Five things we learned from PokerStars Q2 results

PokerStars-parent company The Stars Group announced its Q2 results yesterday, with declining poker revenues a drag on overall performance.

Here are five things we learned from the figures and subsequent analyst call.

• The firm is exploring the launch of a gaming-only brand

CEO Rafi Ashkenazi said the firm is considering launching a gaming-only brand towards the end of the year, to help continue the group’s rapid online casino growth.

Ashkenazi did not detail the reasons behind the potential launch, and PokerStars declined to comment after the call, but analysts suggested the new brand could be needed as PokerStars nears the limits of its existing cross-sell strategy

“Its ability to cross-sell is likely to be running out of steam,” Paul Leyland at Regulus Partners wrote. Non-PokerStars customers would conceivably be more inclined to sign up to a gaming product with a casino themed brand than the existing PokerStars Casino one.

Paddy Power Betfair said earlier this week it was considering a similar move as an answer to its own gaming issues.

• The new loyalty programme is boosting poker

The Stars Rewards programme, which Ashkenazi described as the industry’s “first truly cross-vertical loyalty programme” is expected to deliver poker growth in H2.

Although poker was down almost 6%cc in Q2 and around -2% for H1, Ashkenazi predicted it would rebound in the second half thanks to Stars Rewards

“We have had Stars Rewards in Italy for almost two months and the rest of the world for a month and it’s been very positive,” Ashkenazi said.

“It’s a little bit soon to say publicly but so far we have seen exactly what we wanted to see, which is more engagement and more poker play. I’m confident poker will be flat for the year.”

• Sportsbook is still the primary focus for any M&A activity

The BetStars brand is still subscale with revenues around $9m for the quarter, despite being available to 58% of PokerStars members.

And while Ashkenazi said turnover was 90% up year-on-year, he added: “Our M&A priority is still sportsbook.”

The chief exec has previously suggested any purchases would be about scale rather than technology, with a focus on a large customer base and big revenues.

BetStars will also get a marketing push in H2, with the product finally where management wants it after a period of investment.

• The firm will continue to offer services in Poland despite recent payment blocking

Ashkenazi said Polish customers had been “stifled” over the last week or so after the biggest payment providers in the country had started blocking gambling transactions on the request of the government.

However Ashkenazi said PokerStars was undeterred and would look to integrate new payment options for Polish customers. “We believe we are not violating EU law and are entitled to operate,” he said.

He pointed to the recent ruling from the CJEU against the Hungary licensing regime as an example of European law favouring operators over regulators.

• The firm is expecting a significant boost from shared liquidity in four European markets.

Ashkenazi said the liquidity pact between France, Spain, Italy and Portugal could be up and running by the start of 2018 and would provide a significant boost for the operator.

“We are the only firm in Portugal, and we are the clear market leaders in Italy and Spain, so combining all four should definitely improve our performance there,” the exec said.