Power Countdown of the Po o A year is

Power 50 2006 Countdown of the Po o A year is a long time in the fast-moving world of egaming. Jake Pollard and Scott Longley review the major events of the past 12 months and we reveal the Power 50 for 2006 he height of summer is not exactly the most obvious time to be embarking upon a yearly review. But with most turning their thoughts toward a well-deserved recharging of batteries, now may be an appropriate time to sit back and take stock. The opportunity offered by the unveiling of eGaming Review’s Power 50 list for 2006 gives us just such a chance to engage in some egaming navel-gazing. Although merely a snapshot of who the industry leaders are, the make-up of the Power 50 still points to trends and developments that have a direct bearing on where the industry is heading. T Plus ça change And looking at the list, the first point to make is that as an industry the fundamentals remain the same. For all the talk of finding ‘the next big thing’, the products driving the industry’s growth are still the same as they were 12 months ago. Providers may have modified, adapted and promoted in an increasingly diverse array of ways and means in an attempt to drive customer growth. But from a strategic point of view, the state of play remains much the same. We may also have seen some seismic events taking place within the past year, from high-profile stock market listings to groundbreaking mergers and acquisitions (M&A) and, in the case of the Hilton Group/Ladbrokes, a move back towards becoming a standalone betting and gaming business for the first time in a generation. But the central trend driving all these moves hasn’t changed one bit. Staggering levels of profit growth remain the order of the day. Regardless of the current efforts of the likes of Congressman 38 038_043_eGR28.indd Sec2:38 egaming review Power 50 2006 6/7/06 5:31:12 pm Power 50 2006 Goodlatte and Leach in the US, and the monopolists within the European Union (EU), the bright prospects for future growth in those two key markets are undimmed. Regressive legislation can do no more than apply mild brakes. Looming on the horizon, meanwhile, stands Asia, a continent of vast promise that many operators are now looking to exploit and where others are jockeying for position. Many outside commentators believed the egaming initial public offering (IPO) fever of 2005 to be a one-off surge of investor interest. But clearly that is not the case, as is proved by the likely listing of our top-10 newcomer PokerStars on the London Stock Exchange for around US$3bn later this year. Despite the recent market turbulences, investors still see the sector as one of great potential. The larger floats will always make the headlines but the spate of listings by smaller operators provides further testament to the industry’s health. Access to capital is crucial to any business wanting to grow and this year’s Power 50 shows that most of the firms making the top 20 are listed or looking to list. But as listed companies look to consolidate their positions and make use of the funds available, M&A activity has continued apace. At the time of writing, PartyGaming was rumoured to be on the prowl for a European-focused sportsbook with Trident’s Gamebookers strongly tipped to be in the frame and AIM-listed Leisure and Gaming (LNG) had just announced the acquisition of European-focused Betshop in a deal worth a total of £32m (US$58m). And this after UK-focused and Gibraltar-based poker and casino room 32Red bought sports-betting site Bet Direct from Sportech for £12.5m. 1 Sportingbet (1) Number one for the past two years and deservedly number one again. Sportingbet goes from strength to strength with Sportsbook.com and Paradise Poker helping to make the company the all-round winner. 2 PartyGaming (2) In terms of pure numbers, PartyGaming has continued to put in an astonishing performance this year. Pre-tax profits of US$325m in 2005 suggest that it really should be aiming at the top spot. Boardroom shuffles and the possible addition of a sports book permitting, maybe next year it will. 3 BetandWin (5) A great year for the boys from Vienna with the Ongame acquisition proving to be a landmark in the sector. The proof as ever will be in the post-transaction pudding, but BetandWin now have the platform to build for future growth. 4 888 5 Ladbrokes (3) Still big, still significant and though overtaken for third spot, very much still a force with which to be reckoned. 888 remains one of the possible consolidators in the year ahead. (6) Now a standalone betting and gaming entity for the first time since bell-bottoms were in fashion, Ladbrokes is showing signs of the growing confidence that comes from having its corporate destiny in its own hands. 