PartyGaming (PRTY-LN)

QUOTE AND NEWS
Financial Times  Dec 5  Comment 
Norbert Teufelberger to take sole charge of online gaming group when Jim Ryan, co-CEO and the former chief of PartyGaming, steps down
guardian.co.uk  Apr 18  Comment 
While shares of gaming websites outside the US have jumped, buyers are taking a gamble on future moves by regulators It's always a mystery as to why the US department of justice, having chased the likes of PartyGaming from America's shores in...
guardian.co.uk  Apr 6  Comment 
First the firm ran afoul of US laws, now the share price has been hit by a rise in betting tax in Germany Investors in PartyGaming might have thought they had suffered enough cautionary experiences to last them a lifetime. Party was the firm that...
BBC News  Mar 23  Comment 
Online gaming firm Bwin reports increased revenues for 2010 as a merger with Partygaming is set to be concluded.
Reuters  Mar 3  Comment 
Online gambling group PartyGaming posted a rise in full year underlying earnings and said it was confident going into 2011 despite a shifting regulatory environment.
guardian.co.uk  Feb 7  Comment 
Online bingo group Gamesys has been in talks with owners of the Caesars Palace hotel and casino in Las Vegas Gamesys, which runs The Sun's online bingo platform, has been approached by the world's largest gambling company about a possible...
Reuters  Jan 28  Comment 
Shareholders in Austrian internet betting group bwin voted on Friday to endorse a tie-up with British peer PartyGaming creating the world's largest online gaming business.
Financial Times  Nov 2  Comment 
Shares in the online casino hit their lowest level since July as concerns grew that its £1.1bn deal to buy the Austrian bookmaker might fall apart
guardian.co.uk  Oct 29  Comment 
PartyGaming was one of the big fallers among the FTSE 250 today, amid speculation over the US elections. The online poker giant was down 4% to 251p. The sector is watching the US mid-term elections closely in order to gauge what impact they might...




 
TOP CONTRIBUTORS

PartyGaming is an online poker company, and also offers casino games and sportsbook betting. The company is not allowed to let players from the United States gamble on its website due to the UIGEA legislation (Unlawful Internet Gambling Enforcement Act).

PartyGaming's total revenue increased 40% from 2006 to 2007, and the online casino and sportsbook total revenue increased 188%. [1] The company plans to add bingo, backgammon, and a trading game to its list of product offerings.[2] As a result of a large customer base in poker, the company can market these new games directly to its existing poker players -- 29% of the poker players played at least another Party game within the same month.[3]

PartyGaming had 1,145,600 active players at the end of 2007, of which 683,700 were new player sign-ups. The active player base grew 53% from 2006 to 2007. Furthermore, PartyGaming had 28.4 million active player days in 2007, an increase of 67% since 2006. (Active player days are the total number of days played by each of the players.)[4]

Business Overview

PartyGaming has three lines of business (all online): poker, casino, and sportsbook. In 2006, their operations took a serious setback when the enactment of UIGEA (Unlawful Internet Gambling Enforcement Act) on 13 October 2006, PartyGaming halted the United States customers from playing or depositing into the real money site. At the year end of 2006, PartyGaming discontinued revenues (US revenue) were $779.9 million, representing 71% of their total revenues. The discontinued revenues represent the customers that will not be able to contribute to revenues in the future. [5] Yet, PartyGaming continues to expand as it added 683,000 new players in the year 2007. [6]

PartyGaming Revenue and Income
PartyGaming Revenue and Income[7]

Business and Financial Metrics

2007 Revenues by Segment
2007 Revenues by Segment[8]
2007 Sales by Region
2007 Sales by Region[9]

PartyGaming uses a commission-based revenue system where they take in a rake of the winning pot. Thus, they depend on retaining their active customers and successful marketing to acquire new customers. These key metrics determine PartyGaming's health:

1. Number of Unique Active Players is the number of unique players that wagered in the site during the year.

2. Active Player Days is the aggregate number of days in a given period in which active players contributed to rake or placed a wager.

Ex-US statistics are used to show the growth in the available market.

