The Future Winners and Losers in E-gaming
The Future Winners and Losers in E-gaming
In my article last month for Continent 8 Technologies I wrote about the economic difference between the two segments of the gambling industry - online and offline. In practically every market, the traditional bricks and mortar business has felt the full force of the recession but the Internet gambling business has proven to be far more resilient. During the last week of March, however, both Sportech and 888 Holdings delivered results that were down on the previous year.
888’s profits before tax were down 31% at US$27.5m, on a total revenue fall of 6.1% at US$246m. This equates to roughly a 5% drop in net profits for every 1% fall in revenue.
Sportech’s revenue dropped 10% to £64.6m, producing an overall loss of £17m after exceptional items.
Both businesses have a high concentration of their revenue from the UK. Almost a third of 888’s business is from the UK and practically all of the Sportech business is focussed toward the UK, although management are in the process of redirection. The next UK budget in the summer of 2010 may herald the start of a period of austerity, regardless who wins the general election.
These are undoubtedly both changing and challenging times. This recession is the worst we have seen since the 1930s and we are not out of it yet. But some companies are doing better than others and during these very difficult times GBGC has identified some of the features of those companies:
1. They are focussed on their core product. PokerStars’ success is legendary and they are totally focussed on poker. Bet365, a sportsbook from Stoke on Trent in the UK (paying UK betting tax of 15%) has outstripped its rivals by concentrating on what it does best - providing competitive prices and superlative customer care.
2. GBGC predicts that online sports books will be more resilient than online casinos over the next few years. Television during a recession is the cheapest entertainment available to the consumer. In 2010 there is a great menu of sporting entertainment from the return of Tiger Woods to golf, Schumacher returns to Formula One, and the football World Cup. Sports books benefit from the daily publicity attributed to their product in the media all at no cost. Slots, casino and poker have to be promoted in their own right and at considerable cost.
3. Innovation through technology is key. I recall two years ago investors were saying the business had become stale there was not new product to drive it. In fact it was right under their noses – in-play betting. Pioneered by the likes of Stan James and Betfair and now taken up by almost every online betting firm, the combination of streaming live events and betting through sports books is providing real entertainment.
It is difficult to predict the next wave of technology that will take the industry to the next level but my money will be on smart phones that will connect to the Internet faster than your desktop.
4. Companies which are able to adapt quickly on a global basis will succeed. After the loss of the US business after UIGEA in 2006, online companies quickly switched their attention to the UK and mainland Europe. The market became saturated but some such as Bet365, SBObet, 188bet concentrated on the Far East, and GBGC issued a report highlighting the potential of South America. None of these markets are easy but for those that can find the key to unlock the door the benefits are substantial.
Written exclusively for www.continen8.com by Warwick Bartlett, Chief Executive of GBGC (Global Betting & gaming Consultants - www.gbgc.com)