A new way of thinking: What Gaming Realms does next

As regulatory pressures increase across all areas of the industry, operators are having to re-think their strategies and adopt much more delicately thought-out targets to achieve additional long-term revenue streams. And for relatively young London-listed operator Gaming Realms, this shift has come in the form of developing fledgling B2B and content licensing arms.

The operator’s journey has been a rollercoaster of highs and lows since purchasing the Slingo brand in 2015, but it was still able to experience huge success with its products. However the significant pay out to US-firm RealNetworks resulted in group revenue growth slipping and the firm having to look elsewhere to boost its income.

In January 2016, the operator reported revenues of £21.4m for the 12 months ending 31 December, up 116% from the £9.9m registered in 2014. Southon attributes this period of relative success to the company’s investment in reinvigorating the combined slots – bingo concept and launching its Slingo Riches product in the UK market. Gaming Realms CEO Patrick Southon says that while the brand is not hugely well-known in the UK, it has been a well-loved game style in the US for 25 years, and aided in the company’s international expansion in the North American market.

But the RealNetworks payout for Slingo proved somewhat of a financial drain on the operator and resulted in a significant cutback in marketing spend over the last two years. Southon says as a result the brands have been rather static in terms of revenue. And the business has put more emphasis into growing its international social business, licensing its games to competing operators and investing in higher margin game creation to help boost bottom-line profits.

Patrick Southon – Gaming Realms CEO

“We’re going to make more games and invest more into that rather than investing more into B2C marketing because of the international element of that part of the business. While the cost is upfront in making games, you have a much bigger market than just the UK in terms of licensing them.”

Shifting sands

Shortly before its spate of acquisitions in 2015, the operator shifted its in-house products onto its legacy Grizzly platform after parting ways with Bede. Southon said using a third-party platform had caused the company to lose sight of its players.

Developing the platform itself meant the firm could produce content more quickly and its in-house games now account for 30% of group revenues. “[It] beats a lot of the content from others like IGT or Scientific Games. We’re pushing more resources into that but that’s another investment for the future rather than a return now,” Southon says.

And since opening the door and subsequently scoring a host of B2B deals with top-tier operators like 888, Southon says the business is diversifying and shifting its focus even further in 2018. Firstly to avoid the chokehold of ever-tightening UK regulations, and also because B2C revenue growth slowed down significantly in 2016 and the firm no longer has the resources to invest heavily in marketing its customer-facing products.

“Generally speaking the business priorities are licensing and platform, B2B and then marketing our own stuff as a third point, as much as anything else to inform the strategy of the other two points,” the chief exec adds.

Southon says the operator initially started off with a heavy B2C focus and sought to differentiate its product from the rest of the over saturated casino industry, but having seen the massive opportunity in international expansion and more steadily driving growth, Gaming Realms will be looking to seal more platform and licensing deals in the next 12 months. As it stands, B2C operations still account for over 75% of revenues for the real-money business.

“While the cost is upfront in making games, you have a much bigger market than just the UK in terms of licensing them”

The company is at a crossroads ahead of releasing its 2017 fiscal year results this month, and Southon says a continued reduction in marketing spend has resulted in lower revenue growth for H2 and has been the main reason for diversifying its business strategy. “It’s difficult for a small business like ours because we can’t do everything we want to do and you have to pick your battles,” Southon reveals.

“The battle we’ve picked at the moment is we think the biggest USP of our business as a whole is the fact we can get the casual audience to engage with our products and that’s partly platform but it’s also partly content, so the content is exploitable and the platform is B2B-able, but for us to do B2C more it does raise a conflict. We can’t invest say £3m into marketing Slingo because it would make it harder to support a licensing strategy.”

However, the shifting sands present a much more mature Gaming Realms that has learned from its past mistakes of investing huge amounts into marketing certain brands, as it did with its first product Bingo Godz.

Regulus Partners described Gaming Realms as a “microcosm of the opportunities and threats facing ‘third generation’ online gambling businesses” following the release of its H1 2017 financials. In an analyst note Regulus optimistically outlined the strategic potential of the firm, stating it would see further success in its strong mobile focus and emerging B2B opportunities.