Company 2005 2006 2007
Ex-US Revenue ($M) $153.2 $325.0 $457.8
Ex-US Number of Unique Active Players (000s) 284.7 749.0 1,145.6
Ex- US Active player days (m) 6.5 17.0 28.4

[10]

Business Segments

Note: "Continuing" represents the numbers from the available market

Poker (64% of Continuing Revenue, 56% of Continuing Clean EBITDA) is the main revenue stream for the company. PartyGaming takes a percentage of the winning pot in ring games and of the buy-in from tournaments. The number of active players (player liquidity) are pertinent for success because many players are needed at a single table to make it interactive. The poker revenue growth grew 10% from the previous year and had 924,700 unique active players, and $808,300 average daily revenue. [11]

Casino (32% of Continuing Revenue, 39% of Continuing Clean EBITDA) had the fastest revenue growth of 188%. Casino players bet against the house, and the outcomes are randomly determined but favor the house. Player liquidity is not as important for casino games. Customers do not need other customers to play, since bets are placed against the house. This segment had 534,600 unique active players and $402,100 in average daily revenue. [12]

Sports Betting (4% of Continuing Revenue, 3% of Continuing Clean EBITDA) is the latest addition to PartyGaming's business, and developed from the acquisition of sports betting company Gamebookers in 2006. Players bet against the house, so player liquidity is not as important. Sports betting grew by 188% in revenue from the previous year, had 168,500 unique active players, and $44,000 in average daily revenue. [13]

Key Trends and Forces

Changes in gambling legislation affects future operating profit

Before the UIGEA (Unlawful Internet Gambling Enforcement Act) was passed in 2006, the United States represented two thirds of PartyGaming's total revenues.[14] In 2006, the US represented about 48% of global online gaming revenues, and in 2007, GBGC believes the number fell to 36% with the withdrawals of numerous companies including PartyGaming. [15]

Changes in taxes affect future operating profit

PartyGaming is based in the British territory Gibraltar, where the company pays no corporate taxes and only a 15% tax on personnel and property.[16] However the exempt company tax regime is to be phased out by 2010.[17] This means that PartyGaming may seek to relocate to other countries with similarly beneficial tax policies.[18] Major online poker competitors such as BodogLife, Poker Stars, and others are located in these countries due to their taxation policies.

Seasonality affects the operating revenues

PartyGaming has cited that the quietest quarter each year is the second quarter, while the first and fourth quarter is usually the strongest. The main proponent is the increase in daylight hours and weather, people tend to spend less time online and do other things. Also, since the EMEA region has holidays in the third quarter, this time of the year is also more quiet than the first and fourth quarter. [19]

Competition

  • Bwin and SportingBet are one of the biggest online retailers. They are similar to PartyGaming by offering the same products: poker, sports betting, and casino. However, Bwin and SportingBet were online sports books before their expansion of the product lines.
  • Market Share is calculated from the estimated online gaming sector outside of the US worth of $7.4 billion in revenue [20]
Company Rev. 2007 ($M) Market Share Active Players
Bwin 643 8.7% 1,636,000
SportingBet PLC 242 3.2% 450,000
PartyGaming 476 6.4% 1,145,600

There are many competitors in the online gaming industry, and there is not a single dominant player with a large market share (over 25%). Thus, this industry is fragmented.

[21] [22] [23]

References

  1. PartyGaming (PRTY-LN) Annual Report 2007 Page 3
  2. PartyGaming (PRTY-LN) Annual Report 2007 Page 66
  3. PartyGaming (PRTY-LN) Annual Report 2006 Page 70
  4. PartyGaming (PRTY-LN) Annual Report 2007 Page 40
  5. PartyGaming (PRTY-LN) Annual Report 2006 Page 22
  6. PartyGaming (PRTY-LN) Annual Report 2006 Page 70
  7. PartyGaming (PRTY-LN) Annual Report 2006 Page 22
  8. PartyGaming (PRTY-LN) Annual Report 2007 Page 7
  9. PartyGaming (PRTY-LN) Annual Report 2007 Page 70
  10. PartyGaming (PRTY-LN) Annual Report 2007 Page 4
  11. PartyGaming (PRTY-LN) Annual Report 2007 Page 64
  12. PartyGaming (PRTY-LN) Annual Report 2007 Page 66
  13. PartyGaming (PRTY-LN) Annual Report 2007 Page 67
  14. PartyGaming (PRTY-LN) Annual Report 2007 Page 84
  15. PartyGaming (PRTY-LN) Annual Report 2007 Page 56
  16. Gibraltar
  17. PartyGaming (PRTY-LN) Annual Report 2007 Page 86
  18. PartyGaming (PRTY-LN) Annual Report 2007 Page 86
  19. PartyGaming (PRTY-LN) Annual Report 2007 Page 73
  20. PartyGaming (PRTY-LN) Annual Report 2007 Page 55
  21. Bwin
  22. Sporting Bet
  23. PartyGaming (PRTY-LN) Annual Report 2007 Page 59
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