Q&A: GiG on strategic reviews and the transition from a B2C to B2B business

Gaming Innovation Group is a business that has been moving from one corporate identity to another, as it transitions from a B2C to B2B business model going forward. The drive towards this move went supersonic last week when the Malta-headquartered operator revealed its €31m deal to sell its B2C assets to fellow operator Betsson was confirmed.

This week, the firm announced its Q4 2019 results, with double digit declines reported in both B2C and B2B business arms. Now that the business is accelerating its B2B transition, the demands will change but will the revenues return to profitability? EGR Intel spoke to GiG CEO Richard Brown to find out.

EGR Intel: You’ve come into the company at a time of transition as it moves from being a B2C and B2B business to solely B2B, how much of that has been necessitated by external market developments versus internal plans?

Richard Brown (RB): A good question, I think there’s always been a desire internally to look at the longevity of the B2B segment. We believe we have enough strength there over the long term. That being said, I think that the market conditions over the last couple of years has really changed the ability for operators to have multiple focus points. When I say operators, I mean both B2B and B2C in that sense or any company. I think that continued consolidation in the market and the regulatory pressure, not only now but also what may be coming in the next couple of years, just really shone a light on the B2C arm. The internal discussion went something like, okay, well, if we’re going to do B2C, then we’re going to need some pretty heavy marketing funds, and will we also then be able to develop the rest of the B2B business at the same time? So, I think it’s a combination of both elements. I think internally it also makes sense to avoid conflicting agenda points and conflicting priorities, and hopefully this will enable us to focus on one. We had synergies in the past as being both B2B and B2C but I think those have been outweighed by perhaps regulatory demand and changing dynamics within the industry.

EGR Intel: What’s been the biggest challenge for you since coming into the CEO role?

RB: I’ve been working at GiG in various roles for about four years now. However, if I think what the biggest challenge from a company perspective has been it is really looking at the different dynamics of what is essentially quite a complex organisation and continually asking, is this organisation better together? Or will both parts of it flourish more as separate entities? I think that was quite hard to both conclude on but also to continue to analyse and self-reflect on as well. As I said, I’ve been part of the organisation for the last four years, so I have an emotional connection to GiG as well. So that was obviously a challenge and this is my first role as a CEO. I’ve been COO and managing director before, but this is a CEO role so from a personal perspective, you want to be confident that your first actions within the role are correct. So, you’re trying to control the elements of self-doubt but I’m very confident in the decisions that we’re making now. Based on feedback from the teams that I speak to, everyone’s really excited and actually quite inspired by this sharp focus on cleaning up the issues that have been hanging over us for the last few months and then to be really excited about our business again going forward.

EGR Intel: How do you as a CEO approach periods of negative company results?

RB: It’s been a challenge for everyone, but I think one of the things that I feel is important for us as an operator is to operate transparently and give people that element of truth and reality about our operations. While it’s important to not get bogged down with that transparency, I’d almost like to turn it around and engage with key individuals, stakeholders and other groups within the organisation and say things like ‘this is where we are, how do we get out of it? How do we make the business perform better? How do we better bad results?’ Most of the time when presenting the kind of problems we’re facing and asking for solutions, people will generally come to the same kinds of conclusions. Using this impetus and self-reflection we can get people motivated behind these particular points to drive the business forward. I think the people I’ve worked with here at GiG are among some of the most dedicated I’ve ever worked with, and it’s about reinforcing that by engaging with them on issues we all need to be involved in addressing.

EGR Intel: You came into GiG at the same time as the strategic review began, how much of your immediate role has been dedicated to making this review a reality?

RB: I think pretty much all it to be honest over the last few months. This has been driven by the board and me. I know the company pretty well, having worked in this for a number of years so could easily identify those strengths and weaknesses. This is something that I’ve worked on extensively since I took up the CEO role.

EGR Intel: Within your investor presentation, you listed several action points for the business, some of which have been completed and some of which are ongoing, which of those are or have been the most important for you in terms of the ongoing business?

