FOCUS

Competition forces innovation in EGMs, online gaming in Asia

For this edition of Asia Gaming Briefings, which coincides with the Australasian Gaming Expo, we are dedicating our focus section to trends in the electronic gaming sector.

Baccarat still remains the game of choice in Asia, but electronic gaming machines are gaining traction across the region, especially in jurisdictions such as the Philippines, where the regulator and some of the operators are more accommodating than most about trialling new products.

Australia has for decades been the world’s largest slot machine market, with pokies ubiquitous in pubs and clubs across the country, but industry insiders lament that there is a lack of innovation to drive growth. Suppliers keen to introduce new and exciting products into the market are facing push back from regulators concerned about the potential impact on problem gambling.

In our first focus article, we look at this delicate balancing act between breathing new life into the market, without creating harm to the consumers. In a first for Australia, regulators in New South Wales recently set up a Regulatory Sandbox to test new products and technologies in a controlled environment. Suppliers are hoping this may help ease bottlenecks in bringing new machines to the market.

For our second article, we look at live casino.

A rapidly improving offering of RNG and online slots is beginning to challenge live casino’s reign in Asia when it comes to online offerings. We take a look at some of the ways live casino operators are introducing innovations to differentiate their services to stay ahead of the competition.

Also in the online space, we examine trends in online slot machines. The operating environment has become increasingly competitive, with new entrants aggressively cutting pricing. As a result, game developers are being forced to pay even closer attention to the preferences of individual Asian markets and to produce engaging and relevant content.

For our last article in this section, we talk to Gamesource Managing Director Iao Lam, whose cloud-based gaming platform is being trialled in MGM Macau and being tested in two further casinos. The company also has ambitious expansion plans this year, targeting Cambodia, Vietnam and the U.S.

The company aims to shake up the slot machine market with new types of games that will potentially appeal to that key millennial audience, or as Lam says will “bring in new blood.”

Red tape tangles innovation, manufacturers say

Manufacturers have become frustrated with Australia’s lengthy product approval processes, and have been pointing to “regulatory bottlenecks” as one of the main reasons for a lack of innovation in the market.

If an Australian gaming operator ever wants to see what the future gaming floor looks like, they need only buy a plane ticket to Asia,” said one industry commenter in recent talks with Asia Gaming Brief.

“We see technology moving so quickly in general ‘run of life’ segments that seem to be difficult for gaming to adopt,” adds Neil Spencer, an Australian gaming industry consultant.

“For example, take the reduction of cash usage in the community. You can go to your local supermarket or retailer and be confronted with ‘card only’ checkouts. Yet the same innovation won’t likely come to the EGM space anytime soon,” he said.

Up until now, the road to product approval has been a time-consuming and expensive affair for manufacturers.

John van Waard, Senior Manager of System Sales, APAC at International Gaming Technology (IGT) says that one of the major issues stems from the number of different regulatory bodies, each with their own set of regulatory and technical compliance requirements.

“Each different jurisdiction comes with its own challenges – often evaluating regulatory and technical compliance against older and/or outdated regulations and legislation. This, coupled with the naturally riskaverse nature of regulatory bodies, can introduce additional compliance requirements which can slow time to market or even render a product unviable for introduction altogether,” he said.

“There just aren’t easy ways to get early indicators of acceptance of products that don’t fit neatly into the existing Standards & Regulatory regimes - well before significant R&D resources are expended,” adds Spencer.

Working on solutions

Australia’s regulators say they are very aware of these plights and have been working on initiatives aimed at solving this age-old issue.

“The gaming industry is experiencing increasing disruption and product innovation at a national and international level. Regulators in all Australian jurisdictions are actively working on their approach to new products and the process for assessing those new products for release into the market,” said Natasha Mann, executive director of Liquor and Gaming NSW.

In an Australian-gaming-sector-first, the NSW government has established what is known as a Regulatory Sandbox, to test new products and technologies.

“The Regulatory Sandbox is a closed and controlled environment where innovative products, services, business models and delivery mechanisms that do not meet the current regulatory requirements can be tested,” said Mann.

“It provides the environment to identify emerging, innovative gaming products and practices, and to assess their gambling harm impacts in a real-world, but controlled setting. It is also an avenue to identify specific harm minimization measures that contribute to reducing gambling-related harm.”

Assessing risks

The Victorian government has also been working on similar initiatives, according to Alex Fitzpatrick, Director of Licensing at the Victorian Commission for Gaming and Liquor Regulation (VCGLR).

