with the suspension of [Las Vegas Sands Corp.’s] parcels five and six on Cotai and [Galaxy] MegaWorld etc, we’ve still been able to grow our basic product. We’ve still been able to go into new markets in the course of this last fiscal year. We’re also enjoying [equipment] replacement in Macau properties. We’re getting some replacements there where we haven’t been previously. We’ve also got new markets that we’ve entered in the last year. In addition we’ve seen continued growth in markets like the Philippines. And we’re focusing on new emerging markets like Singapore. We see that growth continuing into next year.
How do you go about building sales and revenue?
CB: When outside suppliers first came to Macau they didn’t always have the right product for the market. It took them a while to catch up and it took them a while to earn the customers’ trust. We at Bally have achieved that and now we’re seeing the rewards in terms of our equipment’s performance.
When Wynn opened, we weren’t part of the opening. We’ve steadily over the last two years gone in there bank by bank. For a property with a relatively small footprint by Macau standards, we have grown quite nicely. We have a good mixture of Bally product there that’s performing well.
In The Venetian [Macao] we went in initially with a modest order, as we were on the cusp of changing our product mix. I think the initial order was 150 machines. We’ve been able quarter-on-quarter to grow and grow [the number of machines supplied] at the Venetian.
Now when you walk in you’ll see a very nice spread of Bally product and it’s doing very well there. Where performance of other manufacturers has been not so good, we’ve been able to capitalise and put our product in [Macau casinos].
We’ve had the same experience in Malaysia with Genting. When we went into that well-established property [Genting Highlands] our first order was for about 20 machines. By last year we were shipping about 20% of their ship share. That’s what we were aiming for, and that’s what we were getting, so we’re pleased with that.
How do you make sure you give customers the right product, given that Asia has many different markets and the players in them have different tastes?
CB: We currently have a portfolio of 170 games for the region, but we don’t have 170 games actually out in the market. We have 60.
What that enables us to do is work with our customers to look at what we think would be successful in their market. We then put that product out and manage it with them to make sure it’s performing. If it’s not performing we have a plan to take it out and swap it for other product to ensure constant high performance. You will see us continue to do that. I don’t see any reason to change that strategy.
It will be on a customer-by-customer basis. Because even in Macau some games work say at the Grand Lisboa but don’t work say at Wynn, or some that work at The Venetian [Macao] don’t work at Sands [Macao]. It just depends on the demographics.
Each customer in each market, we view specifically. Somewhere like the Philippines, for example, they like upright cabinets, so we don’t put too much of the CineVision™ [wide screen cabinets] in. Macau on the other hand, is completely mixed.
Some markets have contracted this year. I’m thinking of the slot club market in Cambodia. What about other markets in Indochina?
CB: We have a distributor that looks after that region for us. They sold a few machines into Savan Vegas [casino] in Laos. That’s a smaller, slower market, but we’re starting to build there.
The slowdown in Cambodia affected us in the slot clubs like it affected everybody. But we continue through our distributor to supply to NagaWorld [casino in Phnom Penh].
The main places where we’re seeing growth in this fiscal year is Singapore, the Philippines, the two casinos opening in Macau—L’Arc and later Oceanus. We’re fortunate enough to have nice orders there. Then there will be some replacement [orders] in Macau.
What other projects are you working on?
CB: We’re working on our re-entry into the Australia market. That’s probably the single most important new plan for us to execute over the next 12 to 18 months. Australia, being the largest [slot] gaming market in Asia Pacific, is an entry that we will get right. It’s not a question of going in and putting a toe in the water. We’ll be diving in and entering the market and making a good job of it.
We also of course want to continue the success we’ve had in Macau. We’ve got a structure in place there.
Kurt Gissane: Australia is a very heavily regulated market as I’m sure you and your readers are aware. The three major states each have different protocols. There’s considerable development work that needs to be done to get into those markets.
In [East] Asia we’ve been fortunate enough to be able to bring over SAS-standard global protocol [equipment] and filter out into other [Asian] markets. We know we’ll get economies of scale by going that route. In Australia you really have to tailor the product on a state-by-state basis.
