From The Times UK
November 20, 2008
Chips are down for PartyGaming as it looks to beef up dwindling player pool
Dominic Walsh
In its heyday PartyGaming was the world’s biggest online poker company, had a stock market value of £7 billion and was a member of the blue-chip FTSE 100.
Today it has slipped to fourth in the internet poker league table, is worth less than £400 million and is seeking merger partners to beef up its dwindling player pool.
Yet as the still-fledgling internet gaming industry prepares to enter its first recession, Jim Ryan, the recently appointed PartyGaming chief executive, insisted yesterday that the company could regain its crown as “the most valuable online gaming company in the world”.
His ambition may be realised if, as he expects, the US Government eventually relaxes the ban on internet gambling imposed two years ago.
“We’re hopeful that, in the fullness of time, the new [Obama] administration will take steps to regulate it,” he said. Although the company has worked hard to refocus itself on other markets, primarily in Europe and Canada, one of the main problems that it faces is competing on the poker stage with rivals that still accept American players. Internet poker players seek out the poker rooms with the greatest liquidity – and the more players an operator has, the greater is its liquidity.
In its third-quarter trading update, PartyGaming reported a 15 per cent fall in poker revenues to $65 million (£43.2 million). While dissastisfaction with a new loyalty programme did not help, its biggest issue was vying with rivals, including PokerStars and Full Tilt, which still take bets from American punters.
In order to improve its liquidity, the company recently struck a so-called white-label deal with ITV that Mr Ryan said would be the first of many such deals. Mr Ryan said that he was also looking at more substantive tie-ups and believed that consolidation of the sector was inevitable. “I believe that there will be market consolidation and that PartyGaming will play a leading role,” he said.
The chances of such a deal being consumated may depend on protracted discussions with the US Department of Justice (DoJ) over a settlement after the banning of internet gambling. Analysts have specu
lated that the group’s cash pile of $200 million should be enough to cover such a settlement. Mr Ryan said: “We’re pleased with the progress we are making on the talks with the DoJ but we can’t be definitive on timing.”
The group’s poker travails were offset largely by strong revenue growth from its casino, bingo and sports-bet-ting divisions, with total revenues for the quarter flat at $118 million. However, there was a $5 million hit from the appreciation of the dollar against sterling and the euro.
Mr Ryan admitted that the fall in customer deposits and spend per player had also been hit by the economic downturn, adding: “This is a tough trading environment. The online gaming industry is having to navigate its way through its first-ever economic slowdown. What the full effects will be for the industry as a whole remain to be seen. However, we concur with the view of one recent analyst report that online gaming will be resilient but probably not immune to the economic downturn.”
Martin Weigold, the finance director, said: “What we are seeing – and we think the impact of this relates both to the strength of the dollar and the macroeconomic environment – is that the consumers are actually visiting less and the amount of revenue we are generating from a consumer over the quarterly period has declined.”  |