With the growing importance of social casino products to the mobile and social gaming space, it is important to look at an important evolution in the land based casino world that will probably impact game companies. I have blogged many times about international opportunities for game companies, and these opportunities are going to become more important in the social casino space. A recent article in The Economist, “The rise of the low-rollers,” highlights how the Asia-Pacific region is expected to become the biggest market for casinos by 2015 (as recently as 2010, the United States made up nearly half the global gambling market). This evolution is likely to be mirrored in the social casino space. In this post, I am going to lay out some developments on the land-based side and you can extrapolate how it might impact the social casino space.
Macau leads the way
When you look at Asia, you need to start with Macau, the former Portuguese colony now part of China. Described by Sheldon Alderson, the Chairman and CEO of Sands Corporation, as “The Las Vegas of the Far East,” its casinos generated $38 billion last year. To put the $38 billion number in perspective, it was more than six times the turnover of the Las Vegas strip’s takings. Between 2008 and 2012, Macau’s gambling revenues grew by 29 percent a year on average, largely due to the opening of glitzy new casinos.
Unlike Las Vegas, Macau’s strong growth is due to its ability to attract big spenders, not mass tourism. Macau attracts these big spenders not only because of its proximity but also because it is not highly regulated and does not ask these great customers how they got their money. It does not hurt being part of China and only a couple of hour’s flight from a billion potential gamblers.
They also acquire big spenders by outsourcing to junketeers, who find the “fat cats” and fly them to Macau, extend them credit to get around China’s tight currency controls and manage the VIP gambling rooms. They effectively run autonomous casinos within casinos, shielding the actual casinos from the dirty parts of their business (like collecting on losses).
Asian success not limited to Macau
While Macau is still the leader, casinos in other parts of Asia are seeing great success. Singapore’s two new(ish) casinos have become among the most successful in the world in only two years. In the Philippines, four casinos have recently opened in Manila’s new Entertainment City. Casino mogul Lawrence Ho recently announced reached a deal to open a casino near Vladivostok in Russia’s Far East. Vietnam is looking to boost foreign tourism by expanding its casinos, and proponents of gambling are making headway in Taiwan and Sri Lanka, according to a different article from The Economist, “Place Your Bets.”
Even in traditional Japan, mainstream politicians, including Prime Minister Shinzo Abe, are pushing to legalize casinos as an effort to revive the economy (and drive tax revenue). An influential Japanese business magazine recently argued that “Japan is being left behind” its Asian neighbors.
Not just big spenders
Particularly interesting, and potentially more impactful, is that the growth of gaming in Asia is not limited to high rollers. Back in Macau, it is currently improving its links with mainland China to deliver more families and mass market. Chinese officials are expanding capacity at the border-control post while China has completed several high-speed rail links that expands the number of people who can get to Macau in a few hours by train to about 100 million. Macau is also building a bridge (literally) to Hong Kong’s huge airport so people can take advantage of the multitude of flights (including cheap ones) to Hong Kong.
On neighboring Hengqin island, officials are eager to build entertainment and non-gambling activities (like conferences) facilities. The head of Sands China recently said, “Hengqin is the game changer for Macau,” as Sands has long focused on the mass market.
An opportunity for social casinos
As more and more Asians discover the thrill of gaming, they will almost certainly look online to extend their experiences. From the high rollers to the families now going to Macau, social casinos will provide them a way to enjoy the same experience while at home and work. Just as Vegas is no longer going to be the largest market for land-based gaming, the United States is unlikely to be the biggest market for social casino experiences.