International edition
June 18, 2021

Statements by WMS’ President, Sebastián Salat, at EY!Mexico conference

“Mexico’s gaming market will keep on expanding, and we are far beyond saturation”

(Mexico).- During recent EY! México 2011, a conference event organized within ELA trade show last week in Mexico City, a group of executives from international companies dedicated to the production of gaming machines analyzed the current situation of the local market, the possibilities of saturation in the near future, and the scope that the opening of Class III has in this segment.

T

he conference counted with the participation of María José Gallardo, from R. Franco, Ernesto Escobar from Gold Club América, Sebastián Salat from WMS International, Pablo Callieri  from Crown Gaming México – Novomatic and Johnny Ortiz from the firm Zitro, moderated by Luis Casamayor, from Codere – Caliente Group.

Luis Casamayor started the conference talking about the market perspectives, from the manufacturer point of view, and the possibilities of market saturation. Ernesto Escobar commented: “According to the current information, in the country there are 300 gambling venues and 90,000 machines. So the question is, How far will the potential of the Mexican market will get? Many people see Mexico as a gold mine, but we have to analyze how far can we keep on placing machines”. He then added: “We still do not know the limit of machines that can be placed in Mexico”, added Escobar.
 
Besides, Jhonny Ortíz considered that “the number of machines may be a relative data. Of those 300 gambling venues, How many will hold on in time? If we watch the local news, we can see that governors support the opening of entertainment centres, but these small venues will disappear and only bigger ones will survive, because they will be the only ones capable to keep on operating. It means that the market will continue growing and transforming. It is possible that, in the following years, we may increase a 40% or 50% the machine collection. It is important that they do not have a doubtful origin and that there are rules to be followed. The market has a very strong growth”.

According to his experience, Sebastián Salat assured that “this number of 90,000 machines is not so big, compared to other countries. It has to do with the Mexican potential and the population density”.

Besides, the WMS' President assured that “in the last year and a half, there has been a transformation in Mexican casinos, mainly from the appearance of Class III. Now there are venues that have more than 1,000 machines. We see a trend in which larger venues are opening, and these 90,000 slots in 300 venues is just a current information, because I think there will be an improvement in the equipments and an expansion of the gambling halls in the near future”.

María José Gallardo stated that she was surprised when she arrived in Mexico for the first time in 2010. She said that this growth is beneficial, “because now we all have the chance to enter in a market that has been limited to a series of companies”.

“It is very important to take care of the product so the stability of the sector is not broken. The Mexican market will decline unless there is a regulatory frame with the agreement of all the actors involved," added the representative of R. Franco.

Pablo Callieri affirmed: “There are equations that let us evaluate the market growth. Now, knowing how many machines it supports will depend on how the market develops, and this is connected to the regulatory frame”, added the executive.
 
Ortín remarked that the market is alive and expanding, and its future growth will have direct relation with the regulation. Besides, Casamayor considered that “the market is not saturated, but it has more gambling culture”. “Market saturation is a myth”, added Salat.

When Casamayor asked which controls have to be ruled to the industry after the fact that, in the last two years, the market has taken a leap in the market with Class III, Escobar considered that “the most important thing is the role of the authorities”.

“We need rules that allow all of us to have security in investments. The risk is to grow without control, have illegal competence, encorage illegality... It is a great risk. Class III must grow, but we all must agree in a regulatory frame that consider us all. I agree that the homologation of software and hardware is an important measure to be taken, so all the machines can operate according to the law”, added the representative of Gold Club in the panel.
 
Besides, Ortíz pointed: “I heard people saying that Class III was going to affect the video bingo, and it is a mistake. Slots operate just as video bingo machines. I also heard that  Class III would terminate with Class II machines, and that has not occurred. Separation between Class II and Class III does not exist any more, and just because of that, regulation is important. Due to the lack of a proper regulation in Brazil, we have witnessed how that important market has been closed to the region. In Ecuador, we see that something similar may happen. That’s why a strict control of the machines is very important, and if the government does not boost regulation, it must come from manufacturers, in order to guarantee the growth of a healthy industry. Players will appreciate that,” adds Ortiz.

Salat assured that “homologations must be performed in Mexico. Maybe the idea of a record of exporters and importers would be a possible solution, in order to avoid the illegal entry to the country of products that do not offer proper security to operators”.

“We have to consider that the regulatory frame must not limit the business, up to the point that it does not allow the homologation of products- commented Gallardo. Low barriers and high controls would be crucial . If controls are not performed, homologation will not be effective”.

Later, Casamayor, as moderator, proposed the issue of the leasing of products, a model that is growing in the Mexican market. "It is a complex question –assured Escobar-. In an emerging market like this, perhaps the investment is strongly focused in the venue itself, and investors may prefer to test one product or another, so they lease a machine in order to reduce investment. Here in Mexico leasing is very common, due to the strong investment in the structure of the venues that we see”.

“The price of the machine is relative”, adds Ortiz. “If we have a machine that is worth 20,000 but has a collection of 1,000 daily, it is a very economic machine. Due to the market expansion, operators are leasing products, but hybrid models may also be interesting.”

Salat agrees with Ortiz saying that “this business was never a matter of prices, it has to do with the performance and commitment that the company brings to the manufacturer”.

“We just offer machines to sale in Mexico. The profitability we have in machines in co-participation worldwide is 72 dollars a day per machine, but the same machine in Mexico would give us a smaller profitability, so we decided not to offer that model here, although we do offer credit facilities and warrantees. We have offered products in participation based in third-party brands, such as el Mago de Oz, because this type of product has a short commercial life”, commented Salat.
 
“Our strategy is to adapt to the customer purchase phisolophy”, affirms Callieri. “The commercial model depends on the needs of the operators, and somehow, we adapt to their philosophy. The co-participation model will continue existing, but sales will also appear in the near future and with the growth of investments. People do not play with the cabinet, but with the game, and the success of a brand lies there”.

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