EGR Power 50 2019: The Stars Group (03)
03. The Stars Group (03)
FINANCIALS: The group reported a 14% rise in Q3 2019 revenue to $653m, with growth from Sky Betting and Gaming offsetting a decline in the operator’s core PokerStars business
STRATEGY & IMPACT: The firm is still the biggest player in poker, while the tried-and-tested Sky Bet model is now the prototype for new US sports betting operations
GEOGRAPHIC REACH: Stars takes pride in its uniquely large collection of regulated gaming licences and ability to enter new markets
INFLUENCE & LEADERSHIP: CEO Rafi Ashkenazi is well respected and collected a formidable line-up of execs through M&A, including most of the Sky Betting & Gaming team
The last year was one of integration for The Stars Group, with Sky Betting and Gaming (SGB) just about completed at the time of writing, with a chunky $100m or so of annual synergies expected by the end of the year.
The 2018 acquisitions – BetEasy in Australia being the other – came at the right time for Stars, with the core business under increasing pressure in several jurisdictions around the globe. Disrupted markets became a buzzword on analyst conference calls, with revenues from disrupted markets (15% of the overall revenue mix) down 32% in Q3. Payment and ISP blocking in places like Russia, Norway and Switzerland all took their toll on the PokerStars business, and even when stripping out that effect, poker continued to show worrying signs.
There was, however, respite for SBG in particular which spent huge on customer acquisition in Q1 – including the now infamous Cheltenham free bet offer – and appeared to reap the rewards in Q3. SBG pro forma revenues climbed 21% to $239m thanks to increased stakes and a rather friendly 9.4% net win margin in betting.
CEO Rafi Ashkenazi said the firm was also beginning to execute on its plans for revenue upside through cross-sell for Sky Bet in Italy and Germany, which have both been moved onto the TSG platform.
Elsewhere, the focus of communications from the Isle of Man-headquartered firm has been Fox Bet. Reports from the market suggest the relationship with the media giant hasn’t gone completely smoothly, but the product is now live in New Jersey and Pennsylvania, while the Fox Sports Super 6 app has been downloaded over 820,000 times, helping begin the customer acquisition push in not-yet regulated states.
Whether The Stars Group can truly replicate the Sky model in the US remains to be seen – even Sky Bet would tell you it might have caught lightning in a bottle – but it cer tainly won’t be for lack of investment. Stars expects to post a $40m EBITDA loss on its US operations in 2019, with that figure also including new investment in pricing through a deal with algorithmic trading firm Banach Technology. The mega-merger with Flutter awaits in 2020 and could finally catapult Stars to the top of these rankings.