Inside Asian Gaming

September 2008 | INSIDE ASIAN GAMING 27 Astro Corp Taiwan’s Astro Corp is a potential breakthrough company in the production of Western-quality gaming machines with distinctively Asian appeal. While Japan has long been making gaming equipment for its large domestic market, demand for locally-made gaming machines in the rest of the Asia Pacific region had been relatively modest until the liberalisation of Macau’s casino industry.That left the market largely in the hands of Western suppliers—a predominant position they still occupy. As the Asian gaming market matures and grows, we expect to see a growth in demand for product not only with distinctively Asian themes, but with game logic that appeals specifically to Asian consumers.We think Astro Corp, as a Taiwanese company, is well-placed to serve that demand. Taiwan is a Chinese society, yet it has been open to Western influence and global trade for 60 years. It has a strong technological base, producing computer mother boards and sound cards used in gaming machines around the world.It also possesses a well-educated, energetic workforce on wages internationally competitive with Western gaming manufacturers. We believe Astro Corp will make use of these macroeconomic advantages to compete withWestern gamingmachine manufacturers.It will build on that strong start thanks to its cultural affinity with target consumers, good management and excellent contacts within the regional gaming industry. An example of the company’s strong vision and excellence of execution is in market research. It places considerable emphasis on observation by Astro Corp staff of player behaviour in the ‘field’, not only on gaming machines, but in games played at street side. It believes understanding behaviour at street level gives a valuable insight into how to design gaming machines for Asians. It thinks that questionnaire-based research, while useful, tells only part of the story product developers need to know. Astro Corp used G2E Asia 2008 to launch a number of Chinese- themed games developed with the assistance of this field research, including Shanghai Tycoon, The Flagship and Convoy . We expect Astro Corp to be in the vanguard of a movement seeing locally produced and locally-themed product competing with the multi- reel and multi-line games of the Western manufacturers. GigaMedia Ltd Taiwan’s GigaMedia Ltd operates one of the most successful online poker rooms in the world in revenue terms. Everest Poker is marketed principally to the European market, and Everest has sponsored a number of tournaments including the European Poker Tour and the 2008 World Series of Poker. GigaMedia is now expanding it operations in Asia, targeting the market for non-casino online games in China. A potential breakthrough deal came in July when GigaMedia announced it had acquired an exclusive three-year licence for Web distribution in China of Electronic Arts Inc’s basketball game NBA STREET Online. ‘NBA’ is consistently the most searched sports term on Baidu.com, the top search engine in China. GigaMedia has now signed upTencent QQ,China’s biggest online messaging service,as its distribution partner. Hong Kong-listed Tencent QQ claimed it had 318 million active user accounts on its QQ platform as of the end of Q1 2008. GigaMedia also has distribution rights to NBA STREET Online in Taiwan, Hong Kong and Macau. GigaMedia estimates 300 million people play basketball in China. If only 1% of them sign up for the online game, the company will have a healthy player base. As well as a healthy supply of content, GigaMedia has strong cash flow, with revenues up 31% to US$52.5 million in Q2 2008 compared to the equivalent quarter in 2007. Before adjustments for GAAP, it delivered a net profit of US$12.1 million, up 17% year-on-year. The company also has extra cash to spend following the sale in August of an ISP business to China Network Systems for US$20 million. Look out for more announcements on new online content and new distribution deals in Asia before the end of the year. Eight to Watch