FOCUS

Taking the pulse of technology

Technology is changing all aspects of our lives, sometimes faster than we’re ready for, and the gaming industry is no exception. Even processes that have always been entrusted to human hands are now getting extra help from artificial technology.

Our focus section in this edition of Asia Gaming Briefings delves into some of the innovations that are being brought to the casino space and how they can help optimize performance.

We look at the various merits of systems used to monitor table games, such as radio frequency identification and camera sensors. Both are able to collect and analyze vast quantities of information from the game as it is played, helping casinos manage staff and tables, as well as collect valuable player data.

We also take a look at the developments in serverbased gaming and the potential to shake up the slot machine industry, which has traditionally lagged in Asia. Server-based systems can create operational efficiencies, but perhaps more importantly, they throw the spotlight on the provision of quality content, providing a greater variety for the player. Some argue this may be the way to tempt that elusive millennial gamer onto the casino floor.

Staying with gaming products, we provide an update on electronic table games, which bridge the divide between man and machines. ETGs have gained strong traction in Macau, where a cap on actual table numbers provided a catalyst for growth. However, that expansion appears to now to be slowing and the focus is switching to other Asian jurisdictions. We look at the potential for growth and the latest trends.

In the online world, the mind-boggling topline numbers of money wagered in Asia, has many companies salivating. However, as a largely unregulated market, operators venturing in will find many challenges they have not had to contend with in Europe. We speak to several experts already operating in the field to ask what the key problems are and how they can affect the bottom line. One of the main issues is payment processing, which means many are still heavily reliant on the agent system, similar to the junket system in the land-based world.

As a result there is a strong focus on how cryptocurrencies could be adopted to alleviate some of the major issues.

Our tech-focused section therefore would not be complete without a look at the ultimate disruptive technology - blockchain and crypto. Asia is already ahead of the curve when it comes to embracing crypto, with Japan, South Korea, and Vietnam accounting for a phenomenal 80 percent of global bitcoin trading. We argue therefore that crypto and online gaming in Asia may be a match made in heaven and even serve as a catalyst for more widespread adoption elsewhere in the world.

Technology tools to boost table game yields

The development of new technologies is creating opportunities to optimize casino operations in a way that would not have been thought possible a decade ago, in particular when it comes to table management, though there is debate over which systems provide the best solution.

The ability to measure the performance metrics of live table games in a cost-effective and timely way has until relatively recently eluded casino operators, who have been forced to rely on labour intensive manual counts during operational hours. This leaves a wide margin for human error, potential fraud and at the end of the day money on the table for the operator.

There are two main forms of technology now being used to help solve this issue, RFID and optical table sensors and suppliers of both claim significant expansion.

RFID stands for radio-frequency identification, a technology that uses radio waves to transmit information from RFID tags to an RFID reader.

In applications of RFID for casino gaming, a sensor at the table or cage reads the information on the gaming chip. It is similar to a barcode, except the tag is electronic rather than a physical image, and instead of reading just one barcode at a time, many RFID tags can be stacked together and read at once.

In the past, RFID technology has been criticized for not being capable of operating in a reliable way in a fast-paced environment such as a casino floor, where there is also confusion from many other electronic and electrical sources.

However, Walker Digital Table Systems (WDTS) claims to have overcome these issues with its PJM3.0 RFID, which it says its three times faster than other RFID technologies, being able to read 1,200 tags per second. Its edge is that it uses eight data channels across a broad range of frequencies. This means not only greater speed but also greater resiliency and reliability in an electronically “noisy” casino environment.

“RFID table solutions are the key to automating manual table procedures, integrating data across casino systems, and enabling significant gains in operational efficiency, transaction accuracy, and game integrity,” Neil Crossan, WDTS Chief Commercial Officer says.

“Our customers experience increases in game speed and the elimination of leakage drives incremental increase in table hold. Every customer that has invested has continued to expand their investment with WDTS, as the ROI is continuous and compelling.”

