Poker in the Far East | Continued

1 April 2009
This is the second installment of IGamingNews' two-part interview with Thomas A. Hall, the chief executive of AsianLogic Ltd.

How difficult is it to exploit televised poker in Asia as a marketing channel?

    Gambling on TV is heavily restricted in Asia. There's very few countries, other than the Philippines, where you can actually show poker on television.

    So what we do is a charity invitational event on each part of our tour, the Asian Poker Tour. It's not considered gambling, so we can put it on TV into markets.

    If you talk to some of the serious poker marketing guys, they say there's a direct correlation between the poker you show on television and the growth of the game. So we're just having to find different channels -- we're lucky in Asia, there's a lot of TV that gets streamed to the Internet, so we're doing a lot of TV streaming and things like that that are working well.

What are the most significant barriers to entry now?

    Payment processing can be a problem in markets in Asia.

    Regulation . . . obviously, there are the restrictions on advertising or promotion of poker on TV, which has always been a growth driver of poker. They're a hindrance.

    Social acceptance . . . interestingly enough, p-to-p games are generally more accepted than full-blown casino. If you put them on a list of how aggressive they're regulated, sports betting would definitely be public enemy no. 1, followed by online casino, followed by p-to-p games. Mah-jongg is pretty much one of the few socially accepted forms of gambling across the region. Because mah-jongg crops up in nearly every country, it's one of the few forms of gambling tolerated in places like Hong Kong. But anything else you do in Hong Kong -- whether it be a lottery or a raffle -- gets caught in Hong Kong's draconian gaming laws.

    So I'd say it's not so much social acceptance -- I think the biggest one has always been payment processing.

What do you think of the European firms looking to get involved in Asia? How well do you think they'll fare?

    PartyPoker have had a team here for a couple of years assessing the market. I think they're going to do quite well here.

    I think Fulltilt and PokerStars will do very well. PokerStars are a monster, right? They've been sponsoring the poker room in Macau for some time. I think they've had some personnel issues, but they've now got an Asian guy running their business here. Unfortunately, from a competitive perspective, he's very good, so I expect they'll do well.

    You've seen a few of the skins on the major networks do very well. They can be a bit more flexible -- multiple skins attuned to different markets. Like I said, AsianLogic's own skin, DafaPoker, is very popular already with Chinese players across the region. There are some skins on the Ongame network -- on the other networks -- that are beginning to target Asia, and some of them are doing quite well.

    I think that because Asia is such a huge p-to-p playing population -- you have the games-playing population, which is several times Europe and the U.S. combined -- the potential upside is huge.

How big of a factor is poker in AsianLogic's growth model now?

    We are seeing a huge amount of business, but from a very small base. So it is growing very, very fast, but, you know, the deposit business is less than 5 percent of our overall traffic. Yes, it's growing, but from a small base. I think that's a trend that's going to continue.

    We still see our top-line revenue growing in '09, but our bottom line declining. When you actually grow your deposit business, you have to spend significant amounts on marketing. We do that, and that's going to impact our bottom line. We're going to be profitable, but not as much as last year as we reinvest in the business.

    When you're doing the deposit business, you have to have a lot more staff as well. The credit business runs on a remarkably small team. You don't have any customer support, you don't have any payment processing -- you just use a liaison team that deals with your agents.

What's investment sentiment toward AsianLogic like currently? I know that the shares have been trading at a significantly depressed price, and that the company is in the midst of a buyback program.

    It's a tricky one because -- I used to work in the banking business. Right now, people are looking for safety, safety, safety amongst everything else.

    We are seeing quite a lot of interest from people that know the space well, from people in the trade. At this point, I guess, we've been on an aggressive buyback program, and we have the full support of our remaining institutional shareholders.

    The world has completely changed. I don't think funds are rushing into anything because nobody's quite sure how the gaming business is going to get affected anywhere.

    I know it's supposed to be a recession-proof industry, but I think certain markets -- like the U.K., particularly -- are going to get massively hit. I think we're lucky in that 95 percent or more of our revenue is coming from Asia. So we're less affected, I still think there's going to be some impact in this part of the world.

    We're not seeing a lot of interest at the moment, but are, internally, from the industry and people trying to do strategic deals and stuff like that.

Is exposure to Asia a reason for Western investors, especially investors that play the gaming markets, to be confident?

    Yeah, I think so -- it has been traditionally. That's one of the reasons why Playtech has been successful, because 20 percent of its revenues come from Asia.

    Ladbrokes has reasonable exposure, William Hill, zero, 888 has some but is looking to increase.

    I think it's an important market. I think that anybody that doesn't focus on Asia medium- to long-term is going to suffer because it's currently -- and will probably remain so for the next ten years -- the main economic growth region of the world.

    But the business is different. It may not be full-on gambling revenues as we know it -- everybody's got skill games and these sorts of things. I think that operators that have a cross of subscription gaming as well as full-on gambling are going to be successful.

Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.