“The Victorian regulator is very mindful of the need for industry participants to introduce innovative products.”

According to Fitzpatrick, the VCGLR is implementing a risk assessment tool and a risk framework to apply when considering new and differentiated products. The regulator said it has also been following the NSW regulator’s sandbox concept closely, which has success internationally in Malta and Singapore.

“The VCGLR will research this concept. At this stage, it has had no industry feedback. However it will engage with industry to get their views on this fascinating concept,” said Fitzpatrick.

However, both regulators made it a point that these initiatives are in place not to expedite the product approval process at the detriment of harm minimization.

“The VCGLR wants to engage with industry to facilitate this innovation but at the same time ensure harm to patrons is not increased,” said Fitzpatrick.

“It is not the intention to fast track the approval of new products at the expense of public interest and harm minimization,” added Mann.

Yet, while the regulator’s ambitions come under good intentions, some manufacturers and industry commenters remain skeptical.

“There is a recent move in public departments for ‘red tape reduction’ and a growing recognition that innovation in our industry needs to be encouraged for the future health of the industry,” says van Waard.

“However, there often isn’t an appropriate framework for evaluating new technologies and products, which still creates bottlenecks in the approval process of any innovations,” he adds.

Lack of results

Similarly, Spencer acknowledged NSW’s innovation strategy but also admitted that he has not seen any positive results to have emerged from this so far.

“We are also still faced with the age-old problem where manufacturers do not want to expose too much too early, particularly in our heavily patent-driven industry,” he added.

It’s not all doom-and-gloom though. Some manufacturers have been able to push products into the Australian market, albeit, with some persistence.

Spintec for example recently celebrated the first installation of its Aura amphitheater gaming set up in a prominent club in Sydney.

“We went through a very long certification process, our R&D team invested a lot of time and effort, and now we are very proud of what we have achieved,” says Primoz Krsevan, regional sales manager at Spintec in a press release in June.

Spencer believes the solution should be greater access to key regulators and policymakers so that new concepts can be flushed out or tailored for acceptability.

Van Waard, on the other hand, says that the solution should lie in a principle-based framework for the approval of new technology.

“Technology will always move at a faster rate than regulation. You only need to look at what Uber has done to the public transport space to understand how disruptive a new technology can be.”

“If a certain innovation was not considered when the original regulation was drafted, then it should be evaluated against a set of clear, published principles or guidelines in a manner that is completely transparent to the vendor. Providing a keen understanding of where and why products have failed to be approved in each jurisdiction will also improve each vendors’ ability to accelerate innovation that is appropriately attuned to each market,” he says.

In the end, however, better communication between vendor and regulator is seen as a must.

“IGT regularly presents its innovative technology concepts to each of the regulatory bodies, where appropriate, well in advance of bringing it to market. We aim to be on the front foot and work closely with them. This enables each regulator to develop a better understanding of the concepts and develop the means for evaluating the technology against perhaps out of date regulatory requirements,” says van Waard.

“If we stick to the current status quo, products will be unattractive to new customers due to the inability to access ‘expected’ technologies, ultimately reducing revenues in our industry,” concludes Spencer.

Live casino eyes innovation to stay ahead of the game

The rising popularity of slots and RNG table games is challenging live casino’s long-held reign as the dominant product vertical in Asia’s online space.

Now operators and suppliers are looking at ways to maintain above-market growth rates for a product facing far greater competition than ever before.

Live casino, where users wager on video streams of table games usually hosted in recording studios, has long been the benchmark for a successful online gaming operation in Asia. Several sources told AGB that it usually accounts for more than half of total revenues from most online casinos in the region.

The product vertical dates back to the mid-2000s, but it is the last five years where it has recorded truly explosive growth.

Live casino’s most dominant supplier, Evolution Gaming, has seen its Stockholm-listed share price multiply 10-fold in the past four years. It reported full-year operating revenues of €245.4 million in 2018, a 38 percent increase on the previous year.

Evolution’s success has encouraged several other large suppliers to enter the space, including Playtech and NetEnt, as well as the emergence of a number of successful regional suppliers specialising in live casino, most notably Asia Gaming.

“It is no secret that live casino is the fastest growing of the major product verticals in online gaming, particularly in key Asian markets,” Andres Burget, live casino manager at the Coingaming Group, told AGB.

