Is the online casino industry consolidating?

Posted on October 20th, 2008

The news has just come out today that William Hill- the sports betting collossus in the UK, is partnering up with Playtech- one of the biggest online casino and poker software companies on the net, in order for it to power up the rankings and become a big (if not the big) player in the market.

The well known UK betting brand is buying parts of the Playtech empire in return for a share in a new company: William Hill Online, which will be run as a subsidiary.

Basically they are buying up the affiliate business of Playtech, plus their customer service team. The affiliate business runs all the partnerships (big and small) with small and medium sized web companies and individuals that help to promote the Playtech´s casino and poker brands.

So this begs the question- is the speed of consolidation in the online betting market speeding up? Since the early days of online casinos and poker rooms in 1997, the growth in this market has been vigorous, driven by an increase in broadband penetration across many markets and a growth in popularity of playing casino games, poker and bingo on the Internet. Sports betting is also hugely popular and there are other games that are fast catching up: such as backgammon and gin rummy.

We have seen some big mergers and tie ups recently in the market. Ladbrokes was flirting with 888 for some time earlier before calling the date off. They have now teamed up with Littlewoods and will be helping them to market online using their games software and online marketing expertise. Bingo provider Gamesys, who run Jackpotjoy, are the team behind the new Sun Bingo launch (and NOTW bingo of course).

So it would seem that the well known mega brands off the high street and offline media are using their marketing clout to muscle in on the action, and with increasing success.

So why is this, and is it good news for players?

Well- in any industry, there are savings to be made from scale- even on the Internet. And while the past 10 years has seen a fragmented market, the smaller fish are being increasingly tempted to get into bed with the big boys and cash out, to coin a few bullsh*t bingo phrases. Running a poker site online, in particular, can be hard if you do not have sufficient number of players- for one there are less tournaments for your players to enter. And for 2, there is less “liquidity” or cash running through the system, which is the lifeblood of online poker sites. Many smaller brands team up into networks- but even this is fraught with dangers, as poker sites make money on the number of hands played, or “the rake”. If they have someone lose all of their money to a player from another poker site in the network quickly, they may get hammered with a big loss after they take into account the cost of managing the transaction in the first place.

More competition generally means better promotional offers for the players, so undoubtedly this will worsen as the number of companies offering games online comes down. But I think we are a long way off a duopoly sitiation yet. There is still plenty of competition out there driven by companies operating across borders, particularly in Europe. Things look good for the punter for the time being, and this being The Internet- there´s always someone with a truly innovative idea just waiting in the wings.

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