Q&A: John O’Reilly on the rationale behind the Stride acquisition

Last week, Rank Group announced it was in advanced talks to complete a £115m deal to acquire UK and Alderney-based operator Stride Gaming. The deal follows the greater expansion and profits generated by Rank Groups digital business and is a key marker in Rank Group’s three-year transformation strategy as it aims to become the UK’s biggest multi-channel operator.

EGR Intel: This deal will result in a huge influx of sites coming under Rank. Do you believe you will eventually have to consolidate these to maintain a strong multi-channel offering?

John O’Reilly (JOR): No I don’t think so. There are two sides to Stride: the proprietary technology business of fourteen brands and the non-proprietary business which is the rest. The bulk of the business is proprietary.

The non-proprietary brands are running off seven different platforms which are delivering revenue from customers that have been recruited by Stride’s business over time. While they are continuing to deliver customers and revenues, I don’t think there will be any change.

What the Stride management team has been doing over the last couple of years is refocusing their business more toward the proprietary products as it’s a bigger margin business. That’s very logical and I think that changes in the taxation regime for egaming have driven that further. So, I think it’s inevitable over time that revenues from the proprietary business will grow faster than the non-proprietary business.

EGR Intel: How does the acquisition of Stride fit into the Rank Group’s so-called transformation strategy?

JOR: Within the transformation strategy there are workstreams based on cost and revenue, and there are core capability workstreams. We have about 12 twelve workstreams in total.

This transaction underpins one of those core workstreams which is how we how we drive scale within the digital business. Our strategy is underpinned by multi-channel and driving scale in the digital business. So, this is absolutely core to our strategy and to the transformation programme which is helping to transform Rank’s digital business.

EGR Intel: How important to the deal was it to keep Stride’s existing management team in house?

JOR: Both Rank Group and Stride Gaming have strong management teams. [Stride Gaming CEO] Eitan Boyd and [COO] Darren Sims have run successful gaming businesses over many years. They have the technology capability around the platform, so it was important to retain them and key management across both businesses. There will be changes in the operating model that will take some time to deliver but we anticipate our Gibraltar, Sheffield, London, Maidenhead businesses will continue as they are.

EGR Intel: You’ve cited Stride’s technology and brands as being “additive” to Rank’s existing digital operations going forward. Where do you see the biggest benefits from the deal?

JOR: Number one is the scale that it delivers. Number two is the technology that it delivers i.e. the proprietary technology – having that capability in-house is a key asset. I think that’s been reflected in the sector in recent years. The other obvious reason is it speeds up the pace at which you can deliver new products to the market and your ability to compete in real time is enhanced by having the full capability in-house.

Having a core platform and the end-to-end is a big asset, from the core platform, to wallet, registration, core gaming engine and so on. In addition, the strength of the management team on both sides, the strength of revenues and the larger customer base are all significant benefits, which will benefit revenues and lower costs.

EGR Intel: You said Rank plans to migrate to Stride’s proprietary technology platform. What does this mean for your existing relationship with Bede Gaming? Will this cease?

JOR: Bede has been a very important partner and, I might add, a very good partner and this will continue. But over time our expectation is we will migrate away from Bede but it will take time to deliver that. We may find other opportunities to work with Bede which would be great as the relationship between us is good. Over time our intention is to migrate both Mecca and Grosvenor. These things are never done overnight and I think it will take us a couple of years to fully migrate both brands onto the Stride proprietary technology platform.

EGR Intel: Do you plan to retain any of Stride’s existing international assets, such as the Indian rummy arm?

JOR: It’s a fledgling business, I hope they won’t mind me calling them that, and it’s in the early days in a new market. It’s a regulated gaming business and there’s not many of them in India. I say gaming, this is sort of an adjunct to gaming – it’s competitive social play more than it’s gaming but it’s an interesting business and growing quickly. I would consider it unknown territory, one of these businesses which might be very successful in the future, but it might not, so we will be reviewing it in the fullness of time. This is perhaps not a fair analogy, but if you look at companies like FanDuel in the US, they were early players in a market which might eventually regulate. I would position India in a similar kind of place; it might regulate but who knows.