Playtech, a gaming technology company that specializes in the black market or under-the-radar gaming industry, is reporting its second earnings warning for the year. Its Asian market share brought in lower revenue than expected. However, the forecast is not all bad. Playtech expects to get some revenue from the emerging U.S. sports gaming market.
Playtech was founded in 1999 on the Isle of Man, which is part of the United Kingdom. A lot of gaming companies are located there because the regulations are laxer. The company has been in the online gaming and software business since it was founded and launched its first online gaming products in 2001. It has had a considerable market share of the online gaming software industry, with nearly all the European blue-chip online gaming companies using its technologies to help their online gaming platforms. The company has an annual revenue of close to $1 billion.
The Asian Black Market
Feeling as though the European market was becoming saturated, Playtech began investing money in the Asian gaming markets online, which are either largely unregulated and illegal or sparsely regulated. The company realized that many of the countries in Asia have enormous potential to be large markets for Playtech. But, with the enormous potential for growth came enormous risk. In its business update, Playtech announced that while the average revenue for the company is up 7 percent year-on-year, the revenue from Asia was below both the 2017 average for the second quarter, as well as below the forecast for the first six months of this year.
Playtech and Revenue
Playtech reported that it has two problems currently affecting its Asian forecasts. First, the company stated that recent entrants into Asia’s online gaming business have been coming into the markets advertising and aggressively marketing lower prices than Playtech can afford to offer in order to grab a share of the market. Playtech has had to lower its prices in order to stay competitive with the upstarts in the Asian markets. Playtech has warned its investors that if this trend continues, the company may lose $70 million in revenue because of price adjustments. Second, the company discussed that it may have put too much of its new investment into Asia, where the market for gaming overall appears to be reaching saturation, and it will take the development of new games, especially mobile play games, in order to regain some momentum in the market. In addition, some of the countries in Asia, such as India, are moving toward the legalization of online gaming and a preference for their citizens to benefit from the online gaming software and platforms, rather than foreign investors.
Amid all the gloom and doom, there is a bright spot, however. The company reported that Playtech is set to work with some of its European clients to roll out online gaming and sportsbook opportunities for the emerging U.S. market, which has not had legal sportsbooks for more than 25 years. Many of the companies that Playtech works with in Europe, such as the Stars Group and Paddy Power, already do business in the U.S. market through their online play and sportsbooks. The company expects to profit from that relationship as its business clients profit. In addition, the company has discussed more advancements to come in the mobile gaming industry, which may put the company back on top of the online gaming world.
If Playtech is able to capitalize both through aggressive marketing in Asia, and the emerging market in the United States, it will be well-placed to dive into the mobile and app gaming markets all over the world
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