“Table automation also eases the supervisors burden - resulting in increased customer service and focus, whilst real-time dealer metrics support coaching for optimal dealer performance. Even more exciting are new insights on aspects of table performance that are now available.”

Crossan says “PJM3.0 has become the industry standard. There are alternate, slower RF technologies available in the market however all of the major chip manufacturers supply PJM RFID and it is the prevalent chip technology on Casino floors today. We do not require these customers to change their technology - our systems allow the customers to leverage the PJM chips they have. We encourage new Casino operators to adopt the advantages of PJM RFID chips at the outset, and have had major operators convert to PJM, driven by the operational advantages our platform offers”

Detractors of the technology point to the fact that it’s expensive to install, involving the replacement of casino’s stock of chips. They also say that some RFID technology can actually slow gameplay.

Australian company SenSen Networks has an alternative solution that it says is costeffective to install and equally as efficient.

It has developed a technology based on 3D Time of Flight (ToF) cameras that capture a multispectral, 3- dimensional view of all gaming tables.

The colour, infrared and depth-sensing technology determines the number of players at each table, number and type of bets placed and the value of all wagers. The accuracy and stability of the solution has been established on live games of Blackjack, Baccarat and various kinds of Poker providing real-time tracking of player demand.

The technology is able to monitor table occupancy; bet count; bet type; bet value; game start; game end; time between games and hands per hour.

“RFID-based solutions slow down the dealers and reduce the number games played thus reducing the turnover of the tables,” SenSen CEO Subhash Challa says. “The SenSen Camera solution does not need a change to dealer or player behavior, layouts or chips and has no impact on game speed and dealer KPIs.”

Challa said the technology received an “exceptional response” from operators at both G2E Macau 2018 and G2E Vegas 2018 and several of them progressed to trails within their own properties. He sees the biggest opportunities in Asia in Macau, the Philippines, Singapore and Malaysia.

RFID suppliers counter that optical technologies cannot provide the same level of security, or reliability to the casino operator.

“A critical advantage of RFID solutions over optical, is RFID’s high speed and reliable identification of chip validity at a serialized level,” WDTS says. “This means that RFID provides the protection against counterfeit chips that optical solutions cannot, as optical can give false positives for fake or invalid chips.” Crossan also notes that that identifying chips at the serialized level allows operators to use the same cash chip set for all gaming activities that today requires the purchase and daily management of many different sets of cash chips, program play chips and junket chips. This reduction is a material saving for any casino.

With the rapid growth in casino properties across Asia, from the multi-billion IRs planned for Japan, to the smaller resorts mushrooming in Cambodia and elsewhere, there’s room for sales growth for both technologies.

Technical hurdles hinder online gaming

Asia’s multi-billion dollar online gambling industry is an opportunity too big to ignore when it comes to the expansion plans of many global players, yet technical issues ranging from latency, through to security and payment systems can prove to be costly challenges for newcomers.

Given online gambling is mostly unregulated across the region, exact figures for how big the market is are not available, though most estimates run into the hundreds of billions of dollars, with China’s outfacing market alone put at about $600 to $700 billion.

While the volumes are massive, increasing competition, the costs of client acquisition and other market peculiarities can eat meaningfully into margins.

One of the biggest issues facing online gaming operators in Asia is payment processing systems. In unregulated markets the mainstream banking system is generally not an option, with punters choosing popular payment methods, such as Alipay and WeChat Pay.

The problem with these is that they are closely monitored by authorities and client accounts are regularly blocked and shut down. This leads to a continued reliance on the agency system.

“The Western market doesn’t have the same issue with well recognized licensing authorities and a wide availability of various payment options including Visa/Mastercard,” one Asia operator who asked not to be named said. “The Asian market continues to be a largely cash market with the clientele not willing, or not able to use bank cards.

