Evolution + Flutter
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With Flutter Deal, Evolution Expands Live Dealer Online Gambling Empire In The US

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The Swedish company, Evolution Gaming, has become the global leader in live dealer online gaming. In the US, its position is one of utter dominance.

Evolution is a business-to-business company, which means gamblers may generally be unfamiliar with its name as a brand. Anyone who has played legal live dealer games in the US knows the product, though.

Evolution is, so far, the only company supplying live dealer games to US online gambling operators. That’s a bit unfortunate, as it leaves players in open states without much variety or choice.

It’s great news for the company’s investors, however.

Evolution completes its collection with Flutter

Evolution was in the news this week when it announced that it had signed a deal with Flutter Entertainment.

Flutter is set to become the world’s largest gaming company next year after it completes its acquisition of The Stars Group (TSG), which already has a contract in place with Evolution. In landing Flutter, Evolution adds its key brands Paddy Power, Betfair and FanDuel to its ever-expanding client list.

Other major companies on that list include:

Evolution has grown to be ubiquitous on the North American and European stages. Indeed, some industry watchers reacted with surprise to the news of the Flutter deal, not because it was unexpected, but because they assumed such a deal was already in place.

2019 a big year for Evolution stock

Evolution’s share price has grown in remarkably steady fashion for five years, suffering only a few small bumps in the road. This year has been particularly profitable for the company and its investors.

When Swedish markets opened in January, Evolution was trading at SEK 107.50 ($11.09). By early October, its value had grown 75%, to SEK 188.50. News of the Flutter deal has spurred further growth of 25% to SEK 235.50, more than double where it started the year.

The only bad news for Evolution investors is that it’s rapidly running out of new deals to pursue. It’s hard to imagine what other contracts it could land to rival the ones it now has in place.

Scientific Games and state lotteries

The Flutter deal dominated headlines this month, overshadowing another piece of news that might be even more important for Evolution in the US. The company also extended its partnership with Scientific Games.

Scientific Games is another business-to-business company that is perhaps slightly more familiar to the average consumer. Like Evolution, it serves online gaming solutions to consumer-facing companies. Its products are purely digital, with a specialization in online lottery technology.

In 2016, SG inked a deal with Evolution to incorporate live dealer products into its Open Gaming System (OGS) distribution network. This expanded alliance makes OGS a one-stop-shop for lotteries looking to bolster their physical ticket sales with digital tickets, interactive games, and live dealer casino products.

The deal creates huge potential for both companies in the US. Some states are electing to expand gambling under the oversight of their lottery. Where commercial competition exists, Evolution has deals with the major operators. But its products are also part of a package deal in states that elect to use Scientific Games to supply their platform.

Augmented reality: Best of both worlds?

Live dealer games were created as a way of making traditional casino games more engaging in a digital context. Not all online casino users are fans of slots, but traditional games, like blackjack and roulette, can end up feeling a bit dry when stripped of the trappings of a physical casino.

Evolution has realized, however, that technology gives it the potential to introduce new games that blur the lines between analog and digital products. Its first such experiment, Monopoly, has proven to be a big success.

Evolution’s Monopoly is based on the standard money wheel format seen in live casinos, but with an augmented-reality bonus game. For this, it licensed the rights to the classic board game from Hasbro.

Alongside the human dealer, a 3D-rendered Mr. Monopoly sits in a chair until the player spins onto one of several special spaces. When the wheel lands on Chance, he jumps up to draw a card that will either award all players a cash bonus or multiply the odds for the following spin.

When it lands on two or four rolls, it triggers the bonus game. In this case, Mr. Monopoly travels to a fully virtual world similar to a regular Monopoly board. Players who bet on the corresponding spaces win prizes based on the results of those rolls and the spaces Mr. Monopoly lands on.

In a recent conference call, Evolution CEO Martin Carlesund said Monopoly has been the company’s most successful launch to date. That being the case, we’ll likely see more augmented reality products come to market in the future.

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Evolution’s legal risks as a sole supplier

Speaking of monopolies, Evolution does run some risk of being a victim of its own success in the US market. It was once in competition with a second company called Ezugi, which opened the first live dealer studio in New Jersey.

Evolution acquired Ezugi last year, however, and has since held a monopoly on live dealer products in the US. While other companies offer such products internationally, regulations in the US dictate that all gaming technology — including the studio — must be located within the state where live dealer products are available.

Major operators could open studios in-house, but this would involve reinventing the wheel to some extent. The only site that has done that so far is DraftKings Casino, which elected to build a studio in Pennsylvania in cooperation with Evolution.

The fact that Evolution is a foreign company doesn’t let it off the hook either. The Foreign Trade Antitrust Improvements Act allows the Federal Trade Commission (FTC) to pursue antitrust action against any company operating in the US.

Monopolies depend on market definitions

That said, there’s nothing illegal about holding a monopoly in the US — only abusing one. For that matter, it’s not even clear that Evolution’s dominance counts as a monopoly.

In order to run afoul of antitrust law, a company must possess sufficient power in an “accurately defined market.” It must then use that power in a prohibited way, such as price discrimination or undercutting potential competition.

Whether Evolution currently holds a monopoly in the US depends on whether the FTC would consider live dealer products an accurately defined market, separate from other online gambling products. Even if it does, there’s no suggestion that the company has engaged in any anticompetitive practices to date.

It is, however, something that Evolution will have to monitor down the road. Should a customer or a would-be competitor feel it has done something unfair, it could find itself in a legal predicament.

Evolution will want to proceed with caution for that reason, especially if live dealer products become a key component of the US online gambling industry.

Alex Weldon
- Alex is a freelance writer and artist living in Dartmouth, Nova Scotia. He has been doing data-based analysis of the online gaming industry since 2016.
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