Inside Asian Gaming

INSIDE ASIAN GAMING | October 2011 2 Fishy Logic It’s been suggested by more than one Chinese academic that East Asian people experience an “illusion of control” when playing casino games of fortune. That’s in terms of believing that through their own good luck and their own virtue they can influence the outcome of a game even after the cards have been drawn, or the electronic device has started its random number generation. It might be argued that governments and gaming regulators around the world also experience an ‘illusion of control’ when it comes to directing the path of the legalised casino gaming industry. It’s true that the most important method of control—limiting the number of places that can offer such entertainment in the first place—is still very much in the hands of the politicians and their advisors. But once that bridge has been crossed, and legalisation or liberalisation has been permitted, then it becomes more a question of trying to make sure the juggernaut doesn’t run off the road. Research by the University of Macau suggests that Chinese people’s demand for gambling is relatively inelastic—i.e. that the demand stays constant or strong even if the price goes up. So even in a supply-limited region such as East Asia, the idea that the Macau government can control the growth of gross gambling revenue by limiting the number of new tables coming onto the market looks like a rickety premise. That’s what the authorities are planning by extending the table cap until the year 2020. But it’s like saying if only humanity could reduce the rate at which fish spawn in the sea then we could reduce the number of people trying to catch them. Without a fall in demand for fish, and a fall in the supply of fisherman going out in boats, then any cap on fish stocks simply pushes up the price of the resource. Apply that logic to the Macau casino market, and it quickly becomes clear that with ever more Chinese people becoming economically eligible to gamble, then limiting the growth of Macau’s table supply is likely to succeed only in pushing up minimum bet prices. That upward trend in minimum bet pricing has already been seen in the mass segment even with improved utilisation by the operators of their existing tables. Faced with a fixed amount of table inventory and an increasing demand for gambling, casino operators will have no choice but to price a segment of current live table players out of the market. The possibility that the operators can divert those less well-off players into electronic table games with lower minimum bets will require cooperation from the Macau authorities. At the moment in Macau, electronic tables are regulated like their live table game equivalents (in terms of odds and pay outs), but their place in casino inventory is hazy. And there are currently no electronic game regulations in Macau to clarify that point. IAG has been told that at least one operator is lobbying for electronic tables to be classified in future as slots—for inventory purposes if not in terms of odds and payouts. It might be sensible for the Macau authorities to throw the industry a bone on this issue and regulate electronic tables as live tables if necessary, but count them as slots for inventory purposes. Pricing a whole segment of Macau gamblers out of any form of table play via the live table cap opens up the possibility of an explosion in the number of illegal casinos on the Chinese mainland. Perhaps we shouldn’t blame the Macau government for trying to exert some control. The legacy of the past 62 years of Chinese history is that some control is better than no control at all. Mainland China tried experimenting with unrestrained market-led capitalism after the fall of the Qing dynasty in the early 20th century. The end result was social upheaval and chaos. The West’s recent experience with ‘light touch’ regulation of its banking sector will hardly have inspired confidence among Asians that they should follow that particular lead. So expect a firm hand on the tiller and lots of fun for industry analysts in the months and years to come. Andrew M. Klebanow In August, Inside Asian Gaming ran the story ‘Emerging Issues in the Use of Free Play’ without properly crediting it to the author, Andrew Klebanow. We apologise for this oversight. Mr Klebanow is a valued contributor to our andother industry publications, withmore than 35 years of experience in casino marketing, business development and market research. Editorial Inside Asian Gaming is published by Must Read Publications Ltd 8J Ed. Comercial Si Toi 619 Avenida da Praia Grande Macau Tel: (853) 2832 9980 For subscription enquiries, please email subs@asgam.com For advertising enquiries, please email ads@asgam.com or call: (853) 6680 9419 www.asgam.com Inside Asian Gaming is an official media partner of: http://www.gamingstandards.com Publisher Kareem Jalal Director João Costeira Varela Editor Michael Grimes Business Development Manager José Ho Operations Manager Sarih Leng Contributors Desmond Lam, Steve Karoul I. Nelson Rose, Richard Marcus James Rutherford, Sudhir Kale James J. Hodl, Jack Regan William R. Eadington Graphic Designer Brenda Chao Photography Ike, Alice Kok, James Leong, Wong Kei Cheong Michael Grimes We crave your feedback. Please email your comments tomichael@asgam.com