“All these aspects lead to the agent networks still being very relevant. Agents also have the ability to provide credit, dealing with customers directly which adds to these networks’ value. However, agent networks eat at the online operators profits largely leaving casinos with a very small margin.”

Nick Hill, commercial director at Flow Gaming, says these payment difficulties are driving research into cryptocurrency models that can be used in a closed network to make moving money much easier.

Also likely to eat into margins is the cost of client acquisition in a highly cutthroat market, where client loyalty is tough to establish.

Hill says that rebates to clients can typically be about 0.8 percent to 1.2 percent of the total game wager, with the operator working on a margin of about 3 to 3.5 percent.

“That means you give back 30 percent, it’s an unsustainable business model,” he says. “We are trying to educate operators into improving loyalty and retention, as the life expectancy of a player in Asia is only about one week, compared with 3 to 6 months in Europe.”

Given the costs of acquisition, keeping clients is a key focus and most operators in the region are obsessively secretive about customer databases.

They acquired the player through their marketing efforts and spent a lot of money and now he’s betting on another site.

While a few years ago, web attacks in Asia were mainly DDOS based, aimed at shutting down or disrupting competitors’ operations, hackers are now more sophisticated and seeking rivals’ information.

“To an extent companies are reaching a level of security that they know what to do and what systems to put in place (against DDOS),” says Jaheer Abbas, senior director Southeast Asia & India at Limelight Networks. “Newer kind of attacks are now gaining prominence, with hackers looking for useable information.”

As a result, there has been strong interest in web application firewall products to prevent code being embedded into systems, which is a much harder problem to detect.

Another trend that has been noted is blatant copying of websites to steal clients through DNS hijacking, where the player may not even notice they have been redirected to a mirror site.

“The operator loses out,” says Hill. “They acquired the player through their marketing efforts and spent a lot of money and now he’s betting on another site.”

Online latency has also been identified as an issue, especially in live betting situations, where there is a lag between the actual event and its appearance onscreen. The gap, which Abbas says can be as much as four to five seconds even for a live television broadcast, takes away from the user experience and can create opportunities for manipulation.

This issue has become more complex with the increasing migration of players onto mobile platforms, many of which don’t support Adobe Flash. Users are turning to HTTP Live Streaming to overcome the problem, but the latency is unacceptably high at about 30 seconds to a minute, Abbas says.

“This greatly disrupts players’ game experience, and even results in a loss in revenue for the gaming operator as the high latency reduces the number of playing rounds, which in turn cuts the operator’s revenues from the game.”

Martin Trang, regional director Asia at Frosmo, says the problem is particularly acute for any companies targeting China, given they are likely to need to use content delivery networks, which slows things down.

“It affects the user experience negatively, especially if you have to load content-heavy websites,” he says. Frosmo’s focus is on improving the user experience, in particular by personalizing a site to the individual client. “There is more target on what the user wants to see and when they want to see it,” he says, which can improve load time.

However, even here Trang acknowledges there is a lot of concern in the market that 3rd party solutions may give access to their well-guarded data. “Everyone is scared of giving up any access to their data,” he said.

Can Asia drive crypto in gaming?

Ed Brennan*

As the adoption of blockchain-based crypto-enabled platforms gathers momentum in iGaming, a persistent question continues to come up: what is going to be the catalyst that drives the adoption of this new technology among mainstream casino operators and their players? The answer may well be quite simple: gaming in Asia.

While the intersection of gaming and blockchain users is still relatively niche in the West, I predict that Asia will be fertile territory for a marriage of the two.

Further afield, widespread adoption is still in its infancy. If cryptocurrency and blockchain is analogous to internet technology, we’re still in the early 90s. The world over, there’s a tremendous amount of education required and indeed scepticism to be overcome, but Asia will likely be the catalyst.

Worldwide there are approximately 25 million users of crypto, many of them originating in Asia. There are also hundreds of millions of online gamblers in the world. Again, many of them originate in Asia.

In my view, what makes this such a good fit is the fact that the Asian market is ahead of the curve when it comes to crypto adoption.

