04.04 20170

March Poker Results – not that kind

PartyGaming, 888, and Amaya all released their results in the last month. I took a look out of curiosity – more so from a customers perspective than an investor as I don’t particularly like investing in structurally declining industries.

Segment breakdowns for Party were a bit hard to dissect having just been taken over by GVC (SportingBet to the layman).

In 2016, NGR from partypoker increased 14% in constant currency. This much improved performance was the result of a change in management, increased investment and a more focused approach.

A pretty remarkable increase and undoubtedly a market share gain from Stars (-4.6%) and perhaps some from 888 too (-2.7%) although I’d suggest the market has likely declined 2-3% just looking at these numbers.

Amaya give pretty nice geographical breakdowns – the Malta/IOM/Other numbers I don’t think are comparable on a LFL basis but looking at UK (-12.1%), France (-8.6%), Spain (-5.0%), and Italy (-4.5%) is useful. In particular Italy where (I don’t think?) 888 or Party compete¬†– Stars have about 50% of the market – seems like a good indicator of where the market is currently headed.

Hello darkness my old friend

Amaya have managed to turn an operational profit this year by way of almost doubling their sports book offering (wow, their cross selling is actually working!) more than compensating for declining poker revenues. Interestingly, Party are doing the exact opposite:

We also took the decision to restructure partycasino and separate the brand from partypoker, repositioning the offering under a new management team.

It’s great to see a competitive market in action – it looks to me a few things are happening in the industry:

Barriers to entry are getting bigger with more regulation

Naturally there has been a fair bit of consolidation in what was a fragmented industry with historically 2-3 big players (perhaps more to come – PokerScout still lists 71 sites internationally)

In the change of management, Amaya have cannibalised their poker offering for the sake of sports book revenues and a variety of quick gains. I make out a blended operational margin expansion of around 7pp (to 25%) backed up by revenue increases Рsadly they throw all the expenses into one bucket so hard to get an optic into how poker specifically is doing but there are undoubtedly synergies between the poker and sports so perhaps it is appropriate. Interestingly one could make some argument that the synergies are accretive to earnings and margin.

Party are really ramping up their investment in both their poker and casino offerings. I actually met the old management in Vegas and found them all to be extremely arrogant and it was very apparent they were on the gravy train (this was pre-Black Friday). A buyout and new management seems like a great idea for them to properly catch up (obviously helped by #3).

888 are still on the cross-sell model as well with sports/casino being sold to poker players. Is this just archaic? Or has Party got it wrong and poker can’t survive on its own? FWIW, I tend to side with Party on this: PokerStars ran with no casino, no sportsbook, in an increasingly regulatory environment and presumably did very well from it.

Two very different business models – I look forward to seeing how it plays out and if Party manage to become the number one site they were when I first started playing.

888 Annual Results (21st March 2017)

GVC Annual Results (23rd March 2017)

Amaya Annual Results (22nd March 2017)
The post “March Poker Results – not that kind” was first posted on Rupert Elder’s Blog.

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