Can Playtech catch up in an already formed US market?

There appears to be a consensus among industry stakeholders that the second wave of sports betting is upon us in the US. And with it has come the entry of a handful of cautiously ambitious companies entering a marketplace that seems to have already established its winners and losers.

Playtech, the world’s largest online gaming supplier, is among those surfing the second wave. At least that is what new chief of US operations and director of corporate development for the firm, Jonathan Doubilet, tells EGR North America.

Having first nodded towards Playtech’s move into the US in December last year, major investor Jason Ader of New York-based hedge fund Spring Owl said the early-mover advantage was unlikely to be vital in the US.

Almost a year later Doubilet is echoing those words. “We are of the opinion that fast movement doesn’t always contribute to a successful end story and the first mover advantage doesn’t necessarily mean anything,” he says. “We didn’t let ourselves get caught up in the frantic gold rush and would describe ourselves as ‘surfing’ the second wave of states which will legalize sports betting, while also servicing first wave states as they mature.”

Doubilet is reluctant to give much away as the company is in the final stages of securing its New Jersey license and announcing its first operator partnership in the market. However, he assures the firm has been strategically planning its entry for over a year, leveraging the knowledge and experience of new board members, former hedge fund manager and industry specialist Anna Maisson and ex-Morgan Stanley MD John Krumins.

“We have a lot of guidance on what the strategic ecosystem is in the US and how things are panning out, taking advice where we can get it,” Doubilet adds.

Deal or no deal?

Playtech is entering the US with an already full suite of products and significant capital, according to the firm’s H1 2019 earnings which reported a 69% increase in revenue YoY with a 31% increase in adjusted EBITDA to $213m. Its B2B operations accounted for 58% of overall EBITDA for the six-month period.

Doubilet remains schtum on any potential deals that might be in the works for Playtech, but with its rich history in both small and large scale B2B and B2C acquisitions in Europe, it would not be unreasonable to assume Playtech may well buy its way into certain verticals in the States, as it did with the purchase of the Best Gaming Technology in 2016 and the Mobenga mobile front-end operations in 2011.

Playtech BGT Sports, which Doubilet sat at the helm of for the last two years in Vienna, Austria, has gained upwards of 90% market share in the UK and 70% in Spain in the last three years and Doubilet is confident the firm can bring such success to the US. “If you look to other parts of the world, we have a track record of not just B2B operations but also successful B2C operations through joint venture and white label activity. Among the JVs, the operators, the suppliers, nothing is ruled out,” Doubilet hints.

Playtech’s purchase of major Italian operator Snaitech for $945m last year cemented the firm as a significant player in the B2C realm. The industry eagerly awaits any news of a US deal from the Tel Aviv-headquartered firm, with one recent conversation of mine turning to the question of “who should Playtech buy in the US?”

It’s a hugely interesting thought, and the answer very much depends on the supplier’s overall approach to the market and whether it seeks to move into the States’ progressively growing B2C space.

However, one US industry exec, speaking under the condition of anonymity, believes Playtech is no longer in a financial position to make such transformational deals in the US. “It is not the Playtech of three or four years ago where they would have rolled in with a lot of equity and the share price has suffered [recently]. While they are still very cash generative there are various pressure points on the business,” the exec says.

Although they agree Playtech’s potential success in the US is dependant on a dramatic move, and a superior product suite will not give the firm the same market dominance it has in Europe. “One would argue the American market is already more complicated and it’s the home turf of a lot of other providers and no one has been waiting for [Playtech]. I think that on the B2B front they will sign deals for their casino content, but they won’t enjoy the traditional dominant status here that they have in Europe,” the exec adds.

But Doubilet does not rule out the possibility of M&A in the US, although he insists the supplier’s focus is very much on pushing its omni-channel betting offering and suite of igaming products, including live casino, in-house slot titles and player account management technology.  “Although we have a renowned retail product, we are heavily focused on mobile,” Doubilet notes.