Awareness is far more prevalent in Asia too, and more importantly, the crypto regulatory markets are far more developed and sophisticated in the majority of countries than many places in the West.

South Korea is not only home to the most active cryptocurrency exchange in the world, it is also the third-largest market for Bitcoin trading and responsible for 35 to 40 percent of global Ethereum trading. Put together, Japan, South Korea, and Vietnam account for a phenomenal 80 percent of global bitcoin trading. South Korean regulators are also implementing regulations that will outlaw anonymous trading.

In Japan, in a bid to increase transparency and consumer protections, regulators have officially approved the operation of 11 exchanges and 17 currencies for trading. Australian legislators are also evaluating laws that would place the regulation of cryptocurrencies in the purview of AUSTRAC, the country’s financial intelligence agency.

We believe strongly that operating in regulated markets is the place to be. As markets become regulated, the adoption by players in those markets increases. Married with this is the far greater proportion of Asian participants in iGaming, which makes it a fantastic opportunity for reaching the mainstream.

However, while the opportunity is undoubtedly there, we need to take some lessons from the wider world to realise there are also significant challenges ahead from which Western operators can learn. Looking at Uber’s performance when moving East provides a good example. One of the reasons Uber looked to exit the region so fast is that they did not localise their goto-market approach.

Uber’s failure was principally because it did not successfully build a product catering to a Chinese customer-base. Despite the large sum of money it poured into the Chinese market, it was still losing market share to Didi, a local competitor. Analysts suggest that Uber should have gone to market with a local partner such as Didi, rather than going head-to-head with a leading local provider. When it comes to crypto-enabled iGaming, the same approach needs to be done.

Currently, most Western-orientated crypto companies do not apply a traditional tech-based go-to-market strategy when trying to expand into other regions. Instead, most choose to leverage their ‘global communities’ and incentivise regional token holders to do local marketing and encourage them to find more token buyers in the region. Granted, this is a great idea for those who want to make a quick buck, but not so efficient for ones who can sustain a platform.

The same holds true for us and will present the greatest challenge for crypto’s adoption in the Asian gaming market. Establishing awareness and legitimacy around the industry is also going to be essential, even in a such a region that is more crypto-friendly than the rest. Partnering with a local operator will no doubt be the way forward, which will enable a far more tailored offering to local audiences.

Given the store of value in Bitcoin and other cryptocurrencies on the market, growth will happen when both the operators and players can see the benefit, of which there are undoubtedly many - player trust, the ability to negate fraud, the speed of transactions and transparency.

The early and quick adoption of cryptocurrency in the region, coupled with the rapid regulatory response by regional governments ultimately bodes well for the global cryptocurrency market. I believe it’s going to be a marriage made in heaven as adoption begins to pick up.

*Ed Brennan is president of CashBet.

Content is king

Server-based gaming in Asia is seeing strong growth. New ways of delivering slot content, both online and off, are helping supercharge a product vertical that has previously struggled to grab the attention of consumers in the region.

On the land-based side, server-based gaming, a success story of the global street and retail sectors, could transform the slots offering of Asian casinos and help it make headway versus table games.

And online, a new breed of content aggregators is finding new approaches to quickly and seamlessly rolling out fresh games from multiple suppliers.

At its core, a server-based gaming system connects a number of slot machines to a central server.

The benefits of this are multifold. On the content side, it enables operators to remotely deliver and continually update slot content on terminals.

But it can also centralize all manner of functions, including bonusing, player management and even responsible gaming, allowing operators to cut costs, drive efficiencies and ultimately deliver a better user experience.

With Macau’s casinos taking less than five percent of revenues from slot machines, the approach, which has proved successful for many years in the retail environment, could be game-changing.

“Server-based gaming has proven to be extremely useful as a new form of gaming in new and established gaming markets,” Igor Rus, Director of Systems at software provider Comtrade Gaming, told AGB.

