30 May 2012
bwin.party digital entertainment plc
('bwin.party', the 'Company' or, together with its subsidiaries, 'Group')
Extension of Group strategy into social gaming
· Investment of up to $50m (€40m) over the next two years to fund:
o establishment of a new social games studio called 'Win' with its own dedicated development
o development and launch costs of a number of new social gaming applications
o the purchase for up to $23m (€18m) in cash (of which $17.25m (€14m) has already been
paid) of a number of assets from Velasco Services Inc. and Orneon Limited which will
accelerate our market entry and include
§ a number of existing B2B social gaming contracts
§ significant software engineering resources
· Strategy focused on leveraging existing Group assets and skills as well as those of partners to deliver long-term value
· Launch of first applications in Summer 2012
· Commitment to secure meaningful market position expected to result in additional costs of €5-€10m in 2012 and 2013
The advent of social gaming has been a spectacular growth story over the past two years. Over this period revenue models have evolved extensively so that what previously was an interesting internet phenomenon has become a large commercial marketplace, one that now is worth billions of dollars each year. Whilst being very different in many ways to real money gaming on the internet and through digital channels, several of the assets and skills required for success in the social gaming world are the same as those required by successful companies in the real money gaming market:
· Proprietary gaming content
· Excellent CRM and business analytics
· Online marketing expertise
· Partnerships with leading brands
With many of these and other assets already in place within the Group, we are keen to leverage them into this exciting new market and so have launched a new social gaming business unit and strategy with its own dedicated management team and infrastructure. Called 'Win', the new unit is based in Gibraltar and will draw on resources across the Group's locations to identify and develop new opportunities in social gaming.
A specialist management team led by Barak Rabinowitz has been recruited to spearhead our social gaming strategy and the establishment of a dedicated social games studio. Having studied at Georgetown University as well as the London School of Economics, Mr Rabinowitz spent three years working in the Mergers & Acquisitions and Global Technology Groups at Morgan Stanley before joining Yahoo! in 2006. Following an MBA at Harvard Business School, Mr Rabinowitz was engaged in social gaming start-ups before being appointed CEO of Mytopia where he was instrumental in growing revenue and has extensive experience in the management and development of social gaming companies.
Alex Usach will lead a new technology development unit dedicated to social games development. He has over 20 years of management experience in software development having qualified with a Ph.D Degree in Computer Science from Vinnitsya Polytechnic University. Previously Mr Usach led Eastern European branches of Flextronics International (until 2006) and more recently of Aricent Group, a software services company owned by Kohlberg Kravis Roberts. Mr Usach is known to a number of the world's leading gaming companies as a partner in developing new content for both real money and social games.
Dan Matkowski, is lead Game Producer. Previously Mr Matkowski was a leading games producer with Electronic Arts, the US interactive entertainment software company and has extensive games production experience across multiple platforms, developing products through the concept and discovery/ prototyping, pre-production, production and finalising phases.
Tilli Kalisky is Head of Publishing. Previously Associate Partner with Greylock Partners, a leading US Venture Capital firm, Mrs Kalisky is a graduate from Massachusetts Institute of Technology - Sloan School of Management and has extensive experience of working with a number of social media companies including mysupermarket, PLYmedia and VocalTec
Dennis Hettema is in charge of prototype development. Previously co-founder and head of incubator at Hettema & Bergsten, a social gaming applications company, Mr Hettema developed the Group's Aces Hangout application that is now running on Google+.
Investment in development resources
Including the acquisition of assets announced today, the Group is investing approximately $50m (€40m) from existing resources over the next two years to become a major force in the rapidly growing social gaming market. As a first step, we have secured significant development resources by contracting with software developers and engineers experienced in delivering social gaming solutions across all key technologies including HTML5, iOS and Android.
Based in Eastern Europe and operating now as part of our Win Interactive subsidiary, the team has extensive experience having been behind the development of highly successful social gaming applications and platforms including Slotomania, now part of Caesars Interactive Entertainment, and Casmul, that was acquired by Playphone, bwin.party intends to launch a variety of social gaming products on the web, mobile and social networks.
