NYX and OpenBet deal raises questions for the sector

Yesterday’s announcement that NYX Gaming Group had acquired OpenBet in a deal worth ?270m was overshadowed by the involvement of its minority partners William Hill and Sky Bet. The two key OpenBet clients were front and centre of mainstream coverage, but the real story here is the rise of NYX, and that tale has been nothing short of extraordinary.

There is the temptation to describe this as the deal that Playtech didn’t do, with William Hill stepping in to ensure it doesn’t return to a reliance on the supplier. Sports betting, and the OpenBet platform in particular, was seen as the last piece in the jigsaw for Playtech and the acquisition would have placed it in a position of almost unassailable dominance in the B2B sector.

William Hill will take a stake in NYX amounting to around 19% at a cost of ?80m and has signed a new 10-year contract. Hills will also work with NYX to “modernise” OpenBet’s technology as part of a three-year development programme. Sky Bet meanwhile has taken a pragmatic and strategic 5% stake in NYX with almost its entire business sitting on the OpenBet platform.

The cynical conclusion from this is to say Hills and Sky Bet will use their stake to gradually squeeze out their rivals and place themselves front and centre for innovative new releases. And there is no doubt some of its rivals will fear the worst. But NYX CEO Matt Davey told analysts neither firm will have a seat on the board or access to any sensitive infomation.

Take your partners

Indeed far from being a Hills deal, this feels very much like the emergence of a new power player in the egaming B2B space. OpenBet posted revenues of ?64.5m in the year ending June 2015 and it will more than double the size of NYX with 55% of its revenue now coming through sportsbook. NYX’s rapidly growing open platform casino offering will also be bolstered by the addition of OpenBet’s often forgotten casino business.

Sky Vegas sits on the OpenBet casino back-end as do a number of other UK casino brands. NYX was already making strong progress with its RGS solution and its in-house content from previous acquisition NextGen but this will be a major step forward in offering an all-in-one solution to the types of major clients where an RFP would previously often lead to a straight fight between Playtech and OpenBet.

“The acquisition of OpenBet by NYX completes the portfolio of industry leading products and services we offer to our customers,” Davey said in the acquisition announcement. “They are two highly complementary businesses with key strengths in regulated markets, technology services and gaming content. It positions NYX as the leading provider of B2B betting and gaming solutions on a global scale.”

And for once in this sector this isn’t merely hyperbole, even if revenue comparisons to Playtech are a little less supportive of the final statement. Playtech generated ?570.1m in revenue from its gaming business in 2015 with ?308.7m from casino alone and a sizeable ?32.2m from sports, which is roughly the size of NYX’s total expected revenues for 2015 prior to the acquisition.

But make no mistake, the combination of NYX’s cutting-edge casino content and OpenBet’s dominant position in UK sports is a real game-changer and Playtech and others will doubtless be concerned at the development. Not least because NYX, like so many other B2B power players, brings with it some very powerful operator allies.

Aside from Hills and Sky Bet there is another operator partner with a large stake in the firm, Amaya. The Canadian firm invested in NYX when selling off its Ongame poker subsidiary in late 2014 and deepened its relationship in 2015 when divesting of its Cryptologic and Chartwell assets to NYX in a deal worth CA$150m that saw Amaya enter into a preferred supplier agreement with NYX for casino content on PokerStars.

What comes next?

The real question though is not how NYX uses these relationships to grow, but what its next step will be. It’s already proved to be aggressively acquisitive and compared with some of its peers there are still gaps in its portfolio. The decision to partly divest of its Ongame poker platform was an interesting move but it would be expected to continue to play a role in any supplier consolidation.

Live casino, virtuals or land-based providers would be obvious targets, as would a move towards more “middle-end” data analysis and CRM technology. OpenBet was known to be working on the latter and it would be no surprise to see this as a key part of the Hills development initiative. But there is also the question of what NYX’s rivals do, not least Playtech.

Does the supplier giant look to acquire one of the many sportsbook suppliers that have emerged in the past few years or does it pour its considerable resources into upgrading its own Mobenga platform? And how will the rest of the supplier sector respond to the challenge presented by a seemingly well-balanced and powerful offering from the new NYX?

It would be no shock to see an increase in M&A from the supplier side in the coming 12 months and in many ways it’s a sector ripe for consolidation. There are many firms that excel in one or two areas, but don’t provide the full service solution NYX is now ready to offer. And this deal could well end up being a real catalyst for change that impacts the entire egaming industry.