Bwin, PartyGaming and the trouble ahead...
The next two years could be bleak ones for the industry, warns Warwick Bartlett, owner of Global Betting & Gaming Consultants, but a decision by Bwin and Party to huddle together for warmth could show the industry as a whole how to weather the storm...
THE NEXT TWO years are likely to prove the most difficult for sizing and forecasting the egaming industry in recent times.
On the one side the principle drivers are still in place. The consumer’s appetite for value and choice provided by Internet gambling is insatiable. The roll out of broadband continues, and now we expect to see significant growth from mobile gambling assisted by faster networks and better handsets such as the iPhone.
However the big negative is that the economy is likely to cast a long shadow over the market for some time to come.
Moody’s, the ratings agency, today published its ‘misery index’ which shows fiscal debt and unemployment. It predicts unemployment rates for 2010 of 17.5% in France, 21% for the UK and USA, 22% for Greence, 25% for Ireland and even as high as 30% for Spain. Both Italy and Germany fare better at 14%, but these levels are still historically high.
Consumer debt will also de-leverage over this period and we expect to see bank credit card charge off rates to grow significantly from 10% to 14%. To put this figure in perspective, charge offs peaked at 4% in the 1992 recession. Total credit card debt in the UK is £64bn, and not much less in both Germany and France.
The news that Bwin and Party are said to be discussing a merger is no surprise at all. Going forward the consumer will have less money to spend as the acquisition cost per customer rises, so it makes sense to merge a large sports book with a large casino and poker site.
The new entity will gain from the cross-sell synergy of both businesses, shared costs on marketing, and reduction in overall costs. The profits for the new business should be greater than the sum of the profit parts.
Such a deal, if it materialises, will herald a turning point in the industry where legal legacy issues will be put to one side in favour of improved profitability to make it through difficult times (and beyond). That will be a landmark event in more ways than one.
Thoughts? EGR welcomes pitches for blog posts of 250-350 words on topical issues in egaming. Email online editor Jon Parker for details.