RB: I’m not sure that you can necessarily say there’s one because we remain a multi-faceted business even if it’s B2B only. If we were to then break our objectives down into individual business areas, be it platform, media or sports, I think it’s imperative that we find an outcome which supports sports in some way financially. That’s an element we need to address within the organisation.

From a platform side we need to accelerate sales. We’ve allowed time over the last couple of years for our development teams to really focus on the product and the development of the second generation of the platform. Now that this work is completed, we can really start to accelerate the sales focus, processing and the new fixed fee model relies on us being able to sell on some volume as well.

We have some internal targets that we are working towards. Our work is never fully completed and we always need to work on development and do more in order to be successful so this is an ongoing process.

From a media business perspective, I believe we’re relatively well organised and structured, however there’s a lot of improvement points within GiG’s existing structures. We need to focus on products and on our tier-one sites, and I believe that our expansion or continued expansion into new markets will help to drive longer term growth from that. Those are the areas of the business that I’m particularly focused on.

EGR Intel: You’ve mentioned in the presentation that you want to transition to higher earnings and quality customers, how much of making the core platform sportsbook agnostic is focused on delivering that?

RB: A part of it is relating to that, as I mentioned in the presentation, different sportsbooks and different styles of sportsbooks will attract varying levels of client. We believe in our platform as it’s been a really strong product and will continue to get better and better, as we’ve seen from the release of the new data platform as part of that. While our sportsbook is designed for a certain style or certain market there are much bigger opportunities in catering to clients who wish to have another sportsbook as well. As I said in the presentation, it’s about giving the customers a product choice, something which I think is really important going forward.

EGR Intel: You’ve mentioned that you want to find a joint venture partner or a similar financial partner to directly support the B2B sports position. How are the discussions going?

RB: There’s only a handful of suppliers which have a sportsbook and platform running in multiple jurisdictions in the US so I think the strategic position and asset quality in that sense is very high. I’m very pleased with that but we are a very new sportsbook, everybody else has had the best part of 20 years run up to this, and we’ve been going at it for only a couple of years. The underlying technology that we have in our sportsbook is really strong, but we have some work to do on the feature enrichment. That’s why I really want to find somebody who can help support that business over a longer period because obviously we need to address the financial position that it creates as well. We are in discussion with several interested parties around agreement, consolidation or arrangement that would help to bring this forward.

EGR Intel: How does the sale of the B2C business to Betsson ensure the company’s future?

RB: There’s two elements, one is the balance sheet strengthening. We had a debt position that will be solved as part of this transaction. Then we can also continue to focus on the remaining part of the business in order to grow that. Secondly, the multiple upsides we generate from having this deal will lead to an improved financial position of the company as we grow over the coming years.

EGR Intel: In what ways has the introduction of the fixed fee model changed the way that GiG does business?

RB: I’m really pleased with the way it’s gone since we started. Initially, I think there was a little bit of confusion with people trying to understand how it would work for them but it’s now gaining some traction. Of the firms we’ve talked to, those companies that predominantly run at some form of scale resoundingly see this as something with great potential due to the fixed cost element. We signed our first customer in Q4 and we’ve just extended the contract with another operator, so I think we’ll see agreements coming in periodically. A lot of the customers, most notably the land-based operators, have a better understanding of the fixed fee model as they operate in similar ways. All in all, most of the responses have been very positive.

EGR Intel: In what ways have you worked to reduce complexity at GiG? Do you feel you’ve achieved that aim or is there still work to do?

RB: I think there is still some work to do. We will have some time now where we need to work on the closure of the Betsson deal, transfers and we’ll provide some managed services to them as well. I do believe the major complexity within the organisation has been reduced, things like the convergence of B2B and B2C, which markets we enter and where we put the most effort were the big issues. We were also trying to continually realise synergies between the B2B and B2C operations, and now that these parts have been removed, we can focus entirely on what is best for those business areas which remain.