6 William Hill (4) Game on But these are only the more recent transactions. It is worth remembering some of the other deals that eGaming Review has reported on since we published our 2005 Power 50 list. In August last year, Unibet acquired MrBookmaker in a deal worth £75m. In November media giant Liberty Media acquired a majority stake in Fun Technologies while earlier this year it was announced that Japanese technology investment company Softbank had acquired a 23% in Betfair, effectively valuing the London-based betting exchange at around £1.5bn. But arguably the most high-profile of the moves made since we last published our list was the €474m acquisition of Ongame by new top-three entrant, Austrian-based BetandWin, in December. With its flagship site PokerRoom, Ongame has provided BetandWin with the player numbers, geographical reach and technical expertise to become an all-round powerhouse. Of course, the Austrian-listed operator now has to ensure it produces the returns the markets are expecting, but nonetheless its newly-expanded status is reflected by its standing in this year’s Power 50. Above all, the egaming industry has hit the big time. Many are keen to comment on how the sector has changed so drastically and how it has become so much more ‘corporatised’. But for all that, the growth in egaming has still been driven by the three products that operators began making serious profits with in the first place – sports betting, casino and poker. Going backwards by virtue of standing still, perhaps, but William Hill remains an exceptionally strong online operator. Online profits growing by over 18% for the last financial year are testament to the Leeds-based firm’s diversified offering. 7 Bodog (7) The front cover of Fortune, a place in People magazine’s Billionaire special and constant US TV exposure. Calvin Ayre is as high-profile as it gets, and his Bodog operation is one of the most prominent US sportsbook and gaming operators. 8 Betfair 9 PokerStars (10) With the recent Softbank deal setting a valuation on the world’s leading betting exchange at around £1.5bn, it’s not hard to see why Betfair has such a prominent position this year. (17) PokerStars has blazed a trail through the online poker market, making it one of the most popular global sites. So popular, in fact, that the company could soon be the latest high-profile London market listing for a rumoured price of £1.5bn. 10 Unibet (14) Marking the rise of the Scandinavian betting and gaming companies, Unibet rises into this year’s top 10 via last year’s acquisition of Mr Bookmaker. The challenge for the year ahead is to build on its multi-product offering. egaming review Power 50 2006 39 6/7/06 5:31:42 pm 038_043_eGR28.indd Sec2:39 Power 50 2006 When it comes to the specific make-up of this year’s list, it was always unlikely that there would be wholesale changes. However, there are some moves worth remarking upon. Many new operators have entered the fray and doubtless will be hoping to show they have the mettle to drive their egaming businesses to success over the year ahead. The rise of the Scandinavian operators continues (see below), London has become the de facto financial capital for the industry and the ‘new poker’ is still to be found, despite the boosterism of the bingo operators. Unseen in this operators-only list but playing an integral part in the industry’s success, the service providers continue to play a vital role in the industry’s development and as such the payment processors and egaming software supplier firms should arguably share a prominence equal to those they collectively supply. Overall though, the influence and financial muscle of the current top operators is even more pronounced than it was last year and this should continue to be the case. Naturally missing from the list are those names that we guess would be all too willing to enter the market should they be allowed to, the internet giants of this world. A shadow list of AOL, eBay, Yahoo!, MSN and their like could conceivably change the landscape of the industry in an instant – but not for now at least, and conceivably not for a long time yet should the US continue to talk about prohibition rather than legislation. But such debates are for the long term. As we have already suggested, this year’s Power 50 provides but a snapshot of an industry which is evolving at pace. Egaming is still effectively in its infancy and is destined to go through many more stages before it reaches anything like maturity. Doubtless many of you will have plenty to say about this year’s list of the best, biggest and brightest. We await your feedback with interest. 11 BetonSports (8) The recent acquisition of Asia-facing Hooball marks another step forward in BetonSports’ ambitions to spread beyond its core US sports betting market. Despite this year’s small drop, BetonSports should be looking to strengthen its position in the coming year. 12 Carmen Media 13 Empire Online (9) Slipping in this year’s charts, but by no means forgotten. Carmen’s strong online casino presence means the company remains a force going forward. (24) Noam Lanir’s outfit punches above its weight in terms of publicity. But following its settlement with PartyGaming, the question now is what the company does with the proceeds. Putting the firm’s marketing muscle to work on new acquisitions could make a great deal of sense. 14 Leisure & Gaming (15) A busy merger and acquisitions year for the owner of VIP, with the Nine.com, English Harbour and most recently Betshop names being added to the roster. Once the acquisitions are bedded in, the likelihood is that LNG will be moving further up the list in the future. 