Small successes

Alistair Assheton, chief executive of Leisure & Gaming, says the smaller market operators will either have to buy or be bought if they are to survive.

As part of its buy-and-build strateghy, Leisure & Gaming (LNG) has been transformed over the past year, from being a listed cash shell with a market cap of £1m (US $1.78m)to becoming a thriving £ 90m –plus mid-cap operator. Further to the initial acquisition of VIP in June 2005, the company has since completed three further acquisitions, and it has more on its radar screens.

The benefits and opportunities these acquisitions have added to the LNG acquired the English Harbour and businesses in December 2005, it has allowed us to drive forward key commercial synergies and advantages, including lowering the costs of payments processing, enhancing marketing effectiveness and maximizing the use of internal resources.
      Key to this integration are the people. When looking at companies to acquire, LNG has been determined to work with experienced, respected management teams seeking to join the company for the right reasons, and looking to take their companies to the next level in terms of growth. With VIP, and English Harbour, it was fundamental to outline the goals and responsibilities, and all the senior management got involved to lay out the basic parameters.
      This works very well (once the initial reassurance that jobs are safe and roles and responsibilities are assigned) and gives the various team members a key responsibility to carry out as part of the integration process.

      A key lesson we have learnt is that the integration process takes time. Though frustrating, it is critical to get the process right. Rather than rushing in without properly understanding the underlying issues, it is vital to ensure change occurs for a reason, and be clear on the goals and objectives.
      The synergies and benefits gained from this consolidation are many, namely consolidating the payment-processing systems and risk-management operations, and being able to implement our customer-loyalty programme across the brands.
      By creating ‘centres of excellence’ that we can then deploy across the group, roll out the best elements from the various brands and work on how we can implement these across the group. This in turne provides the real value for shareholders as well as the best products and services for our customers.
      It is these benefits that attract private operators to sell up to listed companies. The industry is still considered young and fragmented, but I believe smaller niche operators will find it increasingly difficult to operate with respectable margins.

The importance of size

Indeed, as acquires become more stringent with acquisition costs, smaller operators may find the window of opportunity to sell at what they consider the right   price to be limited.
      Aside from the financial gains, the real appeal to a smaller operator comes from the economics of scale gained, being part of larger network, having greater access to cross-target customers, and greater marketing reach.
      The enthusiasm and support of the management and operational teams has been excellent for us and we continue to be excited about the opportunities that exist for LNG.
      We are pursuing several  acquisition opportunity at the moment, in line with our strategy of acquiring business in the egaming sector that are earning enhancing. Specifically, we are focusing on the following categories : US –facing sportsbooks and casinos, new geographic development opportunities, and increased product categories to offer to our player base.
      We have finished the initial integration phase of VIP, and English Harbour, and we are already seeing the synergistic benefits coming through. From this experience we believe the time is now ripe for smaller operators to look to become part of a lager company that allows their business to survive, grow and flourish with the best chance of success.


Flush with success?

Sarah Treanor looks at how Microgaming has moved towards a single brand

Towards the end of a process of rebranding that the company hopes will prepare it for the next stage of growth within the egaming industry. Roger  Raatgever, chief executive of Microgaming, is looking ahead – but with an eye on past industrial history.
      Preparing for the future. Raatgever points out by way of context that the internet revolution is often compared with the first railway boom of the 1840s. A first massive wave of investment and construction ended a crash and misery for many. But out of the initial chaos emerged a number of successful businesses with giant consolidated companies that would go on to shape the rest of the nineteenth century and beyond.

