Dragonfish's Italian job: what now for 888?
Dragonfish managing director Gabi Campos was bullish following 888's results. EGRmagazine.com looks what its deal to provide casino to Bwin in Italy means for the company.
THE FULL-YEAR RESULTS for 888 on 23 March were partially eclipsed by two significant, and related, stories.
In an interview with EGRmagazine.com, group CEO Gigi Levy revealed the compaÂny is “constantly looking at” spinning off its busiÂness-to-business (B2B) arm Dragonfish “because it could be traded at better multiples”. He also admitted that “a non operator-related B2B business could theoretically be better at winÂning deals”.
Levy’s timing appeared apt, as DragÂonfish announced what its managing director Gabi Campos believes is something of a landmark deal. On the company’s results day, Campos met eGR to discuss the announcement that Bwin Italia has seÂlected Dragonfish as its provider of casino games.
This followed the morning’s statement to the City, which revealed Dragonfish had delivered US$51.3m of 888 Holdings’ US$246.7m operatÂing income for the year “ a US$12.7m (33%) rise for Dragonfish on its 2008 performance.
UnderÂstandably, Campos was in bullish mood despite 888’s overall figures being down. “My wife’s a psychiatrist, so I know what it’s like to be in two states of mind,” he said. “We’ve got lots to celeÂbrate. We are over the US$50m threshold, DragÂonfish has contributed a large stake to 888 and is a very profitable operation, and we’re penetrating new spaces.”
Source of excitement
The reason Campos was quite so excited about the Italian deal is that it represents the culminaÂtion of three years of work with the offering and technology teams, including pre-sales manager Sigal Blonder, devoted to building a technology platform the company can leverage in differentterritories for infinite clients, with the ability to tailor accordingly.
It follows its first deal with a major US casino operator, Harrah’s Interactive Entertainment, to provide its turnkey solution and sees it now servÂicing Europe’s largest publicly listed operator, as well as PartyGaming. “If I’d told you 888 HoldÂings will be the provider of major operators,” said Campos, “you’d have told me ‘no way’. I don’t think Jim Ryan has any doubt my aim is to grow Party’s bingo business and we aim to do the same for our Bwin casino offering.”
No doubt the market is impressed too. “I’ve been cautious about Dragonfish’s ability to get big conÂtracts,” commented Daniel Stewart analyst James Hollins, “but to be fair they’ve done quite well with the Caesars-Harrah’s deal and Bwin. This is a flag in the earth and Bwin was obviously comfortable that Dragonfish was sufficiently independent.”
The Bwin deal also involved working with the Italian government to ensure it can monitor bets, put caps in for player protection, and offers the ability to approve bets in real-time and calcuÂlate tax. As a sign of what it can do in regulatedmarkets, Campos clearly feels it will have intrinÂsic long-term value as other markets, such asFrance, open up.
Dragonfish stands to gain a great deal in Italy. As the largest casino market in Europe, Campos is confident it will soon be generating signifiÂcant income for both parties, not least because Bwin purchased Italy’s first independent gaming site Gioco Digitale in September last year. Plus, the deal has been done in advance of the casino market opening up, offering the advantage of being good to go.
Poker is a $250m net gaming revenue market in Italy, Campos said, and will become a $0.5bn market when cach games are launched. “Casino is much bigger in Italy than poker, so it puts us inan amazing position. When you can advertise casino on TV and cross-sell casino from sportsÂbook, there is potential to turn the total gaming revenues in the Italian market to $1bn and beyond,” said Campos.
As a side note, 888 plans to launch a stand-alone Italian offering soon. So, would separating the businesses make sense? Hollins suspects not: “It would be a very complicated, potentially exÂpensive way of realising very little upside.”