15 Expekt 16 Gala Coral 17 Pinnacle 18 Victor Chandler (45) ‘Bigger than you think’ is the comment about the second of the big Scandinavian movers in this year’s list. Definitely one to watch for the year ahead. (13) Venture capital-owned UK- and European-focused betting and casino behemoth that is arguably not making the most of what remains a very strong European footprint. Scandinavia calling Scandinavians have always been quick on the uptake when it comes to new technologies and related business sectors. Therefore, the rise of predominantly Swedish-owned online betting and gaming operators is no surprise. For a region with a population of only 20 million, Scandinavia has achieved a level of egaming success that has seen it punch far above its weight. The leading lights in egaming include Unibet, Expekt and Betsson, and until its takeover by BetandWin in December 2005, Ongame. However, numerous white-label providers and network operators have also come out of the region, bearing testament to the entrepreneurial spirit of egaming professionals there. The way the Scandinavians operate is to establish businesses in their home market, then use this base level as a springboard for expansion into other markets. The strategy has certainly worked to date. (16) Still a hugely strong US sportsbook brand, Pinnacle is rumoured to finally be on the verge of taking its tight margin model into the online poker market. (11) Still a strong brand, but like others in the list going backwards by virtue of moves elsewhere. First-mover status in Gibraltar means it has been around longer than most, but arguably the company needs new impetus to regain ground. 19 Ultimatebet (27) A strong multi-product brand that has been helped by the public listing this year of its ‘partner’ company Excapsa which valued the firm at £214m on float. Its new status could give it a base to grow, or make it a tasty target for a hungry acquirer. 20 Betcorp (18) Refocused this year on the US sportsbook market via the BetWWTS brand, Betcorp is busily putting the travails of recent history behind it. egaming review Power 50 2006 41 6/7/06 5:31:59 pm 038_043_eGR28.indd Sec3:41 Power 50 2006 21 Full Tilt (n/a) 27 Trident Gaming 28 Sportsinteraction 29 World Gaming 30 Fortune Lounge 31 Bet365 32 Skybet (33) Acknowledged as one of the coming brands in the world of online poker, the rise of Full Tilt makes it the highest new entry in this year’s list. The firm’s marketing strategy has made the most of the burgeoning pool of poker professionals. A merger with Gamebookers and an innovative marketing strategy has seen Trident move ahead significantly in the past year – and into the sights of an acquirer? 22 OIGE Intercasino (22) (12) Intercasino remains one of the strongest brands in online casino and poker and despite its fall in this year’s list, it still has heavy marketing muscle behind it. This one should not be discounted as the sector looks towards consolidation. Another US sportsbook that suffers from a relative lack of visibility. However, it remains a strong player in this key market. (n/a) 23 BetCris 24 Interwetten 25 Golden Palace 26 Paddy Power (19) Another strong US pro-betting sportsbook brand, but recent successes in the ‘props’ market could see it breaking further into the mainstream in the year ahead. The May 2005 acquisition of Sportsbetting.com sees World Gaming leap into this year’s top 50 for the first time. The US sports-betting market will be key to the company’s year ahead. (29) (21) A important European-focused sports-betting operator with a strong focus in the vital German market. Could have a part to play in any consolidation moves. Old school online casino operator maybe, but still a strong player and could be one of the names in the mergers and acquisitions frame this year. (32) (23) Infamous in wider circles for its stunts, Golden Palace remains an extremely strong online casino operator. It should be able to build on its notoriety. UK-focused betting and gaming operator that is also making strides in European markets. Bet365 is privately-held at present, but whether it continues to be is open to question. (30) (40) One of the biggest movers in this year’s list, the Irish-based betting and gaming group is doing ever more business online, helped by a high-profile marketing strategy. New language sites and possible openings in the US make it one to watch. Still a strong UK-focused multi-platform operator. Moreover, the possibility of further progress on the road to the convergence of gaming and television should mean that Skybet will be one of the names for the future. This is particularly so bearing in mind the surname of the BSkyB chief executive, a certain James Murdoch. How are the Power 50 assessed? The Power 50 is a reflection of the most powerful companies in the online gaming sector. Though by no means definitive, the list compiled in these pages aims to reflect the operators that have led the way in revenues, profits and size but also product diversity and innovation and geographical expansion. With every industry observer commenting on the need for a ‘supermarket’ approach to egaming, operators will be launching even more new products in an effort to diversify their income streams. Egaming is a