Amaya GVC Bwin Sale Update

Could Amaya Gaming be shut out of the sale process for Bwin.Party? Now that GVC looks more likely to bid by itself for Bwin after announcing GVC will raise 150 million pounds by issuing more share to the public and using the proceeds to re-ignite an offer for Bwin.Party. That GVC is considering going alone without the support of Amaya is bad news for Amaya shareholders. GVC seems to be getting good feedback from investment bankers regarding a secondary offering of their shares. This means investors see the benefits of a GVC/Bwin tieup without a Pokerstars connection, which means that one of the main benefits of of teaming up with Amaya (money) seems less important if GVC can raise the funds on its own.

Let’s say that GVC is able to raise money on their own and they beat out 888 for control of Bwin.Party, how will this change the online poker landscape?  Pokerstars would still be the dominant platform, and it would still be cutting into ancillary revenue from its competitors in the form of sports and casino games. But since network effects are so strong in online poker, a buyout of Bwin without Amaya would open the door for even greater consolidation and stronger competitors.  Its possible there could even be a tie-up between GVC/Bwin including 888 down the road.

Lurking in the background is Playtech’s iPoker white label platform, which would still be number 3 in the world by market share.  3rd party white label platforms are gaining more acceptance by operators in the online gaming market as the market matures and barriers to entry from technology and regulation continue to grow. I think iPoker is a bigger threat to Pokerstars than consolidation of smaller platforms as iPoker is a differentiated product.

Amaya shares soar on earnings update

Shares of Amaya rose sharply today on an earnings update. The data released today gives investors a clearer picture of Amaya in the Pokerstars era, now that Amaya has mostly divested itself of non-Pokerstars/Full Tilt assets. Going forward, investors will be better able to make a fair comparative analysis of q/q results with less one time adjustments.

Amaya reported profits of $82 million on revenue of $340 million. This represents a 25% margin for a growing global business with the largest market share. Investors should be bullish on shares of Amaya following these results.

Online Poker Trends

As the online poker market develops, more countries are regulating online poker and network effects are taking hold.  I believe the network effects that impact online poker are encouraged by greater regulation, as the larger more sophisticated operators will be better able to manage the increasingly complex online gaming regulatory environment. This points investors to PokerStars, 888/PartyPoker, and Playtech.

PokerStars to Launch Expanded Sports Betting and Casino

PokerStars has announced it will launch sports betting and casino games including Blackjack and Roulette on its websites in the near future.  This is a great move by PokerStars to gain incremental revenue from its huge player base.  But PokerStars should be very cautious about how it treats its players.  It should be subtle about how it promotes these additional games to current players so as not to bother them or send them spam.  The most important factor for PokerStars is to invest in its games and nurture its poker playing base.

How will Pokerstars Grow in the US?

If online gaming regulation happens on a state by state basis, then it will be a slow slog for Pokerstars as it re-enters the US online poker market. But if the federal government steps deeper into online gaming regulation, and players are allowed to pool wagering among state location, then Pokerstars will have a clear edge over its competitors.

Especially in California, gaming Tribes may force the federal government to become more involved in online gaming.  The NIGC and the IGRA could become more influential if Tribes can’t make agreements with individual states.

Pokerstars thrives because its the market leader in technology and player experience. And it gains from network effects by its market position.  If online poker is regulated state by state, it will decentralize the market position of Pokerstars and thereby decrease its network advantage.