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US strategic manoeuvres gather pace

28th February 2012 10:43 am GMT

Shuffle Master to buy Ongame, Chiligaming partners with Golden Nugget, Bally acquires RGS platform and then Chiligaming....the US news/gossip keeps on coming.

Despite recent appearances, I promise that this blog is not devoted to the US market. In fact this blog is fairly sceptical about the strategic manoeuvres going on Stateside in both the political and commercial gaming worlds. But this blog is by no means blase about the riches on offer if it does get regulated. And I have to admit to being endlessly fascinated by who is courting who and where it leaves them.

The Shuffle-Ongame news is so far unverified but I understand that it will happen before Shuffle Master announces its financial results on March 6th (or it will be announced at the same time). It is a move that intrigues.

In October 2011, Shuffle recruited a new chief strategy officer in the shape of Louis Castle, who joined from Zynga where he focused on the intersection of social media and gaming technologies. (That could be handy experience methinks.) It then unveiled its Shuffle Interactive product at G2E in November.

Shuffle Interactive pushes Shuffle Master games such as Three Card Poker, Dealer Bluff and High Five Poker onto PCs, Macs, facebook, Android and iPhone.

“We know these games are popular in online gaming because people have been ripping them off,” CEO Gavin Isaacs told Casino Enterprise Management.

He also said he was going after the copycats incidentally. Shuffle is not immediately obvious as a competitor to fear for established online operators and suppliers but its presentation is slick and its land-based reputation and contacts far stronger and deeper than many European online companies. If it does complete the acquisition of Ongame, it will be a significant competitor in the US online space.

In fact, the acquisition of Ongame would make a lot of sense for a few companies. It is a good platform and the loss of bwin’s liquidity should not be a huge concern to an American buyer - or even anyone else given the long-term expectation of ring-fenced markets across Europe. The price seems to have dropped significantly enough because of that, surely making it an even tastier morsel.

But it ain’t sold yet. The Americans are most concerned about a lack of genuine P&L figures for the majority of its existence. (It was never accounted separately during its time in bwin so most of its figures are estimated.) This is a lesson for all those who claim not to account for certain divisions separately. I always presumed this was just an excuse to fob off journalists but it seems that some people really are that um…. remiss that they think they don’t have to measure the performance of all divisions accurately. You see it can come back and bite you in the....

Anyway, lecture over. I digress. If the lack of P&L is the biggest concern, potential US buyers probably also have some concerns about Ongame’s regulatory history. With all and sundry willing to talk down bwin.party’s legacy US issues, Ongame can hardly be much of a lesser concern.

However, under new management and with a bit of IGT/Entraction-like spring cleaning, Ongame would be a good buy. Now here, I have to admit, that this blog was originally written last week, just before I heard news of Bally’s acquisition of Chili. Here’s what I wrote:

One can’t help but feel Bally would be the ideal home. Its recent announcement of its online ambitions was vague to the point of bafflement. For such a well-managed, strategically thoughtful and downright successful company as Bally to be making such ill-thought out pronouncements shows the pressure is on Stateside.

Competitors such as Aristocrat and IGT are marching forwards with land-to-online plans and deals and even the likes of GTECH G2, normally more associated with lotteries than casinos, is doing deals with the Native American gaming customers. Bally is under immense pressure to announce something - anything to show that it is still taking part in this online arms race.

It certainly is - just not with a spring in its stride just yet. It looks light years (or at least five years) behind IGT, which has claims to be pioneering the use of every in-vogue technology on an almost daily basis right now. But it could turn out that what Bally has, or what it ends up having, is just enough.

France’s Chiligaming signed a deal with the Golden Nugget brand last week, which could be described as the first of a second generation of Euro-US B2B deals. Neither Chili nor Nugget could be described as giants of the industry or as market leaders but the deal is an indication that the online bug is spreading in the US to smaller casino operators. It is also a sign that smaller European suppliers can get a slice of the action.

The Golden Nugget and its downtown neighbours are resonant brands for a whole generation of American gamblers. They might not be able to compete with a Caesars or an MGM but it is still a valuable niche. State-by-state legislation will aid these smaller operators in many ways. Their lightness of foot may well be a huge advantage when it comes to regulatory compliance, for example. Regulators will not have to investigate the backgrounds of a cast of thousands and the supplier will not need to restructure accordingly, meaning the operator can get to market far quicker.

And if Chili’s technology is good enough for the Nugget, that could turn out to be good news for Bally too. That is no reflection on Chili’s technology, which has been praised for its innovation, but it has yet to make a mark in the B2B market. As in Europe, there will be space for many different offerings. And if Bally is not there yet, it will be soon and whatever shape its technology takes, it will almost certainly be good enough.   

Italics over and fast forward to today. It seems Bally is as “well-managed and strategically thoughtful” as I thought. The RGS acquisition is more of a European play; something that allows Bally to offer its content securely on competitive platforms in Europe. Bally does not want to compete in Europe against established networks and platforms but it does want to offer its games there.

The Chiligaming platform will be much more crucial to Bally’s plans in the US. It will admit the Chili platform is not yet as good as some. But it will now have the investment to move it on a level. Bally will also bring its knowledge of casino floors and their bonusing and player promotions. Crucially, the Chili platform offers a flexibility that the likes of bwin.party, IGT and Playtech, to cite just three obvious examples, cannot.

Once Bally has signed a few partnership deals, you will be able to plug a number of poker products into the Chili platform. That open architecture is a crucial part of Bally’s strategic vision.

“If the architecture is structured in a way whereby you can build upon it. If the design and coding are open and it is easily integrated into our core business and other systems or application suppliers - that is fundamental,” says Bally Interactive chief John Connelly.

Aristocrat and its GameAccount platform can do the same thing. Their internet gaming system is live in Nevada and preparing to launch its first customer in April. Chili reckons it will get the Golden Nugget up and running in 60 to 90 days.

That’s pretty fast, by the way. As important as Chili’s open architecture was its compliance. It does not have any past misdemeanors stateside, which cannot be said of everyone.

When MGM chairman and CEO Jim Murren announced his results last week, he said that should regulation happen, “we’ll be out of the gate as soon as anybody”. Well, we’ll see about that. The Nevada Gaming Commission is in the process of its pre-suitability review of MGM’s provider bwin.party. If bwin.party needs to indulge in a bit of spring cleaning, that will take time. Speed to market will be key.

In the background to all these deals, certain people, who are supposedly in the know, had been getting very excited about the possibility of a Harry Reid-sponsored online poker bill being tacked on to the back of the unemployment payroll tax bill. It wasn’t.

Boyd Gaming CEO Keith Smith summed up the mood last week, when presenting the company’s financial results he stated “it appears today Federal Legislation for Internet gaming is a little further off than we had hoped”.

He went on to say that he “will consider” working on a state-by-state basis while hoping for a federal solution. Will consider?!

It really is time to move on but Smith’s words suggest he still harbours hopes of the bill being tacked on elsewhere. Others do too but there are a plethora of issues, which seem totally unworkable. Those issues could take up a whole new blog so I’ll leave the summary to one of my contacts: “Stop drinking the kool-aid guys. It just ain’t gonna happen!”

sah@gamingintelligence.com

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