As well as securing significant development resources, the Group has assumed certain B2B service contracts under which Win Interactive will continue to provide a range of social gaming and related services to third party gaming companies whilst also developing proprietary applications for the Group.
Social gaming strategy
We believe that we can establish a competitive advantage in social gaming built on the following four pillars:
· Experienced management team and proprietary gaming platform
· Portfolio of new applications online and on smartphone platforms
· Original IP in the creation and distribution of social gaming content
· Best of breed partnerships with leading independent game studios
Leveraging the Group's existing assets and skills including, inter alia, our extensive library of proprietary games content and experience in customer acquisition and analytics, we have a plan in place to reach the following milestones over the next twenty-four months:
· Establishment of a dedicated social gaming unit, Win
· Development of dedicated social gaming technology platform
· Release of social sports betting, casino, poker and bingo applications
· Launch of a new social gaming destination portal called www.win.com
Drawing upon the Group's extensive games portfolio as well as through the development of new content, Win will operate on a 'freemium' business model based on the sale of virtual credits for users to play and advance in the games, as well as to purchase virtual gifts and other consumables. Win may also seek to exploit advertising opportunities that can provide additional revenue through offers, banners and search.
Mobile is an important channel for social gaming and by drawing on the experience of our newly engaged developers, many of whom were integral to the development of an application platform for operating multiplayer-social games and gaming networks on iOS and Android devices, the Group intends to launch games using this important medium.
Commenting on today's announcement, Jim Ryan and Norbert Teufelberger, the Co-CEOs of bwin.party, said:
"We have chosen a 'build and partner' strategy, one that provides us with both the resources and additional management expertise to execute our planned extension into social gaming - an exciting and fast growing area of digital entertainment that is the latest addition to our business strategy. We are focused on building a meaningful stand-alone enterprise that will operate outside our core real money gaming business but which will benefit from the Group's significant resources and assets. Our investment will enable us to launch Win, our dedicated social gaming studio with its own development centre that will increase our speed to market both for social as well as mobile games. Intent on securing a meaningful position in the marketplace, we expect a €5-€10m impact to Clean EBITDA in 2012 and 2013. However, we are excited by the potential of this new market and believe we can deliver attractive returns in the medium term through relatively modest investment, funded from operating cashflow over the next 18 months."
Video interview and analyst presentation - 30 May 2012
An interview with Norbert Teufelberger and Barak Rabinowitz, in video/audio and text will be available from 7.00am BST on 30 May 2012 on: www.bwinparty.com.
The Group will also give a presentation on the Group's entry into the social gaming market to invited analysts in London at 11.00 a.m. BST on 30 May 2012. The presentation will be made available via a live webcast that can be accessed through the Group's website: www.bwinparty.com. Copies of the slides presented at the meeting will also be made available on 30 May 2012 and a telephone audio stream of the presentation will also be available using the following details:
Dial-In No: +44 (0)20 3003 2666
Replay (available for 1 week): +44 (0)20 8196 1998
Replay passcode: 6419292
bwin.party digital entertainment plc
Peter Reynolds +44 (0) 20 7337 0100
John Shepherd +44 (0) 20 7337 0100
Notes for Editors
bwin.party digital entertainment plc (LSE: BPTY) is the world's largest listed online gaming company. The Company was formed from the merger of bwin Interactive Entertainment AG and PartyGaming Plc on 31 March 2011. Incorporated, licensed and regulated in Gibraltar, the Group also has licences in France, Italy and Denmark. With offices in Europe, India, Israel and the US, the Group generated total pro forma revenue of €816.0m and pro forma Clean EBITDA of €199.3m in 2011. bwin.party commands leading market positions in each of its four key product verticals: online sports betting, poker, casino and bingo with some of the world's biggest online gaming brands including www.bwin.com, www.PartyPoker.com, www.PartyCasino.comand www.FoxyBingo.com. The Group's scale, technology and strong portfolio of games collectively differentiate its customer offer from those of its competitors. bwin.party is a constituent member of the FTSE 250 Index and the FTSE4Good Index Series, which identifies companies that meet globally recognised corporate responsibility standards. For more information about bwin.party, visit: www.bwinparty.com.