EiG: Hypercompetitive Industry Means 'Move or Die' for Operators, Party C.E.O. Says

23 September 2008

The opening day of the European i-Gaming Congress and Expo in Barcelona began with a nebulous question from the keynote speaker, Bruno Giussani: What's happening out there?

Mr. Giussani is the European director of Technology Entertainment Design and is an analyst of technology innovation and trends. Indeed, some delegates would be forgiven for thinking they had stumbled into the wrong conference, as Mr. Giussani’s speech covered topics as varied as the assassination of John F. Kennedy, airport delays, prosthetic limbs and faulty bicycle locks but rarely touched upon Internet gambling.

The aim of the talk, however, was to look at the wider trends on the Internet that influence all industries, not just online gambling. Mr. Giussani discussed five trends that are prevalent in today’s digital age:

(1) Tools like mobile phones and digital cameras allow people to become witnesses to events and collect information; (2) the Internet then allows people to share their information to a wide audience; it enables (3) conversation; (4) collaboration; and (5) action between users. In essence the Internet has made it easier for individuals to organize activities and share information. He described the Web as a field for low-cost collective experimentation.

He went on to question whether businesses in any sector have been as quick to adopt these trends as the individual user. Although there were few mentions of gambling specifically or how the trends he outlined might be applied within the e-gaming sector he did pose some thought-provoking questions for delegates to take with them for the rest of the conference.

The next two sessions were panel discussions, one with software suppliers, and the other with C.E.O.s from the major gaming operators. With their competitors sitting right beside them it was inevitable that the speakers were going to be careful in what they revealed. But Nik Robinson, the creative director of Orbis Technology Ltd., did use the session to unveil a deal between his company and the betting exchange Betfair to supply games for its arcade.

On the software suppliers panel (with representatives from the likes of Playtech Ltd., Orbis, and Ongame Network) Brian H. Hadfield, chief executive of Cryptologic, continued the theme from the opening address that the online gaming industry can learn a lot from other industries. There was general consensus among the panelists that there is a change in the market dynamics of the industry taking place and that the next five years will be characterized by suppliers being: adaptable, open, innovative, and willing to listen to consumers to ensure that the customer experience is right.

It was an indication of how the industry is changing that several of the panelists in the gaming operators’ session could also have been on the gaming suppliers’ panel, with the likes of 888 Holdings and PartyGaming now increasing their business-to-business partnerships and white labels.

The move into b-to-b partnerships was a major topic for the operators. Gigi Levy, chief executive of 888, argued that the b-to-b business model was being driven by a need for greater distribution of products and a need to increase the all-important liquidity for poker rooms.

James A. Ryan, chief executive of PartyGaming, agreed that the online gambling industry was in a state of hypercompetitiveness at present, where operators had to -- as he termed it -- "move or die." But he cautioned that a balance had to be struck between a need for liquidity gained through partnerships, creating profits and maintaining control of the product.

Turning to the impact of the global economic downturn on online gambling, Malcolm Graham, chief executive of PKR, argued that that the sector was not recession-proof and the prevailing environment was a challenging one for gaming operators. Mark Blandford, the founder of Sportingbet and now a director of Valhalla Investments, which seeks to invest in technology and leisure businesses, compared the situation to the recession of the late 1980s when he was running a chain of betting shops in the United Kingdom. He said that spending appears to continue on low-cost activities like gambling, while it is the big-ticket purchases (cars, domestic appliances and so on) that tend to be postponed at times of economic gloom.

The general conclusions were that size and brand would be key factors in determining who survives over the next five years; consolidation within the sector is likely; cash will be king in 2009 as operators prepare to pay taxes in newly regulated markets; and that there will have to be some definitive outcome regarding regulation in Europe in the next five years.

The first day here in Barcelona has been about the big picture; the broad trends that will be influencing not just e-gaming but e-commerce and the Internet in general. The next two days delve more into the detail of specific issues and by the close of conference on Thursday it will be interesting to see if anyone is any closer to really understanding what is happening out there.

Lorien is a research analyst with Global Betting and Gaming Consultants, and currently resides on the Isle of Man. Prior to this, he spent three years at a leading United Kingdom gambling firm, providing regulatory and market research for its various international e-gaming ventures.