Patrick Southon, Gaming Realms PLC’s (LON:GLM) chief executive has a pretty good idea what makes a good online gambling game.
Acceptability to the audience, fun to play and quick rewards are among the requirements.
WATCH: Gaming Realms to capitalise on its platform and 'Slingo Originals' library
His original company Cashcade was behind the development of Foxy Bingo, now sold to GVC, and understanding what gamblers want underpins Gaming Realms.
It is likely to become even more important in the future after a recent change in strategy for the AIM-listed business.
Re-positioned
Gaming Realms has just sold 70% of its Real Money Casino brands, its consumer gaming business, to Oslo-listed River iGaming for up to £23.1mln.
The business operates games such as Pocket Fruity, Spin Genie and Britain's Got Talent and X Factor games.
In future, they will be run by a new business River UK Casino that will be 30% owned by Gaming Realms.
Some £8.4mln of the consideration is payable upfront, with the final amount dependent on earnings.
The games being sold contributed £13.9mln of Gaming Realm’s revenues of £31.6mln in the year to December and underlying profits of £2.2mln.
Gaming Realms needs underlying profits to rise to £6mln in 2019 to earn the full payout.
Licensing the new focus
Southon says the disposal is part of the decision made recently to focus on licensing and content development rather than operating the games.
It’s not hard to see why Gaming Realms made the switch.
Marketing/customer acquisition costs were a hefty £10.4mln in 2017, though down from almost £15mln the year previously, that is still a hefty sum for a company of Gaming Realms’ size.
Licensing deals have been signed with several industry majors over the past six months, with a renewal of an agreement with GVC the most recent.
That two-year licensing and revenue share agreement will see GVC roll out the “Slingo Originals” content worldwide and distribute it across its sites – Slingo is not part of the River UK casino sale.
GVC has a six-week exclusive period hosting a new 'BlackJack X-Change' casino game.
Slingo staying put
Last year, GVC agreed to distribute Slingo Originals in New Jersey, US and Southon says this latest deal highlights the long-term potential if you get a popular game.
Slingo originated twenty years ago – Gaming Realms bought the IP in 2015 for US$18mln - but is still going strong.
“Licensing is a great business – as revenue drops straight to bottom line,” said Southon.
Once a game has been developed it just a matter of integration into a customer’s platform.
Of course, a lot of work goes on beforehand but the operators can see how good the content is, which is half the battle he says.
Though the timing of license contracts can be uncertain, margins are much better than in the ‘real money’ arena.
Here, rising taxes (such as point of consumption), tightening regulation, savvy customers who know the best deals and growing competition are making life difficult.
Gaming Realms is also a small in real money relative to giants such as GVC and William Hill in a sector where size is becoming increasingly important.
Recent results showed a move into profit to £800,000 (£2mln loss) on an adjusted underlying basis as the benefits of cost-cutting on the Real Money side started to show through.
US potential
In the longer-term, there is the prospect of the US market opening to casino games in the wake of the relaxation of sports betting rules.
Southon is not expecting it to happen quickly but if it does it will ‘transform’ the business.
“We can then offer content where casino games are legal.”
In the meantime, the focus will be on making the most of its games nous and content.
“In a mature business model, if you become a niche provider, a specialist in something that has international demand you can become very successful.”
At 9.3p, Gaming Realms is valued at £25.6mln.