Untangling Caesars’ online poker plans

7th February 2012 10:02 am GMT

Caesars Interactive Entertainment (CIE) cut a couple of very interesting deals last week with Dragonfish/888 for the US and with LB Poker (aka FDJ and Barriere) for “regulated markets”.

Well, I say “regulated markets”, the Barriere announcement (roughly translated from French) reads like this: “Each company will use the platform in different countries where online poker is or will be regulated, and in which either decide to operate.”

Both of which beg a few questions. Firstly, why has Caesars cut two deals? Are Dragonfish not good enough for France and elsewhere? If not, then why not, and if it’s not good enough for France then how is it good enough for the US?

Firstly, let’s look at France. 888 did not enter France under its own steam, or Italy for that matter, preferring to partner with Microgaming. 888 would have had to build its own platform to deal with the closed nature of those markets and that was not deemed a priority. Firstly, the French tax burden meant that such investment would probably not pay off but more importantly, it had to get its poker product shipshape. Not just for regulated markets and their closed nature, it had to make its poker game playable and attractive.

It has done that in some style. Since the launch of its Poker 6 software, traffic and revenues have rocketed and all and sundry (including us) have applauded a company that once seemed on a permanent downwards trajectory.

In doing so, 888 has also got its head round the technology needed to restrict its software use to national boundaries - a necessity in a US likely to be split state-by-state - but it couldn’t do that at the time of France or Italy going live. (In Italy it is using its casino as the vehicle for market-entry, which might be smart as Poker 6 would have been arriving late to challenge in a market dominated by Lottomatica, Microgame and PokerStars.)

Dragonfish has powered Caesars’ World Series of Poker brand in the UK for some three years now for very little, if any, financial benefit. While it may be difficult to understand why Caesars cut this deal pre-Poker 6, CIE chief Mitch Garber has obviously seen enough of a good thing since its launch to trust Dragonfish with ushering WSOP on to its home market.

Garber has been very adept at cutting these (for want of a better word) pre-deals that have allowed him to assess his partner from within. He also did it with the acquisition of social gaming provider Playtika, which was split in to two parts.

It also makes some sense for Caesars to work with an English-speaking company in the US and a French one in France. The alliance of Barriere, FDJ and WSOP looks fairly formidable on paper although barrierepoker.fr has not made a huge impact on its home market, where PokerStars, Winamax, Everest Poker and PartyPoker dominate.

Here, the press release and a few inside sources are revealing. Despite all the hyperbole about a world-beating poker product, the PR notes “the software is currently still under constant development”.

The issue here is control. Caesars reckons it can help Barriere develop its platform (as it has done with Playtika) for France. Further down the line, it is understood the contract has a flexibility that allows Caesars to own or co-own it in markets deemed strategically important.

So LB Poker is a work in progress and not yet ready for the all-important US (not that the all-important US is quite ready for it yet). Dragonfish/888 has great software that can be trusted in the US as soon as regulators say “go” but Caesars is merely a licensee - and a non-exclusive one at that, which is the final notable point of this intriguing little scenario.

888 ultimately played a good long-term strategic game in waiting for Caesars’ hand in US marriage and it also looks to have negotiated very smartly by not being tied to an exclusive relationship. Obviously that is important should regulation go down the state-by-state route (allowing Dragonfish other supplier relationships in states where Caesars does not have a presence), but it is understood the company is close to securing a deal with another titan of the US gambling market.

There are not many, world-beating brands left. If Dragonfish has won a Hard Rock or a Wynn then it really will have played an absolute blinder in this fascinating game of strategic chess, which is being played out ahead of regulation.


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