GPWA Times Magaine - Issue 23 - February 2013

By Lorien Pilling A state of maturity is a good attribute for certain things – cheese, savings bonds and a potential husband, for example – but in a business sector maturity is not always so desirable. With the iGaming sector seeing a number of acquisitions and mergers in the last 18 months, it does appear that the sector is “growing up.” Such a phase of consolidation has implications for all those involved in the industry. As ever in the gambling sector, regulatory change has been one of the main reasons behind this consolidation and move to maturity. In the U.S., the ever-tantalizing prospect of iGaming regulation has seen casino gaming suppliers snapping up European Internet gaming software companies. WMS acquired Jadestone Group as part of its strategy to create Williams Interactive, for example, while Bally Technologies acquired the B2B division of Chiligaming in February 2012. In Europe, the fragmentation of the region into separately licensed jurisdictions has made the scale of iGaming businesses important as they try to cope with the increased regulatory, tax and operational costs of holding multiple licenses across the continent. When the plan to merge bwin and PartyGam- ing was announced in 2010 the companies stated the merger would “create the world’s largest publicly listed online gaming group – a group that will be ideally positioned to take advantage of the rapid consolidation of the online gaming industry and to open up new markets around the world.” Norbert Teufel- berger, now Group Chief Executive Officer of bwin.party, explained at the time: “The on- line gaming industry is going through a phase of consolidation, making market players’ size and geographic diversification more crucial than ever.” In the online poker sphere in particular it was inevitable that consolidation would happen. With a revenue model that depends upon sufficient player volumes, there were always going to be brands that did not reach the nec- essary critical mass to survive on their own. These brands were able to join wider poker networks, and again there were networks that could offer greater player liquidity than others. Throw into the mix the fact that two brands – PokerStars and Full Tilt Poker – chose to continue to operate in the U.S. with- out serious competition until April 2011, thus giving them a dominant position, and there was always going to be a shake-up in the sec- tor. With these two brands now under the same ownership, further rationalization is expected in the rest of the sector. These concepts of maturity, rationalization and consolidation are not necessarily beneficial when applied to the Internet gambling sector. They suggest a “solidifying” of the sector, a move to make it more “corporate.” For a sector that has been characterized by innovation, nimbleness and technological development, the idea of becoming more corporate does not sit comfortably. Being more corporate does not necessarily mean being better, more professional or more efficient. In addition, a lot of corporate mergers and acquisitions simply do not succeed. One recent example was the acquisition of the Entraction poker network by IGT in May 2011. IGT paid approximately $115 million for the Swedish poker company and at the time of the deal all concerned were effusive as to what a good thing it was for everybody. COVER STORY Growing up is hard to do 27 Growing up is hard to do