Last week, Yaniv Sherman, SVP and head of the US at 888, examined the group’s US intentions; adopting a distinct slant to delve into the group’s moves thus far as well as implications of the Wire Act in ‘poker country’.
This time around, or just later on in the call if you managed to catch last week’s part one, which can be accessed here, attention shifts to the future, making moves in a three-way tie with casino and sport and what will happen (dare we say) when things get back to normal.
“To your point about exponential growth, this is sort of something that feeds itself, and creates a sort of ascending spiral of activity. We’ve seen this worldwide, and that is just the direct effect,” he begins.
“It also has an indirect effect, in the sense that poker is an effective gateway, and cross-sell, to other products”
With the last year having potentially introduced new forms of gaming to people, which is arguably more accessible, as a solely online gambling operator is there a fear of a digital drop-off amid a land-based uptake upon the resumption of normality in everyday life?
Sherman continues: “I think that what we’ve seen is that, depending on where you stand, one of the opinions is saying that it’s a structural shift and things won’t be back to what we’ve seen, others have said that with so much pent up demand people will be back to bricks-and-mortar and going back to physical casinos, and generally physical locations, when this is over. I think it’s somewhere in the middle.”
“If you don’t have a digital agenda with a bricks and mortar destination by now, you’re just playing for time”
Elaborating on the pros and cons of the retail versus digital debate, which will no doubt rage on and on and on, acknowledgement is given to the staying power of large entertainment destinations, with Las Vegas being one all too familiar prime example.
“I think it gave, if anything, retail space in general, brick and mortar casinos in particular, a sort of sneak preview into the future,” Yaniv explains on the potential long-term pandemic takeaways.
“Because, much like airlines, much like cinemas if you want to take another example, cinemas aren’t going away anywhere, but there’s no argument that Netflix, or Amazon Prime and the whole OTT experience is changing its structure, it’s just accelerating a trend.
“There will be fewer of them when we come out of it. And I think the same thing goes for casinos that have gotten a sneak preview of 10 or 15 years down the line, where millennials come of age, and casinos that used to be a preferred entertainment gaming destination are less attractive in that regard.”
Adding: “If you don’t have a digital agenda with a bricks and mortar destination by now, you’re just playing for time – at least from my perspective. And that’s why, I think, that 888 as a digital operator has been in such an interesting counterparty to any such conversation, because that is what we do, that is what we’ve been focusing on for the past over two decades now”.
Casino and sports are often as frequent in a poker conversation as poker itself, and that is definitely the case on the particular evening in question.
Asserting that poker remains “a tremendously important vertical,” Sherman moves on to explain that that isn’t just for the game itself, but partially due to its cross-sell value.
“Our growth plan includes all three products”
“So now you have a casino and sports market with a few dozen operators, and that’s why it’s a 95 or 90 per cent casino and sport market. Having said that, the ones remaining in competition have a maybe smaller total addressable market but they can have a bigger piece of a smaller pie.
“So I think that it’s always going to be third, I don’t think it closes the gap to casino and sport, but I think it grows. If we now look at the shared network environment, it grows faster than other verticals and its addition has a tremendous impact on the other two verticals.”
Despite being the third leg in the race, social interaction and engagement are often heavily lauded as the overwhelming poker plus points. Particularly in the current environment that we are all too familiar with.
However, Sherman adds into the mix the importance of having more products to offer consumers: “If you can just get in front of your customer more often, give them more choice, it’ll have an indirect, or ancillary, affect very early on, so to me the benefit is, for 888, is that we have the pole position and we have the ability to be a market leader in a category, even if that category is smaller in the US,” he explains.
“And also having growth and that cross pollinating effect between the various products to drive our growth. Our growth plan includes all three products, unlike some competitors that are either sports or sports and casino driven, we’re a three product company over a singular platform which is again quite unique for this marketplace, not a lot of competitors can demonstrate such a delivery system.”
To conclude the near 30-minute conflab, attention, rather unsurprisingly, turns to that of projections, and what slice of the pie poker can realistically look to occupy.
“But we’re pretty bullish on the overall North American trajectory right now”
Sherman explains: “Well if you apply the same logic that we’ve seen in other places, and I think the figures from Morgan Stanley, the latest ones, modelled the gaming element at either $12bn or $15bn.
“But if you just take, from a top down perspective, ten per cent of that, which typically you would put poker between five and ten per cent, then that creates a total addressable market of anywhere between $1bn to $1.5bn just on the same market footprint.”
Continuing: “So, it is a meaningful vertical, again to a $12bn – $15bn and having just ten per cent, but it’s lets call it a $1.2bn addressable market in a steady state, so lets say mid-2025, I don’t see more than three, maybe four, competitors on that market segment.
“So if you look at 888’s positioning, that’s why we are so bullish, and that’s why we are so excited about this opportunity, because, as I said, it’s a rare opportunity in the current land-grab that is the US market, to have not just a meaningful market share but a profitable one.
“That is exactly what we are aiming for, because our poker business right now in the US is profitable and we’re just aiming to grow that with our partners at Caesars, with our consumer facing brands, so that is the goal and it brings us one step closer to a high growth profitable business in the US.
“And also, just to put a little cherry on top, I think that the latest developments in Canada are also encouraging, I think that also builds additional regulated liquidity into the picture and we’ll see how that develops. But we’re pretty bullish on the overall North American trajectory right now.”