“Server-based gaming is coming to different markets in different forms. At the phase we are in, we see it in gaming halls or the so called ‘street market’. I believe that, over the next decade, server-based solutions will be introduced onto leading casino floors. This form of gaming is absolutely beneficial to all relevant parties that can see past existing business models.”

Currently server-based gaming comes in different forms. It is rare in the modern casino environment for a terminal to be entirely self-contained; at a minimum, most locate the game on the terminal, with the RNG and logic determined by a server.

This enables casinos to sync RTPs across the floor, and also upload new content remotely - albeit usually from a single game provider.

However, a new generation of server-based gaming, ushered in by the 2016 release of the Gaming Standard Association G2S protocol, goes a step further. It allows operators to connect terminals from a range of providers to a single, open system, and also upload games from various creators.

“Past vendor-specific server gaming solutions were limited by the fact that operators needed to run a separate system for each slot machine vendor. That is changing now. The G2S protocol enabled slots of different leading vendors to be connected to the operator’s central server, that runs unique ticketing, cashless and responsible gaming programs,” said Rus.

Online model

The server-based gaming model is also applicable in the online space, where a new generation of content aggregators is rethinking how games are distributed to operators.

“Our mission statement is to recruit the best (RNG games, gaming studios), and distribute them to the best (operators, suppliers),” Jonas Alm, CEO of Asia-facing games distributor QTech, told AGB.

“Player proclivities can differ wildly across Asia’s wide spectrum of gaming colours. So it’s a stringent selection process, segmented across countries, which aligns with cultural proclivity, age and gender preference, not to mention ascendant legislation.”

Rather than online operators integrating new slots content independently from games studios, QTech centralizes the process, adding five to ten new, specifically selected titles each month. It ensures operators continue to receive fresh content on a regular basis.

Earlier this year, QTech also launched its QT Play app, a cross-provider recommendation mobile app that allows players to choose and switch between games from multiple providers.

“QT Play’s ability to distil the prevalent trans-Asia variety and bundle it according to player preference and respective market requirements allows our partners to target any region with precision and confidence,” Alm said, adding that the app could do for online gaming what Spotify has done for music.

The future of content

It is clear that there is already strong demand for advanced, server-based solutions to the content conundrum.

In August, retail giant Inspired Gaming credited a strong third-quarter performance to the 37.7 percent growth in its server-based gaming revenues.

The challenge now is to capture the same efficiencies on the casino floor.

“The way I envision development of server-based gaming is more complex than just having online games being projected on computers in the land-based environment. Slot cabinets are an important part of the unique value proposition of traditional vendors in the retail world,” said Rus at Comtrade.

“The ultimate value is that getting data instantly allows analytics to provide insight for the operational adjustments and development of unique cross channel loyalty programs. There is enormous potential for the operators to use the instant data, to act promptly on their product mix and optimize operations.”

So far US-based casinos have led the way when it comes to server-based gaming, although in many respects it is even better suited to Asia, as a way of delivering more content in casinos which are cautious when it comes to assigning additional floor space to terminals. Server-based enabled multi-game terminals are a cost-effective way of expanding the slots offering.

This does require a change of mindset for many operators. One industry consultant told AGB that the current products on the market fail to provide a UI that truly engages the user or unlocks the full potential of server-based gaming. Recommendation engines, like those utilized by QTech online and Amazon, Spotify and Netflix across broader ecommerce, may be the answer.

Indeed, replicating the success of those internet giants by placing content at the heart of the gaming experience could be a major step for operators, both online and off.

Emerging Asian markets to lead sales growth

Macau is likely to remain the largest market in Asia for electronic table games (ETGs) for the foreseeable future due to its sheer size, though growth is slowing and emerging markets such as Vietnam and the Philippines are likely lead further expansion.

The sector has flourished in Macau, where a table cap imposed nearly six years ago limited the increase in table games at just three percent. ETGs allowed a great many more players at a baccarat table, with fewer staff required.

