Land and expand: How Playtech is using its New Jersey base to conquer the US market

Playtech’s US journey began in New Jersey in 2018, not long after the repeal of PASPA and five years after the state went live with igaming, however the firm did not truly ratchet up its operations until 2020. Beginning with BetMGM and bet365 in the Garden State, Playtech expanded its operations further into Michigan and Pennsylvania, where the firm partnered with BetParx in a multi-product partnership. Flash forward to now and Playtech’s emerging US presence totals five US states, including the igaming powerhouse trio.

But its ambitions didn’t end there, and in March the firm agreed a headline-grabbing $85m strategic investment into Hard Rock Digital, as well as a contract to accelerate growth of the Seminole Gaming subsidiaries brand in the US. With an increasingly competitive US igaming market, having the right games on the right sites can make or break an operator, and vicariously the suppliers concerned. EGR North America talks to Playtech US MD and VP of operations Jonathan Doubilet to discuss the US market.

EGR North America: How would you describe Playtech’s strategy when it comes to the US market?

Jonathan Doubilet (JD): Overall, we have a land-and-expand strategy, but this is a marathon, not a sprint. The igaming industry in the states is still in its infancy. We are touching upon sports betting, we’ve rolled out SSBTs [self-service betting terminals] in Ohio, we’re underpinning Parx with our PAM in Ohio and Maryland for sports betting purposes, and we’ve initiated and received certification and licensing in numerous igaming and sports betting states.

We’re currently licensed in eight states, operational in five, and we’d expect to be operational in probably about six or seven by the end of 2024. The trajectory of states licensing and regulating igaming is far slower than in sports betting. For every four states that pass sports betting or sports betting regulations, only one state will pass something similar for igaming. There’s maybe one or two per year and the most recent states have been relatively small. I hope that picks up, but I don’t think it will anytime soon. So, we’re going to go wherever igaming and strategic sports betting opportunities take us, such as Maryland and Ohio.  We have states right now like Connecticut and West Virginia that we will enter when the timing is right. However, primarily, we have to increase our distribution in the three key states – Michigan, New Jersey, and Pennsylvania – where we’re live and operational.

That’s not just with igaming content, it’s also our live dealer products. We’ve opened two studios, one in Michigan, one in New Jersey, and have an additional studio pending in Pennsylvania, which should be opening soon. These three states have generated $5.6bn in igaming GGR over the last 12 months, second only to the UK on a per country basis, which is especially impressive given that we have 40+ states to go.  From there, we’re going to make sure that our distribution is maximized. We’re going to focus on achieving a generous wallet share on a per-operator basis in each of those states. Once we feel we’ve fulfilled what we should be doing at the minimum in those three states, we’ll concentrate on more state expansion for igaming.

EGR North America: In what ways have you tailored your heritage international offering to suit the needs and demands of the US audience?

JD: The three biggest states for igaming – New Jersey, Michigan, and Pennsylvania – are all very different. For example, Pennsylvania has very strict restrictions on what can and can’t be offered in the form of icasino games. They have different regulations for table games, and the rules for those table games are written into the regulations in detail. If you want to introduce a new type of table game, even a side bet, you’re going to have to have that side bet written into the the regulations as well. Pennsylvania is a good example of where we’ve tailored our offering, and not just by removing functionality, rather sometimes it’s something as simple as adjusting payout limits or odds multipliers. Then comes the all-important slots RTP [return to player], which in Europe tends to be very high, running near 96%-97% in most jurisdictions. Here in the US, you’re expected to have your games for the most part around 93%-95%, 95% being the maximum, so we’ve had to introduce different math models to accommodate that as well.

EGR North America: How does that tailoring translate to your US operator-based partnerships and how do their demands differ to international operators?

JD: It’s a mixed bag because a lot of the international operators have expanded their operations in the US through joint ventures and so on. Some are a little bit more robust and mature than others, some came in the early days, like Entain, and some are new to the US market. International operators, particularly the more established ones, understand the ecosystem here and they know what types of games are popular. What you’ll commonly hear is the games that are on the casino floor are generally proven contenders for online, but that’s not always the case. I can point to some competitors that have introduced some online-specific, non-land-based games that are big hits. Even our own content, which had never been seen either online or on the casino floors here, is doing remarkably well. Some operators rest on their laurels and say, “I’m going to operate like I do in Europe (to a certain degree) in the US as much as I can,” and some have taken a completely different approach.

EGR North America: How would you characterize your dealings with US regulators? Are they eager to understand your products?

JD: Some regulators here are strict and incredibly professional, as you would expect. A few of them are incredibly open to innovation as well as hearing new ideas and new thoughts on how they can craft the regulations differently. They are eager to not seem to be just representing the brick-and-mortar industries exclusively; they want to be at the forefront of innovation within the industry worldwide. You can see that in their actions and in our dealings with them. So, it’s been quite pleasant.

EGR North America: Having the Playtech product live in the regulatory gold standard state of New Jersey is a huge boon for the business, but how has that translated into other states?

