Playtech’s half-year results focused heavily on its Asian business, but CEO Mor Weitzer took time to explain that the gaming division was looking across the Atlantic for growth in the US.
Playtech operates the iPoker network which is used by William Hill, Bet365 and Paddy Power Betfair amongst others. The network never made it to the US market despite early expectations that Playtech would get involved.
iPoker has seen online poker decline as a percentage of its business in recent years, although in 2017 revenues rose for the first time in a very long time. The first half of 2018 has seen those gains continue although at two percent — three percent in constant currency— the revenue increase is hardly earth-shattering.
Online poker revenues came in at €4.7 million ($5.43 million) which represents a tiny proportion of Playtech’s current revenues. Casino revenues dwarfed poker at €169.3 million ($195.5 million) with sports betting bringing in €46.7 million ($53.9 million) and even bingo saw almost triple the poker revenues at €12.7 million (14.7 million).
It’s worth noting that all of this revenue is generated through B2B activities where Playtech’s technology platform known as Playtech ONE is used by other gaming brands.
Inevitably Playtech’s current interest in the US results from the opportunities in sports betting. However, online poker is part of the Playtech ONE product suite and can easily be deployed in US states such as Pennsylvania where regulations allow.
Playtech’s sports betting product is operated by its subsidiary Playtech BGT Sports (PBS). PBS is active worldwide and significantly is now a major player in the Mexican market through its use by regulated market leader Caliente.
During the earnings call, Weitzer explained the importance of this to Playtech’s US ambitions:
“In terms of the opportunity in the US, the capabilities of PBS position Playtech with a compelling offering. Playtech’s sportsbook is ready now and is already one of the largest traders in US sports due to our activity in Mexico whose most popular markets are the US sports markets.”
Playtech is in the process of applying for a New Jersey license but indicates that it is looking for a much larger US footprint.
Weitzer explained that the PBS sportsbook is particularly suited to the fragmented US market because it is extremely scalable on a state by state basis. A single casino looking to get into the market can use PBS in a simple “one-step process” avoiding the development costs and problems of starting from a blank sheet.
The full “strategic optionality” was set out in a single slide but at the end of his explanation Weitzer significantly added “watch this space!”
When the Kindred Group announced its Q2 results on July 25, CEO Henrik Tjärnström produced a very similar slide to the one Mor Weitzer offered. Any doubts as to Kindred’s commitment were quickly dispelled when only three weeks later the company announced a 10-year partnership with the new Hard Rock Casino in New Jersey.
Playtech’s US links are arguably stronger than Kindred’s. Not only did Playtech begin the process of building relationships with its first attempts to enter the state-regulated US markets in 2013, but in June 2017 they signed a deal to partner with Caesars Entertainment EMEA.
The deal has Playtech and Caesars working together at eight of Caesars UK properties using Playtech’s proprietary Neon Enterprise system. Neon is operated by Playtech’s IGS subsidiary and provides substantial backend support to casino operations.
Playtech may also be able to leverage its relationship with William Hill. For several years, Playtech and Will Hill were partners in the joint venture William Hill Online. William Hill bought out Playtech’s stake, but the two companies have maintained a strong relationship ever since.
Perhaps one of the most likely routes forward for Playtech would be to partner with one of Pennsylvania’s casinos, which brings into play the possibility of an iPoker skin coming to PA. Certainly Pennsylvania is not a market Playtech can afford to ignore if it is to stake a claim to a serious share of the US market.
The problem Playtech may be running up against is that the licensed casinos in Pennsylvania are already well advanced in signing up online gaming providers. If Playtech doesn’t move soon it could completely miss the boat.
CFO Andrew Smith was quizzed by investors as to the likely spend the company would incur in pursuing its US ambitions. The answer did not suggest that any deals are immediately on the horizon:
“In terms of US investment, over the next 18 months, I think you’re looking at a single digit million number.”
Despite Weitzer’s enigmatic “watch this space” comment, expecting an announcement on US expansion to come in a few weeks may be too optimistic.