“Macau, and to a lesser extent Singapore, are the dominant markets in terms of the number of ETGs in operation,” said Grant Govertsen, Union Gaming’s managing director and head of Asia equity research.

“It is no coincidence that both of these markets have very high labour costs, which therefore incentivize casino operators to look for alternative solutions.

“That being said, Macau is nearing the end of its development pipeline, and as such we expect only modest growth in ETGs from here forward. Singapore is stable, and now that Genting has wrapped up its renovated casino project in Malaysia, there is little to expect in terms of ETG growth there too.”

Post-2019 growth is expected with new properties in locations such as Incheon and Jeju in South Korea, Manila in the Philippines and the Russian port of Vladivostok, 50km east of the Chinese border.

In its latest ETG report, published in May last year, Union Gaming predicted a modest rise of 1,000 ETGs across the region to a total of 15,000 by the end of 2018. Japan, South Korea and Vietnam are expected to provide Asia’s greenfield casino growth, helping to offset a slowdown in other territories.

Vietnam has proved to be a particularly lucrative market for Interblock.

“Vietnam is the emerging and hot gaming market, like Macau was in 2005, with gaming licences and properties being granted and built non-stop,” Interblock’s vice-president of Asia, Michael Hu, said. “Interblock has been enjoying dominance… with 2,500 units installed in Vietnam over the past 10 years.”

Across Asia as a whole, Hu expects ETGs to occupy as much as 30 percent of the casino floor space in the future, given labour cost considerations and the popularity of the games.

“Stadium multi-game and multi-play offerings are becoming extremely popular,” Hu added. “ETG games that are implemented on traditional slot platforms will become another game-changer.”

There are two primary types of ETG – stadium and standalone, which are either fully automated or provide a live dealer. The stadium games can have as many as 200 seats, while a standalone ETG seats between five and 10 players.

There appears to be particular momentum behind ‘live’ products, with technological advances offering more life-like interactions with the dealer.

As a guide, the DICJ reported that live multi-game products generated $250 million in gross gaming revenue in Macau in the first nine months of this year – up from $224 million over the corresponding period in 2017.

“In terms of market trends, we observe that Asian players may feel more comfortable when betting on a real live dealer distributing cards instead of betting on random resultsgenerated machines,” said Leo Chan, chief financial officer and company secretary at Paradise Entertainment, whose LT Game unit dominates in Macau.

“As the… sole supplier of live multigame (LMG) machines in Macau, and the biggest ETG supplier in Macau in terms of number of seats, we still see LMGs as the most influential ETG product in Asia at least in the near to medium term.”

From a distributor’s perspective, Herman Ng, CEO and executive director of Asia Pioneer Entertainment Holdings, believes the recent popularity of standalone ETGs in Macau could achieve cut-through in markets like the Philippines and Vietnam.

“Fully automatic multi-table game stadium products are emerging products in Macau and Singapore and this trend is hitting Southeast Asian markets as well,” he said, before adding that his company plans to explore standalone and stadium ETG opportunities in Japan.

“Southeast Asian markets have space for increasing [the number of] ETG machines. Roulette machines were the only famous table games in these two markets for years.”

LT Game’s dominance in Macau translates into more than a third of the ETG market across Asia, according to the most recent figures available, whilst Aruze, Interblock, Scientific Games and Alfastreet had market shares in the low double digits.

However, the outlook is likely to change considerably in the coming years due to new market entrants as the continent shifts away from one-stop-shop solutions to a multivendor approach.

According to Ng, this will not only lead to more competitive pricing.

“Competition improves innovation and product quality,” he said. “This means fewer technical issues and a more stable machine performance – a key factor in making a brand successful.”

Further down the road Japan is expected to be a promising market. With high labour costs and casino space restricted to just 3 percent of the total IR size, ETGs could serve as an efficient revenue-generator, especially with the population’s appetite for mechanical games such as pachinko.