The Coingaming Group, which operates online brands Bitcasino.io and Sportsbet.io, recently launched its own live casino studio in Riga, Latvia. Known as the Bombay Club High Roller Studio, the Asian-themed studio is tailored to VIPs, accepting wagers of upwards of €50,000 per hand.

“Live casino has been a key driver of online gaming growth in Asia for more than a decade now. But it is true that the landscape is changing and live casino will need to adapt.

“For many years, players in Asia’s grey markets had tended to avoid slots and RNG games out of a fear that unregulated operators would rig these games against them. So live casino had something of a free run.

“This is now changing quickly. Many of Europe’s most respected slots suppliers have entered Asian markets and their games are becoming more trusted and widely played. Now live casino must compete with a wide range of RNG table games, slots, virtual sports and other products.,” Burget said.

For the Coingaming Group, creating a fully bespoke, branded live casino product is advantageous over offering a standard white-label. While most live casino providers offer larger operators the chance to brand individual tables, launching its own studio gives even greater control over game variants, languages and bonusing.

“We launched the Bombay Club High Roller Studio to take control of our live casino and offer our customers a truly bespoke experience,” said Burget.

“Another important part of this is creating a sense of exclusivity, and the Bombay Club is tailored specifically to our VIPs. We can accept wagers of up to €50,000 per hand, which most traditional live casino offerings simply cannot compete with,” he added.

For BetGames.tv, a provider of live games since 2012, innovation is the key to future growth, with a focus on introducing new social elements to its product.

“Playing live casino is no longer a solitary activity,” BetGames.tv COO Aiste Garneviciene told AGB. “Now you can chat live while playing, and there are multiple camera angles available.”

BetGames.tv is live on more than 400 websites, and also supplies its feed to more than 3,000 retail outlets.

BetGames.tv has also expanded beyond traditional live casino favourites like roulette and blackjack to offer a range of lottery draw products. Its typical games offer players more than 90 options to wager on, creating greater levels of player engagement.

Garneviciene notes that some studios are now offering commentary on sports, with a host reacting to the action on screen and encouraging interaction with players.

Moving live casino forward in this manner will help avoid the dangers Burget at Coingaming Group describes when he warns that the product is becoming “increasingly commoditized.” Many operators are currently sharing unbranded tables from a handful of major suppliers.

Different suppliers are taking different approaches to remedying this.

For NetEnt’s live casino product, the focus has been on the mobile channel and creating a fully immersive experience on handheld devices.

Playtech has explored the potential of augmented reality, allowing players “to experience products on an entirely new level with … content literally leaping out of the game.”

It has also enjoyed success with its multichannel Age of Gods Live Roulette product, which allows players to experience the same slots brand across an online slot and a live casino game, with a jackpot shared between the two. At the time of launch, Playtech said the product would “significantly increase” cross-sell opportunities.

And Asia Gaming’s VJ Hal’ product looks to maximise the social element by encouraging greater interaction between the player and the game’s host.

The hope will be that against a backdrop of increasing competition from other product verticals – particularly slots – such innovations will help keep live casino’s impressive growth rate ahead of the pack.

Online slots up game on content as competition heats up

It wouldn’t be fair to say that anyone enquiring about the Asian gaming scene faces a wall of silence when it comes to the specifics of the market but there is an element of the-first-rule-of-fight-club about it all.

As one experienced gaming executive living and working in Asia says, given the regulatory profile in most Asian jurisdictions, it doesn’t pay to say too much in public. “It’s stupid to be high-profile in Asia,” the source adds.

Or as another European-based gaming executive says, “there are so many wheels within wheels and people saying one thing and doing another.”

Still, solid information about what is happening across the region does occasionally leak out. In particular, Playtech’s recent comments about its travails in Asia provide some insight into a clearly competitive landscape for suppliers.

In its profit warning in July last year, the company said its revenue run rate in Asia was “materially below” average. The company blamed the “sudden” deterioration on an “aggressive pricing environment from new entrants.”

“Microgaming, Playtech and NetEnt were the first into the market and they dominated by size,” says our seasoned executive. “But they didn’t dominate on innovation. And arguably now they are being dominated by innovation and by price pressures because the market is so competitive and the B2Cs are more powerful and they can drive down the price.”

One such new entrant is QTech Games, a developer and supplier of slot games which claims to be the fastest-growing in Asia. Global chief executive Markus Nasholm says one look at the “crude numbers” for Asia point to why the sector has become so competitive and why there has been a “transformation” within the past three years.