CB: When we look at Australia, we look at the market as if we were an Australian company trying to get into the Nevada market. You wouldn’t for example say: ‘Okay, next week we’re going in to Nevada.’ You’d be foolish. Every company that’s done an approach like that has failed miserably.
Australia is a mature gaming market with 200,000 machines. [One gaming machine for every 105 people, based on the latest population estimate of 21.1 million people.] When you go into Australia with a product, you are setting up a full-scale operation to meet the market needs: you’re designing product, you’re implementing specific protocols. It’s something you want to get right the first time.
We want to go in. We want to get it right. We believe from a company point of view we’re well positioned now. The experience we’ve had in the region serves us well to go into a market like Australia and we’re looking forward to it.
We’ve done a lot of hard work to build here [in Macau] and we want to make sure that translates into another big, mature, market.
How, if at all, would the experience in Macau and the rest of East Asia help you in Australia?
CB: The product that we’re playing in the region is product that will work in Australia. Not all of it will, but some of it certainly will.
I think there are some parallels between the player in Asia and the player in Australia. Understanding that [Asian] player I think helps us and positions us for Australia. It gives us some insight.
Are there a lot of ethnic Asian players in the slot markets in Australia?
CB: Absolutely. If you look at some of Aristocrat’s core strengths when they came into this market [Macau], they brought games that had been designed for Chinatown in Melbourne and in Sydney. They’re great games, they’re global games. The fact that they were made for an [ethnic] Chinese market and that the Chinese love them, has meant that globally they translate [work] everywhere. They are knockout games.
They took that experience from Australia and brought it to Macau. Bally will do the same thing from here to Australia. We’ll do that not only with our Asia Pacific experience, but also with our knowledge of Europe, South America, North America—we’ll draw on all of it, and we’ll come up with the right product mix for the Australian market.
Are equipment replacement cycles getting lengthened in Australia as a result of the global recession?
CB: I don’t know. In Australia you can certainly see some quite old product on the [slot hall] floor, but there could be other explanations for that. One of the reasons it’s still on the floor is probably the loyalty of the customers to that product. So why would you [the operator] take it off?
The same thing happens in Nevada. There are products where sometimes the operator says: ‘I don’t want them [the product] removed. I don’t care if there’s a latest and greatest’. It’s because the player loves it because there’s such a familiarity to the product.
Is there a common denominator for achieving success in all these different markets?
CB: The key for us from the point of view of product on the floor in Asia is we started small and built. So what you’re seeing from us throughout Asia Pacific is a targeted approach to each customer of building a bank [of machines on the floor] at a time.
We’ve gone through an evolution of products. We started with the CineVision™ [wide screen] video display, then we moved into a reel. We started with Hot Shot, then Blazing 7 and then we added another three games to that portfolio. We had Quick Hit and then we added to that; video, stepper and built on the success of those games. Then what you see is a mixture of product. So whether it goes into an upright cabinet or whether it’s stepper or whether it’s video, we’ve built on that.
If you take our CineReels™ product, there’s no other product like this in the world. Macau is the first market where we released it and now it’s throughout that market. It’s also going into Singapore.
Building on the Quick Hit theme, after the stepper, which we launched with [in Macau], we then went into a new cabinet, the Quick Hit Platinum cabinet, offering an even better playing experience and a different style of game.
For us it’s very much a question of: ‘What’s worked?’, then going and building on it and expanding it so we come up with something that’s a little bit different.
When you look at the casino floor and the Bally product—from the player’s perspective, they don’t really care who makes the product. They just want to know it’s something different and a good experience. That’s what we’re aiming for.
This market continues to need choice. We’re seeing new players [from different countries] coming into the market so you’ve got to be able to offer them choice.
We’re starting to see now in Macau a move from that ‘Build it and they will come’ scenario to the competitive landscape we expected. So now it’s about ‘What do I offer the player? How to I create incentives for the player? How do I make them stay in my property?’
We’ve just signed contracts with L’Arc [the new SJM casino in Macau] for both our slots systems and our table systems. They’ll be using our promotional products, so you’ll start to see that built. How you take care of your player is becoming a very important part of the Macau market.