Rags to (Slingo) Riches

The Gaming Realms story began in 2014 with two former Foxy Bingo executives. They aimed to reinvigorate the casino vertical and tackle player churn by combining social games and real-money gambling to develop a mobile product that catered for the Facebook gaming masses.

The amalgamation of real-money casino products and social and Facebook games has driven the growth of a number of medium-sized operators in recent years, particularly the likes of Gaming Realms, Casumo and Gaming Innovation Group. Southon says getting it right very much depends on accurate player data.

“You have to know your individual cost per player and you have to know your monetisation curve almost on a daily basis in terms of the different groups of players you get in,” he comments. “Our learnings from the social business are that the feature developments you have in those games, like levels, tournaments, leaderboards, points or even just having a very fast delivery system, are very applicable to real-money gambling but you have to get all the bits right.”

The operator acquired the Slingo brand from RealNetworks in 2015

By integrating social features into casino games, from levels to leaderboards, customers are proven to play for longer and developers have rejigged the way they direct the content at them. “They see it very much as a content business and the player has to interact with the content. It’s very much looking at it like a game and the casino industry hasn’t done that historically,” Southon continues.

Through its own unique content Gaming Realms has successfully attracted the attention of the wider audience and has since spawned a number of other in-house games that account for 30% of the operator’s group revenues. “It beats a lot of the content from others like IGT or Scientific Games,” Southon says. “[And] we are pushing more resources into that but that’s another investment for the future rather than a return now.

“It’s a good strategy in some respects because you get a wonderful feedback loop. When you make the games you can see how it works for your players, you can sit down as a collective and work out how you’re going to do things as a team,” he adds.

Producing branded content has been another of the company’s main drivers, and a focus that has resulted in the launch of The X Factor and Love Island-themed products. Southon uses the rise of live casino provider Evolution Gaming as an example of the industry branching out and discovering a new content channel that has piqued the interest of the consumer.

“In our industry you have to provide content people want. We’ve licensed the likes of The X Factor or Britain’s Got Talent, which suits a certain type of audience.
It’s not right for everybody so it wouldn’t fit a sportsbook but there is definitely a space for it.”

Humble and optimistic

Southon is clearly optimistic about the firm’s outlook, but remains staunchly humble. And despite the financial hiccup caused by the Slingo acquisition, M&A remains on the chief exec’s radar. “We managed to [pay off the final RealNetworks instalment] with the help of Jackpotjoy on a licensing deal, but now we’re free from that shackle so our stock is a bit more liquid again,” he comments.

Southon attributes the firm’s progression to a unified team that shares the same mantra and ultimate goal. The senior management comprises an impressive mish-mash of industry experience. COO Stephen Downer spent 10 years at Sky Betting & Gaming and a further two years at Betfair before joining the team at Gaming Realms.

“I think we’re just trying to do our own thing and at some point it will pay off, but we’re not at that point yet. We’ve got to flex as the market is changing very quickly”

Others share bwin.party and Cashcade experience, particularly Southon and Gaming Realms co-founder Simon Collins who facilitated the sale of Foxy Bingo and Cashcade to bwin.party. From there, the two learned to adopt the entertainment first stance they have since brought to the operator.

Southon says: “Our experience at Foxy and then at Party was as much about the type of player as it was about the game that people were playing. Foxy Bingo [took] very much an entertainment stance, and it was mass market, and the premise of the business, in terms of Gaming Realms, is really to continue that but with our own technology and focusing on mobile and the new methods of marketing and gamification.”

As it seeks to broaden its offering, Southon says the operator looks to supplier of instant win games IWG as an example for its licensing business as it has developed and successfully rolled out its own niche gaming model.

Elsewhere, the chief executive counts Stride Gaming as another firm to watch for its varied business arms and unified strategy. “They’re all very different businesses. I think we’re just trying to do our own thing and at some point it will pay off, but we’re not at that point yet,” Southon recounts. “It’s going to be a while before we get to it because we’ve got to flex as the market is changing very quickly.”