August 30, 2013
Interview with Norbert Teufelberger, CEO
|0:00:00||The first half|
bwin.party digital entertainment plc
2013 Interim results
Interview with Norbert Teufelberger, CEO
The first half
Q: We knew that the first half was going to be difficult, but you say you are disappointed with these results. What’s the main area of disappointment for you?
A: Well, I assume it would be a bit cocky and arrogant of me to say that I am happy and not disappointed with a double-digit revenue decline. Yet it was expected because the way we initiated the transformation, we had expected our revenues will down. But we are disappointed, mainly about time delays – implementing the new product launches, especially the Poker launch, we should already be out to the market. We are coming very soon now. But it’s mainly timing we are disappointed about.
Q: What steps have you taken to deal with some of these issues?
A: Well, we have initiated a dramatic transformation, especially on the IT side, where we have changed the senior management completely. We are in the process of changing the Poker management and actually the new Poker head is starting on Monday.
And on the back of that we expect a lot of the initiatives to show traction, especially starting now in the second half of the year.
Q: And what would you see as the major achievements in this period?
A: Well, the major achievement was really to build the basis and foundation for future growth again, and initiate all the necessary steps. As I said, management changes on the IT side, product side, poker side. We are on track to deliver €70m of synergies versus 2012. So we are bringing the cost base down, which should also help us to perform substantially better in the years ahead.
Q: Have you completed the actions which are related to the new focus on value not volume? Or are there more still to come?
A: Well, we are living in a flux of change. There will be permanent adjustment necessary, but the major steps and the foundation blocks have been put in place. Now, we will build upon those but we will permanently adjust the way we are doing things – we call it ‘game-changing’ internally here – and that is actually something we will have to live with for the years to come.
Q: You are just about to re-launch partypoker. Do you think that you can really create growth here? Or are you just slowing the decline in the poker business?
A: Well, it’s really a two-fold answer. In the markets we are currently operating in, bear in mind that since the end of 2006 poker was in permanent decline for the company. So on the one hand, we needed to put something in place where we stopped that decline, and we have reached this inflection point. And we’re confident that by launching the new product we will be able to do so.
On the other hand, we are also preparing ourselves for getting back into the United States, where we need to have a different foundation, a different basis, and we believe the new poker product, together with the new branding, will provide that foundation for growth in the United States.
Q: You describe the new focus of partypoker as being disruptive. What exactly do you mean by that?
A: Well, disruptive in as far as we are no longer focusing on professional players, but we are focusing on the recreational players. We are trying to put this element of entertainment back into poker by adding social hooks, by making it really fun to play again, and rewarding net depositors, the people who bring money into the system, which then attracts the professional players.
So we’re changing the ecosystem, and we are evolutionarily developing the product. Now bear in mind what we are launching very soon here is only the foundation, the first step. So we will build upon that over the next periods to come. But we are confident that we will be in a position again to regain and get traction on poker.
Q: But you’re planning to launch this sort of premium.com for high-value players. Which businesses will this relate to? And does this mean that you’re dividing your products into different sites for the so-called high-rollers?
A: Not really. First of all, we have never really attracted high-rollers. But what we have both achieved, party and bwin, over the years, because we’ve both been in the market for a very long time, is to have attracted very loyal players.
Now, in the markets we are currently operating in, it’s more about retaining those players and rewarding the players who are already with you, versus acquiring new customers. And premium.com will be a way to reward those players and give them services that others will not be able to do because we know those customers already.
So it’s a custom-made product proposition for currently loyal players. And we actually expect a lot from it, and retaining those players will be a focus for premium.com.
Q: But if partypoker is concentrating on high-value recreational players and not these high-rollers, and it’s going to be the brand launched in New Jersey, how will this work, because the USA has lots of these sharks, if that’s what you want to call them?
A: Now, we’re not talking about sharks really. But bear in mind what I said before. Premium is mostly addressing the current markets here in Europe. Now, obviously in the United States, it’s a completely different ball game. What we will be launching in the United States will be a very comprehensive poker, and hopefully also, casino offer attracting all segments of the market. But this is really about new customer acquisition because we’re starting from scratch.
This is a completely new market in the United States, whereas here in Europe, we’re seeing already, especially in Poker, some signs of saturation. And also bear in mind poker is only one of our four product verticals. So there are others, like sports and casino and bingo as well.
Q: And so what’s happening with your push into social gaming?
A: Well, we launched our first product at the beginning of March of this year, Slots Craze and we’re making nice progress there. And we launched shortly thereafter our Bingo application. So on the product development side, on the business development side, I’m very happy with the developments.
On the revenue contribution we are a bit behind; we are maybe three months behind our schedule which we initially set for ourselves, but we are confident that we will see some traction going forward.
Q: Can you give us an update on your progress towards launching in New Jersey?
A: Sure. We filed our application with the regulator on time. We are currently operationalizing our operations start in New Jersey, hopefully by the end of November – both poker and casino. So we are making a lot of progress there. Ultimately it will depend on the regulator whether they will be ready to issue licences on time.
Q: And what other states are currently active?
A: There’s the usual suspects. There are movements again in California. We have heard now, that in the new session of Congress, Pennsylvania, possibly Michigan and Illinois will be looking at it. I personally would expect that everybody will want to see what happens in New Jersey first. Is it a real success? Is it not a success? If it is a success, then I would suspect that many other states will follow very quickly thereafter.
Q: And what about Nevada? Because that is currently operational, but you’ve yet to obtain the necessary licencing there. Do you plan to be licenced in Nevada?
A: Clearly, yes. We have filed a so-called “preliminary finding of suitability” in Nevada. But then New Jersey came, so we had to make a choice on where to focus. So we’re focusing currently on the application in New Jersey, but both of our partners, MGM and Boyd Gaming, are based in Nevada, so ultimately, yes, we intend to get licenced in Nevada. Will we then immediately operate in Nevada? It’s still open.
Q: Yet again there has been speculation on a possible Federal initiative. What’s your view on that?
A: Well, there are so many speculations, especially on the Federal initiative. And whatever we say, we’ll get it wrong. We’d rather focus on things we can control. That’s one we can’t, and we rely on our partners, MGM and Boyd, to be in the lead there.
So whether or not Federal legislation will come is completely out there; nobody really knows. We are focusing on our operational approach now in New Jersey. Obviously, whatever we then have to face, we will deal with then.
Q: So despite this first half yearly performance, you’re increasing the dividend and you’ve announced plans for a share buy-back. What are the main factors behind this confidence?
A: Some time ago we talked to our shareholders and we agreed that we would launch a progressive dividend policy. So, on the one hand, that means we are following through with that promise. It also means that we are quite confident about our prospects, especially going into 2014 with the new product initiatives and having now slowly reached the turning point in returning our business to growth, we are confident that we will be able to pay that dividend and still continue to finance all our operational cash flow needs internally.
Q: So specifically, what are the key things you’re focusing on in the rest of this year and in 2014?
A: Well, it’s basically following through on all the initiatives, whether it’s the volume to value approach, whether it’s the re-launch now of our new poker product, or the launch of new mobile products. A very big part of our new initiatives is obviously on mobile. We are also putting in place new digital marketing capabilities.
So it’s actually a combination of those. We have planted the seeds for many, many initiatives in the first six months of this year. And we are now looking forward to harvesting the rewards in the future.
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