“Just in population alone there are 4.5 billion (people) in Asia versus 741 million in Europe,” he says. “You don’t need to be an accountant to interpret those figures for each continent’s respective potential.”

Another company targeting Asia is Kalamba Games which itself is based in Malta and Krakow, Poland. Chief operating officer Alex Cohen says the key to success is content. “To be successful, a new supplier must be very efficient at producing highquality content, while providing innovations that players and operators respond well to.”

Whatever the nature of a given market, whether regulated, grey or black, the same commercial dynamics will determine whether the product is a hit with the end consumer. “Trite as it may sound, content remains king,” says Nasholm.

But what will be crucial is whether the product is tailored, not just for Asia but at an individual territory level.

“It is definitely not a homogeneous region, and that is reflected in terms of styles of graphics, math, and betting activity,” says Cohen.

Indeed, Nasholm makes the point that the Asian market is as fragmented as Europe, making it vital that the games portfolio is targeted. “Such is the ever-expanding breadth of taste and sheer volume or games, it’s a matter not only balancing quality with quantity in any given region, but also sifting through that quality to define the desirable games.”

Cohen says that at Kalamba the aim is to understand the nuances of the various Asian audiences. “We attempt through several of our designs to make culturally relevant games for the Asian market,” he says. “We see many other suppliers trying to do Asian-style games through a very European lens, but it’s a different matter to make a game that appeals to the audience on its own terms.”

Still, the differences between game preferences shouldn’t be overstated. Cultural differences have to be taken into account – mah-jong is, in Nasholm’s words, “distinctly China’s game of choice” for instance – but baccarat works across the continent. So with games, as Cohen says, most cultures will have been exposed to Chinese and Japanese-style content.

Technology is definitely a driver in Asia as elsewhere. “Smartphone-adoption rates continue to rise rapidly over this great continent, and this tide is only running one way,” says Nasholm.

Further developments are also set to drive the market forward. A particular success across the continent is live casino, and while Nasholm says that both RNG games and live casino “happily co-exist” at present, he foresees changes as games become ever more immersive.

“Ultimately, as the RNG trend becomes more seamless and convincing, overcoming ingrained player biases in, for instance, India, live casino will likely concede any ground it holds for reasons of cultural trust alone,” he predicts.

This might be the next step change in Asia and what can be guaranteed is that the next phase of development within the market will be just as crowded as it is currently.

Gamesource eyes expansion with cloud-based gaming

GameSource, a cloud-based gaming platform, says it expects to enter three new jurisdictions this year as well as further expanding in Macau.

The company’s games have been deployed in MGM Macau on a trial basis since October last year and are expected to be turned into revenue generation mode shortly, the supplier’s Managing Director Lam Iao told Asia Gaming Brief.

The company supplies land-based operators access to a library of innovative games through a gaming terminal on the casino floor. MGM has selected 7 games from GameSource’s 80-strong library.

Lam says the platform is also being tested by two further casinos in Macau, while it also plans to roll out in Cambodia, Vietnam and the U.S this year. The Philippines is also on the radar, though not in 2019.

In Vietnam, the system will be deployed by Hoiana, Sun City’s $4 billion integrated resort which is scheduled to open later this year. While in Cambodia, the company is working with local casino, Jin Bei, for the second and third phases of its casinos in Sihanoukville.

GameSource is also in discussions with a U.S. partner to deploy the platform in their properties Lam says.

The company is seeking to shake up the traditional slot machine market by providing access to new types of games. The ultimate aim is to draw a new market segment audience, who are more in tune with casual/ social/ online gaming, back to the physical casino floor.

“The keyword is not “slots”, we are trying to invite game developers to develop “games” that can be certified and placed on the casino floor,” Lam says. “With those new games, it will help the land-based casino operators to target this new market segment.”

“We started this initiative because we talked with the casino operators and they thought there are no real new games out there in decades. There are just new game titles with no new content,” he adds. Our goal was to bring in new blood.”

GameSource’s games can also be accessed on a hand-held device in a designated area in the casino. In Macau, this is likely to be on the casino floor, though in Cambodia, there may be a much wider footprint, such as in bars and restaurants, and potentially in hotel rooms.

The company is currently working with four gaming content providers — CREATEC, August Gaming, EPICONE and Laxino Systems — and a number of individuals developers. Lam stresses that the system is open and flexible and it’s seeking the most creative minds to build games based on its modules.

These games have a 95 percent chance of achieving certification as GameSource partnered with BMM Testlabs to build the platform together.