E-gaming Migration: From Frying Pan To Fire
In most areas of life migration generally involves leaving one situation behind and heading for a better one. Birds migrate south for the winter to leave colder climes for warmer ones. Wealthy tax exiles migrate from a high tax location to a low tax one. But, judging from Bwin.Party’s recent interim results, the concept of technological ‘migration’ in e-gaming does not always bring similar immediate benefits.
Bwin.Party’s recent results for the first six months of 2013 revealed the following in accounting for the difference in revenues between H1 2012 and H1 2013:
• Sports betting ‘migration losses’: € 4 million
• Casino and games ‘migration losses’: € 6 million
• Poker ‘migration losses’: € 11 million
This comes to a total of € 21 million in lost revenues due specifically to the migration of players as the two separate Bwin and PartyGaming platforms were merged at the end of 2012. It does not include revenue losses due to poorly performing markets like France and Italy, nor does it include the impact of the company’s new ‘volume to value’ strategy.
At the time of the merger ‘synergies’ worth € 55 million were identified for 2013. This figure was subsequently raised to € 65 million for 2013 after additional savings were identified. But the ‘costs’ associated with the merger – ie migration losses – represented the equivalent of 32% of the expected synergies in 2013. And that was just from migration losses in the first half of 2013. But it would be hoped that migration losses do not continue at anything like the same rate in the second half of the year.
Of course, migration losses can be turned around by attracting back those customers that were lost or finding new customers to replace them.
The company’s CFO Martin Weigold stated when the interim results were published: “We are working to ensure that the migration losses are also recovered in time.”
Given that the greatest migration losses were felt in online poker, the new partypoker.com
will have a big role to play in getting the lost revenues back. The first phase of the new PartyPoker was launched in early September and news of its performance will be eagerly awaited.
But one cannot help but feel, several years on, that the two companies were better separate rather than merged. All the effort of the integration has meant a loss of focus on developing new products and services. It has allowed Bwin.Party’s competitors to get ahead.
This was not the intention. At the time of the merger announcement, other operators were concerned at the prospect of competing against such a large e-gaming behemoth (2010 archive: Bwin and Party – a match made in heaven?
). Those fears have not yet been realised.