The firm will take a more cautious approach to the US than others arguably have. “There is a lot of money being spent in the US right now and we’re not going to preclude ourselves from spending money too, but it will be in a calculated manner,” says Doubilet.

New York, New York

To kick-start its US efforts, Playtech has established a commercial hub in New York’s Midtown. The office includes a showroom for potential clients to visit and trial its products first hand. Doubilet is wary of giving away too many details on staff count or breakdown of local and relocated employees but he says there will be a mix of both, with the office mostly housing commercial operations.

Its technical and support functions will remain in Europe, Tel Aviv and Central America, the latter of which is where it supports major operator Caliente via a five-year partnership to supply betting and igaming technology.

“In a nutshell, New York is a commercial operations center and not a technical operations center by any means. It will allow us to become more tangible to the US audience,” Doubilet confirms. The technology on offer in the US is based upon the same offering available in Europe, with a few minor tweaks to meet the needs of the US consumer.

Recent industry rumblings have suggested that operators have been unhappy with the services provided by some European suppliers in the US, particularly customer support and trading systems.

The Latam influence – can it work in the US?

But Doubilet is quick to quash any suggestion that Playtech might fall short of these expectations. He says the firm’s Latam operations, which power major Mexican igaming and betting operator Caliente, will also support its future US partners.

“[The Caliente] partnership has caused us to adapt our trading operations to cater to Vegas lines and US trading methodologies, specifically US professional and college sports, trading more than Vegas itself throughout the past five years,” Doubilet assures.

“We have also gained the marketing and product know-how through the relationship, which allows us to offer products and services that appeal to American customers.”

It’s an interesting comparison considering the experiences of others that have successfully gained market share in the US. Both FanDuel and PointsBet have leaned on their experiences in the Australian market as guidance for taking on the US consumer.

PointsBet US CEO Johnny Aitken recently told EGR he believed the Australian market was the closest to the US in terms of the types of sports people bet on, the types of product available, the regulatory landscape and the need to work with the leagues.

“I don’t mean to directly compare the American customer to the Mexican one but there are many parallels between them,” Doubilet says. “Mexican players are accustomed to the same betting experience, featured events and intricacies that Americans are. They are used to American odds and teasers and parlays.”

“The Latam deals are not like the North American deals,” says the anonymous industry exec. “The equivalent of the Caliente deal in the US would be partnering with MGM or Caesars, and most of those seats are already taken in this round.”

European pals

Playtech could leverage its long-standing relationships with some of the major European operators now in the US, particularly its close ties with GVC, which has taken a bullish approach to building its market share in the US, having recently partnered with Yahoo Sports and signing a spate of smaller marketing deals with the likes of Buffalo Wild Wings and Taco Bell.

Doubilet says the firm certainly wants to use such partnerships and is consulting its customers overseas to consider the types of value-added benefits it can supply to them in the US.

He believes Playtech can thrive in North America in spite of the vast number of supplier operator deals already in place. “I don’t necessarily see tie-ups that have happened up until now as precluding us from becoming a supplier or partner.”

But the anonymous US exec considers that as so many platform deals have already been struck with the likes of IGT, Scientific Games, GAN and sports betting suppliers Kambi and SBTech, Playtech is unlikely to secure such transformational deals in this early stage.

“What I suppose they’ll do is go in and try to strike a few deals then hope that one of the bigger boys like Penn National or Eldorado will come out of their current set-up and choose Playtech as their partner of choice at some point,” the exec notes.

Where the challenge will surely lie now is in building its reputation stateside and marketing its offering as a multi-faceted suite of products. With vast experience and scale on its side, the supplier has the potential to take the US by storm, but with the first wave of deals seemingly behind us and a slow progression for online casino regulation across the states, it could be a long game for Playtech. Whether it has the patience, drive and capital to give the US market as much energy as it has in Asia and Europe in recent years, we will have to wait and see.