multi-product, multi-billion dollar, worldwide industry that has innovated its way into the business spotlight. Such an approach is sure to remain route one for some time to come. The Power 50 is assessed according to the following four criteria: ■ Scale takes into account revenues and profits, in addition to the financial strength of an operation and its access to capital. Having cash in the bank on top of high revenues is more favourable than being heavily in debt, regardless of profits. ■ Reach is a measure of the geographic expansion operators have carried out. Most will always rely on one or two regions for most of their revenues, but it is no surprise that many are keen to highlight how they have broadened the appeal of their products in order to attract new customers in untapped markets. ■ Influence is probably the most difficult criterion to gauge accurately. Sector dominance is one way of doing this, and some commentators would argue the most important one. However, product innovation, activity in the markets and public profile of company or chief executive also come into play. ■ Diversity is simple enough to assess but is also becoming increasingly important in the eyes of industry analysts and investors. Not every operator will ever offer every egaming product under the sun but a range of different products means more than one revenue stream. 42 038_043_eGR28.indd Sec3:42 egaming review Power 50 2006 6/7/06 5:32:00 pm Power 50 2006 33 Profitable Play 34 32Red (n/a) (37) 43 Sunny Group 44 Fairground Gaming (42) Operator of the high-profile bingo brand Jackpot Joy and destined to be playing a big part in any advances made by the soft gamers. Old school casino group that holds its position. This one operates on the Playtech platform and is reputed to be one of its biggest players. Another UK-focused betting and gaming brand, 32Red topped off a great year by announcing the acquisition of Bet Direct. A recently signed shirt sponsorship deal with English Premier League football club Aston Villa should see it gain even more exposure. (n/a) 35 Betfred One to look out for in the next year, the recent acquisition of the Spin Palace group of online casinos puts Fairground on the map. By no means likely to sit on its recently acquired laurels, more news is expected soon. (n/a) Seeing a pattern? UK-focused multiplatform operator that looks destined to expand beyond its home market into Europe and beyond. 45 Virgin Games (39) Struggling to hold position despite possessing one of the stronger brand names in the sphere. Should the entity put its back behind its poker and gaming products, then Virgin should remain a significant player in the future. 36 Stan James (n/a) The last of the UK-focused new entries, the Gibraltar-based operator is like its competitors looking to expand into the European market. 37 Gaming VC (25) 46 Intercontinental Online (41) Another of the older online casino operators, and again on the Playtech platform. Like some others, Intercontinental Online suffers comparatively in this year’s list due to a lack of visibility in business terms. Germany-focused casino operator, but listed in on the LSE, Gaming VC needs to expand geographically to hold its position. 38 Fun Technologies (26) A landmark acquisition by John Malone’s Liberty Media of a majority stake has kept the skill-game operator in the news in the past year. If its link-up with the US Game Show Network pays off, then Fun Technologies is sure to be a big player. 47 Betsson (n/a) 39 King.com 40 Hardway Investments Sweden-based sports-betting and gaming operator recently spun out of the Cherry group of companies. Likely to make moves over the year ahead to move beyond its Scandinavian heartland. (49) MidasPlayer became King.com this year and remains a contender for the soft-gaming crown. Bingo remains central to the business. 48 Svenska Spel (n/a) (36) The only European-state operator in the list, its entry comes via a controversial, recently launched online poker offering. If early reports are true, it could be making waves far beyond its home market in the year to come. Operator of the Club Tropez online casino among others, Hardway Investments remains a strong player in this key market. The company’s casino products are believed to be among the larger players on the Playtech platform while Titan poker is a coming name in that sector. 49 Betdaq (48) 41 Canbet 42 Rank (38) The only other betting exchange to date to have held up in the face of the dominance of Betfair. Betdaq is believed to be making in-roads in the key horseracing on-course market and if true, it stands a good chance of gaining all-important liquidity. Australian-based but also globally-focused sports-betting operator, Canbet remains a player in the market. 50 UKBetting (47) (34) The corporate entity of Rank has had a tough year, but its online offerings of Blue Square and Mecca bingo remain key UK players. The combined sports information and betting and gaming proposition has still yet to truly catch light. Should this customer acquisition model gain additional traction, then UKBetting could be making strides back up the list in the year ahead. egaming review Power 50 2006 43 6/7/06 5:32:02 pm 038_043_eGR28.indd Sec1:43