JD: Being regulated in New Jersey doesn’t give you a carte blanche in all other states. However, there’s a degree of acceptance that you have a reputation and that kind of travels in front of you. The same can be said of most of the licenses in tier-one regulated markets like the UK. But regardless of where we regulate, it’s the regulation that spurs our reputation because we can be seen to comply with the regulatory requirements in that respective jurisdiction. Being regulated in New Jersey does help, but it’s by no means a free pass. It’s difficult, it’s strict, and there’s a lot of rules which you have to follow. But if you do that, I think it’s a good place to run a regulated business.

EGR North America: Playtech invested $85m into Hard Rock Digital (HRD) as part of a strategic partnership. Why did the company feel the need to make this move?

JD: The US is a strategic market for Playtech and many other companies for all sorts of reasons. Number one is the growth potential/the profit potential, after all, that’s what we’re all in it for at the end of the day. But also, I liken the US to being a gateway to the Americas; it’s the largest economy in the region and it counts for a lot. The Hard Rock Digital partnership itself represents Playtech not only endeavoring to plant a flag in America and sell our content and products, but it’s also a strategic investment that is intended to see us through the long term. It is a sign to investors, analysts, and competitors that we’re here to stay, that we’re serious, that we’ve got skin in the game, and that we see this market and this wonderful partner as being a key driver in the growth of the American market as a whole. Simply put, it’s really just a double down to everybody, our belief in the market itself, our commitment to being here for the long run, and expanding as the market expands.

EGR North America: How does the firm’s relationship with Hard Rock Digital work on a day-to-day basis?

JD: I can’t go into the specifics but what I can say is that we are working together on a daily basis on numerous fronts. We have signed deals with Hard Rock Digital to supply our random number generated (RNG) content and live dealer gaming products where permissible in the US. That’s something that’s ongoing and those are projects that are well under way. Additionally, we’re working on the online expansion of the Hard Rock brand, which is present in over 70 countries. It’s a very formidable brand worldwide, and there’s no reason to not believe it can succeed, not just in the US, but in international markets as well. For me, the international partnership where we lend both technology and services to Hard Rock Digital is not going to be just a blip on everybody’s radar.

EGR North America: You have announced a live casino partnership with FanDuel. Can you provide more detail on that?

JD: We’re partnered with the Flutter Group worldwide on a number of different fronts including live dealer. FanDuel happens to be their biggest brand in Canada, and they were looking at doing something different to increase their foothold in Ontario. They have a decent one already, but live dealer was key and the numbers are speaking for themselves there as a percentage of igaming revenue. Live dealer has had a bigger share of igaming revenue in Canada compared to the US market for years, mainly due to it being a more mature product in Canada than in the US, where it was shut down for years. Our extension with FanDuel is going to be one of the largest of its kind in that we’re operating a dedicated live dealer studio for that market. You’re going to see FanDuel branding, and much more than just on the table felts.  We’re really excited about it and when the market sees the images and product come to fruition, it’s really going to be an impressive feat.

EGR North America: Playtech also invested in NorthStar Gaming in Ontario. How is that partnership going?

JD: Oh, it’s a great partnership. Both parties agree completely in terms of their respective visions, the greater investment, and essentially building up a strong brand and portfolio of content for expanding into other Canadian provinces. Again, that is a marathon, not a sprint. We don’t anticipate numerous provinces regulating igaming overnight, it’s going to take some time, but, like the Hard Rock deal, it shows our commitment to investing and building our structural growth here in North America.

EGR North America: In what ways does working with a Canadian operator differ from the aforementioned US operators?

JD: Canadian operators have been operating for more than a decade so they’re well acquainted with the Canadian player. Likewise, Canadian players are well acquainted with the Canadian ecosystem of igaming and sports betting – it’s a really mature market. Most, if not all, of the notable igaming and sports betting operators have ultimately applied for igaming and sports betting licenses in Ontario. The biggest difference is that the US is very much still a young market. New Jersey might be an exception but for Pennsylvania, Michigan, and other states to come, they simply don’t have the maturity Ontario does.

By maturity, I mean basically where you see a lot of what you see in European markets in the form of allocation of product share, whether it be live dealer, RNG games, or sports betting. What you see in Canada is much more akin to Europe than it is to the US.

EGR North America: What’s on the agenda for Playtech in the US over the next 12 months?

JD: We aim to fulfil all our distribution agreements throughout the three main gaming states. When I say fulfil distribution, we have already launched with BetMGM, Rush Street, 888, WynnBET, PokerStars, Parx, and bet365. There is a good dozen plus other operators that exist in the market, some bigger than others, but what we’re really looking at is making sure our content gets everywhere it needs to be and that means every single operator. I am very confident in our prospects; the contracts are less of a concern at this point right now, it’s all about delivery. As I said at Playtech’s last Investor Day in London (3 March 2023), last year was the year of contracts and signatures and this year is more about delivery. That is a trend that’s going to continue on into next year. Going forward, fulfilling that means expansion in existing states but also taking strides to expand into neighboring states and newly regulated states, as well as considering additional products such as poker and bingo.