Scientific Games & WMS: A Regulated U.S. Online Poker Powerhouse?

While it’s not a 100% done deal, all indications are that Scientific Games is set to acquire WMS. The buyout will have a significant impact across much of the global gambling industry.

Early analysis has focused on how the combined company will fare in the arenas of lottery (Scientific’s  area of expertise) and slot development (the core of WMS’ business). I want to briefly talk about how the new venture looks from an online poker point of view.

Scientific/WMS will have a number of intriguing assets that could cumulatively provide the company with a remarkably strong position in the emerging market for regulated online poker in the United States. A non-exhaustive list:

• Relationships with majority of U.S. states. Scientific has what could prove to be an invaluable slate of relationships with state governments (and lottery commissions). According to company documents, Scientific:
• • Has long-term contracts in 11 U.S. states for the operation of both local draw games and multi-state lottery games
  • Is an instant ticket supplier to 41 U.S. jurisdictions and has experience selling into ~50 countries.
  • The latest addition to the Scientific roster is potential online poker linchpin Iowa, who inked an instant ticket contract with Scientific in early January 2013.
• Interactive gaming manufacturer license and a service provider license in the State of Nevada. WMS was granted both in September of 2012. Scientific will likely have to jump through a hoop or two to transfer the licenses, but that shouldn’t be a significant hurdle.
• Partnership with Zynga. Scientific struck a 3-year branding deal with the social poker juggernaut in September of 2012.
• Partnership with 888 Poker. WMS and 888 announced a strategic partnership in July 2012 whereby WMS would add 888’s online poker software to its suite of white-label online gambling solutions.
• Relationships with land-based casinos. WMS is the second or third (depending on your metric) largest supplier of gambling machines in the industry. That title brings with it a stable of long-running relationships with nearly all the major players in the land-based casino industry.

Of course, nothing about the above guarantees that Scientific / WMS will excel in the market for regulated online poker in the U.S..

In fact, there’s little to indicate that online poker will be a priority for Scientific/WMS. The documentation accompanying the WMS acquisition announcement contains zero mentions of online poker. Neither company has a native online poker product. And as Vince Martin notes in his write-up of the buyout at CalvinAyre.com, slots and lottery are the obvious synergistic areas – poker could easily end up an afterthought.

But as the path for regulated online poker in the United States bends harder and harder toward the state level, the strength of Scientific/WM’s position may come be such that the company is compelled to commit substantial focus and resources to online poker. And if other states follow Nevada’s lead by using online poker as the trial / launch product for online gambling, the company will have little choice but to aggressively promote an online poker product.