Macao isn't such a slam-dunk after all, according to the Wall Street Journal (no link; subscription req'd). Yesterday, reporters Tamara Audi and Bruce Stanley charted some of the financial narrows American operators have to navigate over there. Obviously, the tightest scrape is the "rake" taken by junket operators. Some take as much of 40% of the gambling revenue they bring in (leaving the casino operator with 21% after taxes).

This meant that Wynn Macau pulled in $444 million in VIP play in 1Q08 but was left with $88 million (hardly chump change, of course) once the junketeers and the government had gotten their share of the take. MGM Mirage tried another, more conservative formula, according to Audi and Stanley, but is now reworking its commission policy. The company has also conceded that it's underperforming in Macao, where its "fair share" (i.e., proportion) of the market would 9% but is running at 8%. In other words, it's getting only 88% of the play it ought to, were the action distributed proportionally to gaming positions.

Between a consolidation among the junket operators* that has left them wielding increased power and the fact that Peking takes its 39% of gambling revenue even on dishonored markers (forcing the casino to pony up money they don't have in hand), the WSJ finds that companies like Wynn Resorts, MGM and Las Vegas Sands are contending with market forces they didn't quite expect. (*--A-Max Holdings Ltd., Crown Macau's exclusive junketeer, folded eight junket operations into one late last year.)

Sheldon Adelson is rumored to be dangling a 45% revenue share before junket operators, shaving his margins even narrower. Steve Wynn says he's not going to raise his commission rate, so that's one guaranteed ally for Macau CEO Edmund Ho's commission freeze, which Adelson's emissary is loudly opposing. 

Adelson vs. Wynn -- what a novel scenario.

Signs of panic were evident three weeks ago, when Sands sent a self-described "SWAT team" to Macao to whack costs and cultivate VIP play. You know it's crunch time when William "All Chinese Look Alike" Weidner, Venetian prexy Rob Goldstein and Sands exec VP Brad Stone converge at once upon Macao -- and do a 180 on junket commissions.

And not without reason, seeing as Crown Macau had eaten Sands' lunch, thanks to its A-Max deal. Also, between the not-inconsiderable additions of Palazzo in Las Vegas and Venetian Macao, Adelson is getting his first taste of cannibalization (especially if Majestic Research's Vegas numbers are to be believed).

Steve Wynn could tell Adelson a little something about that, Bellagio's opening having devoured play that would have otherwise gone to The Mirage or Treasure Island (thus setting in motion a sequence of events that would culminate with MGM's Mirage Resorts buyout). In this case, Adelson dropped the world's largest casino onto the Macao market, which evidently was unready for the resultant "supply shock." Obviously it's a long-term play, particularly in terms of luring the MICE market to the Macanese cheese.

The big question is, How long will it take Macao to mature sufficiently to support colossal megaresorts? Also, can a Vegas-style product be grafted onto another culture? It's great, fascinating fun to watch the experiment unfold ... so long as you're not the executive whose job is riding on it.

Changing gears ...

All-time low. Can the Clinton campaign get any more tasteless than this? On second thought, every time it seems the Clintons have scraped the bottom of the barrel they find new depths to plumb. Where's the vaudeville hook when you need it?