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Talking
high stakes game at PartyGaming, by Roger Blitz
- 28th December 2008
(Credit:
Financial Times)
When Jim Ryan talks about turning
PartyGaming into once more the most valuable online
gaming company in the world, you wonder whether
the relatively new chief executive is getting
ahead of himself.
True,
the company retains strong brand identification
in what is an increasingly crowded market. “I
always looked at PartyGaming as the scary monster
we had to compete with,” he recalls of his
time running gaming network solutions and software
developer companies.
But
the scary monster has been muted of late. Once
the most talked-about investment after storming
into the FTSE?100 when it floated in 2005, its
share price in mid-November barely surfaced above
£1.
The
online gambling company has spent the last two
years in survival mode since it was effectively
turfed out of the American market by US lawmakers,
costing it three-quarters of its revenues, mainly
derived from poker, and forcing it to regroup
around European markets.
Maybe,
just maybe, there is light at the end of what
has been a long, dark tunnel for PartyGaming.
The
man who has provided the break is not Mr Ryan
but co-founder Anurag Dikshit, who this month
travelled to New York to plead guilty to a charge
of illegal internet gambling and agreed to forfeit
$300m (£203m) to US authorities. He will
be sentenced in two years’ time.
The
deal is expected to be followed by others between
the US Department of Justice and companies in
the online gaming industry, enabling the stalled
sector to clear liabilities and engage in long-delayed
consolidation.
PartyGaming
could be the first. Its shares have bounced back
to just below 200p in response to the settlement
with its co-founder. A January deal is on the
cards.
Mr
Ryan declines to discuss progress on such talks.
In any case, turnaround will not happen overnight
but over three years, the time he gives himself
to restore the company to the exalted position
it once held.
“This
is a marathon, not a sprint. We have been chasing
quarterly profits, but the market has become so
competitive you’ve got to know where you’re
going,” he says. “We’re not
so much slowing down but keeping ourselves focused.”
Like
his predecessor Mitch Garber, Mr Ryan, 46, is
from Canada. An accountant by training, he built
up a steady reputation in high technology companies.
Mr Garber, a fast-talking lawyer, was impatient
for success and PartyGaming’s exodus from
the US ruined his best-laid plans.
The
more softly-spoken Mr Ryan, who took over in June
brings a different style to the company whose
flotation valued it at near to £5bn, but
is now worth £800m.
No-one
knows whether the regulation of the US market
will happen under an Obama administration. All
Mr Ryan and his team can do is “prepare
the company for that day”.
Until
then, PartyGaming lives with the frustration of
seeing unregulated US operators such as PokerStars
and Full Tilt not just roam unchecked over the
US online poker landscape but start stalking European
territory.
That
is increasing PartyGaming’s costs for media
buys and for teaming up with affiliates.
“Our
job, frankly speaking, is to take share back”,
Mr Ryan says. “It may cost us more.”
Since
the US debacle, PartyGaming has diversified into
other gaming products. Mr Ryan’s “holy
grail” is a PartyGaming website with a completely
integrated platform – poker, casino, sports
betting, bingo, backgammon, party markets.
“[We
offer] six different products with one back office
platform,” he explains.
“One
deposit, one account – it’s a one-stop
shop. That is still the main strategic objective
for a number of our competitors – we have
it already.”
Poker,
he continues, is “the engine room, and will
always be very important to PartyGaming”.
He believes there will only be five online poker
operators players of any consequence in next three
years and says PartyGaming will be one of them.
“That
being said, our job is to acquire more casino
players, more sports betting players. We need
to have less focus on cross-selling, more on acquiring
players.”
PartyGaming
once hosted the largest online casino game in
the world, played by 59,000 people at the same
time, and is the world leader in online casino.
But
it has now fallen back to number four in online
poker – and that hurts.
“We
need to retake the hill and position ourselves
to be that leader again,” says Mr Ryan.
Such
targets look daunting. Player numbers are the
same as they were three to four years ago, but
they are depositing smaller amounts of money.
Since poker is played in dollars, UK players are
being squeezed by the weakness of sterling.
Part
of the knack is catering both for novice players
and those who, in making a living out of it, play
up to 20 tables at the same time. Another is finding
brand names who want PartyGaming as their online
gaming operator.
None
of which gives Mr Ryan time to work on his three-year
vision. “I don’t think the market
will need to wait three years to see if Jim Ryan
has done a good job”, he says.
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