Amaya Q3 Reports Sports Betting Still In ‘Investment Mode’

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Amaya investment mode

Amaya reported that total revenues for the third quarter of 2016 increased by approximately 9.5 percent. Full year revenues are forecast to come in at between $1.137 billion and $1.157 billion.

Amaya continues to combine sports betting revenues with casino revenues. They will continue to be reported in this way until they climb to more than five percent of total revenues.

Together sportsbook and casino have grown from 15 percent of revenues in Q3 2015 to 24 percent this quarter.

During the earnings presentation, Amaya said that the sportsbook vertical “continues to be in investment mode.” Quarterly active uniques of 230,000 showed no growth over Q2, but are up from 100,000 in Q3 of 2015.

In sportbook investment mode Amaya will:

“Focus on product improvements and bringing it up to parity with our competitors.”

The Malta licensed business segment produced the best performance

The detail of sportsbook performance is not discernible in the combined numbers. But Amaya breaks down its revenues by license category. An analysis of these numbers provides an indication of how the new business vertical is faring.

Total casino and sportsbook revenues for the different license categories came in at $64.2 million. By far the largest contributor was from the company’s Malta licensed operations. These serve customers typically in the EU who are not obliged by national laws to play at sites hosted on their own national internet domains.

Casino and sportsbook revenues from Malta amounted to just over $40 million, 75.6 percent of the revenues generated by Malta licensed online poker. Figures from the same period in 2015 showed Malta licensed operations produce $23.8 million, just 41 percent of the revenues of online poker.

If all Amaya’s license segments performed as well as Malta, casino and sportsbook revenues would triple. That level of growth is probably not achievable across the whole business, but Amaya is looking to get as close as it can.

The dot-com business licensed in the Isle of Man produced $4.45 million in revenues, just 5.6 percent of Amaya’s poker revenues.

Isle of Man Poker revenues of almost $80 million comprise more than 40 percent of total poker revenues. This is a market where casino and sportsbook should expect substantial growth when the sportsbook product exits investment mode.

Segregated European markets are also moving positively

The only separately reported market where Amaya reports sportsbook independently is France. French gambling laws do not allow online casino games.

PokerStars is not the market leader in the French market. That honor goes to Winamax, which launched its own sports betting offering well before PokerStars. Amaya uses the BetStars brand for sports betting, but the product is available through the PokerStars client.

Sport betting revenues from France stood at $886,000 for the quarter, just 8.8 percentof total poker revenues.

It is tempting to cross-analyze and draw out an estimate for the percentage of combined revenues provided by sports betting on the basis of the French numbers. However, the novelty of PokerStars entry into the French sportsbetting market makes that an unreliable process.

There are no revenue figures for Q3 of 2015 because the product hadn’t yet launched. Sports betting in other markets was available much earlier. The market share in France appears to lag that in other markets, even though they may be only a few months further on in their development.

Highly regulated markets are delivering more market share

In Spain, where sports betting and casino are both allowed, Amaya posted revenues that are 53.8 percent of those generated by online poker. PokerStars dominates the Spanish market with around a 75 percent market share. The performance of casino and sports betting is likely even better than the simple figures suggest.

In the UK, casino and sports betting represents only 21.1 percent of revenues. There, PokerStars and Full Tilt combined have a lower percentage of the online poker market than PokerStars alone has in Spain.

This figure seems surprisingly low. Comparatively, it makes the Spanish figures look good. But the promotion of casino and sports betting in the UK has been at least as active as in Spain.

Investors looking at what the real potential of the casino and sports betting verticals can provide for Amaya will be asking why there is such a large disparity between the two markets.

The Italian experience is closer to Spain. There, casino and sports betting provide over 48 percent of the revenues generated by poker. Perhaps the better performance in these two highly regulated countries reflects the additional dominance that PokerStars has established.

Certainly many of PokerStars competitors have failed to survive in the segregated markets of France, Italy and Spain.

Future revenues from sportsbook and casino may well continue to be very different—higher in highly regulated markets, lower in those where there is open competition.