Piece of the action

“The online gaming revolution has spawned one o those successful industries, and has occasionally resembled a Klondike- style gold rush with many different companies up for a piece of what has provide to be extremely lucrative action,” he says.
     “We have seen, at times, intensive activity by hundreds of investors fuelling massive – and some have said unsustainable – growth. It has been staggering for everyone at times. ”

We have seen intensive activity by hundr4eds of investors
fuelling massive- and some have said unsustainable – growth.
It has been staggering for everyone at times. ”

      Raatgever adds this activity has settled down over the past few years and a series of successful initial public offering  (IPO) within the egaming sphere has lent the industry an increasing credibility and confidence. Out of this comes a more mature industry with genuinely global software and operator brands.
     “The larger players will shape our industry as it heads for the next stage of growth. ” He says.
     “Many observers agree the industry will continue to  experience massive change and growth, but also that it will evolve. In a fiercely competitive industry that is expected to quadruple in size by 2008, no one can afford to stand still and it is already clear that big names are the ones that will stand out. ”
      Raatgever warms to his theme, suggesting that what was right for operators and software providers in the industry’s childhood and feisty adolescence – building up a series of boutique brands that could quickly win player loyalty and build operator revenue and liquidity – is not he right model for now.
     “As the industry   matures, the major players need to adapt,” he says. “We all need to take a view on what is best for the industry, how we are best going to exploit new markets and in turn continue to enhance operator value. ”

Under one umbrella

As Raatgever points out, Microgaming was in at the beginning of all this. Its Prima brand was used effectively to build the network and establish liquidity through innovative sponsorship. Microgaming, powering more than 120 casinos and 40 poker rooms, has helped to provide a platform for operators to build their own brands. The company now feels there is a clear advantage in Microgaming bringing its own brands under one umbrella, on the basis that this will generate greater loyalty and a more consistent tone of voice.
      It will provide an increasingly aggressive satellite tournament structure to enhance its poker network under the one brand, not forgetting progressive casino play where over US $193m has been paid out to date through the largest progressive casino network in the world. “Having a number of brands in the current,market has potential to dilute our share of voice and marketing spend,” says Raatgever.
     “While some companies have opted for a higher-name profile through an IPO, we believe this new direction is the right one for us and for the industry too. ” This is a branded world and the company’s belief is that a big brand is needed to enhance recognition for its platinum standard of software, with the aim that the words ‘Powered by Microgaming’ on sites will grow in stature. The aspiration is that the marquee becomes closely associated with a more sophisticated, intuitive and involving gaming experience, enabling operators with Microgaming software to retain players longer and lead to loyalty.

“While some companies have opted for a higher-name
profile through an IPO, we believe this new direction
is the right one for us and for the industry as well”

On the radar

“This in turn will allow the company to gain greater recognition from players as well as the industry,” says Raatgever. “Effectively Microgaming believes this should add weight to individual marketing budgets. To return briefly to the railway analogy, it will be able to market the locomotive that pulls the carriages of the individual companies. This will attract new poker players and enhance the image of all operating companies. ”
      To assist industry growth still more, Raatgever says microgaming is maintaining its commitment to introducing the maximum number of casino games each year. Around 60 games are scheduled for 2006 catering to all levels of players and every taste. The company also has a commitment to improving player support and continually building on its PayCheck and CashCheck  system.
      Raatgever says the company will drive the single brand in casino, poker, network gaming and mobile in a consolidation that he hopes will add value to the overall brand.

A Micro evolution

“The clearer direction will ease entry into emerging markets,” he says. “In terms of operations and appearance, the move will be evolutionary, not revolutionary. The logo has been adapted, not transformed. It will stand for fair play, a consistent and intuitive interface and a simple, transparent online playing experience. Bringing all the brands under one umbrella will mark the end of the Prima and Jacpot Madness brands later in May. ”
      For over a decade, Raatgever says the company has been constantly evolving, just like the industry as a whole.
     “Consolidation under the microgaming brand will continue to ensure a wide degree of player protection and confidence and will prolong lifetime customer value,”  he adds. “It promises it will continue to introduce an enriched, aggressive. Progressive gaming experience. ”
     “These companies will provide entertainment on an ever more global scale based on models of sustainable growth, accountability and player fairness. Microgaming intends, with this change, to signal its ambition to remain at the forefront of this industry. We believe this rebrand will keep us on the right track. "