Bwin.party reveals social gaming strategy

Bwin.party has announced details of its social gaming strategy, setting up Win Interactive, a dedicated, Gibraltar- and Ukraine-based development studio as part of an investment of up to €40m in the vertical over the next two years, with the first apps developed by the new subsidiary to go live this summer.

The news comes ahead of an analyst presentation discussing the company’s social plans, to be held in London this morning at 11am. This follows eGaming Review exclusively revealing yesterday that bwin.party would acquire Ukraine development studio Orneon Limited as part of its entry into the social space.

The operator today confirmed the deal, and revealed that it would acquire a number of assets from Velasco Services Incorporated – a separate business to Orneon – for a fee of up to €18m in cash, of which €14m has already been paid. These assets, from both companies, include a number of existing B2B social gaming contracts and software engineering resources.

While there has not been official confirmation of whom these contracts are with, eGR understands that Orneon was involved in the development of Mytopia’s Bingo Island as a ‘hidden object developer’, meaning that it worked on elements of the game’s design without owning the IP of its work.

Orneon is also thought to have helped develop mobile games for Slotomania, the core brand of Caesars Interactive’s social subsidiary Playtika, something supported by the fact that bwin.party has announced that Win will develop products for Android and iOS platforms. In a release announcing the launch of the social strategy, bwin.party highlighted the fact that many of the Orneon developers “were integral to the development of an application platform for operating multiplayer-social games and gaming networks on iOS and Android devices “¦ “

Win will operate on a freemium model, with revenues derived from the sale of virtual currency and virtual gifts, as well as advertising income from banner ads, paid search and special offers.

In a joint statement bwin.party co-CEOs Jim Ryan and Norbert Teufelberger (pictured) said: “We have chosen a ‘build and partner’ strategy, one that provides us with both the resources and additional management expertise to execute our planned extension into social gaming – an exciting and fast growing area of digital entertainment that is the latest addition to our business strategy.

“We are focused on building a meaningful stand-alone enterprise that will operate outside our core real money gaming business but which will benefit from the Group’s significant resources and assets. Our investment will enable us to launch Win, our dedicated social gaming studio with its own development centre that will increase our speed to market both for social as well as mobile games,” they explained.

The social gaming divison will be overseen by Teufelberger, but day-to-day operations will be led by former Mytopia CEO Barak Rabinowitz, as reported yesterday by eGR. Working under Rabinowitz will be a Alex Usach, who will head up a technology development unit; former EA employee Dan Matkowski, who becomes lead games producer; head of publishing Tilli Kalisky, and head of prototype development Dennis Hettema, co-founder of social app developer Hettema & Bergsten, responsible for the bwin.party-backed Google+ poker game Aces Hangout.

The cost of launching Win is set to impact bwin.party’s EBITDA through additional costs of €5-€10m in 2012 and 2013, but Ryan and Teufelberger jointly commented: “”¦ We are excited by the potential of this new market and believe we can deliver attractive returns in the medium term through relatively modest investment, funded from operating cashflow over the next 18 months.”

Analyst Ivor Jones of Numis Securities retained his firm’s ‘Buy’ recommendation, but admitted that it was difficult to gauge the success of the division: “There is much in today’s announcement which has to be taken on trust. Is the new management team capable? Are the assets being acquired a suitable platform for the group’s plans? Will the social gaming variants of the group’s gambling products be commercially successful?

“However, we are in no doubt about the size or growth potential of the market which bwin.party seeks to exploit,” Jones concluded.

Jones went on to comment on potential regulation of social gambling products, similar to regulation on cash games, and highlighted the fact that bwin.party’s experience in regulated markets left them in a stronger position than a number of purely social operators: “We are doubtful about the legal basis for “social” variants of gambling games. However, if there is a legal challenge to such games, bwin,party has the expertise necessary to limit access by location and age which some of its social gaming competitors do not.”

Family Tree: Win Interactive management team

Barak Rabinowitz, head of Win Interactive: Formerly CEO of 888’s social gaming subsidiary Mytopia, Rabinowitz, leaving in January 2012. He was previously co-founder and CEO of social gaming operator Amuso, which went into voluntary administration in September 2010, selling its assets to BBC Worldwide.

Alex Usach, head of technology development unit: Usach joins from software services company Acrient Group, where he was president of Eastern European operations. Before joining Acrient he served as CEO of AJM Software, and has over 20 years of management experience in software development, and holds a PHD in computer science from Vinnitsya Polytechnic University.

Dan Matkowski, lead game producer: Former Electronic Arts employee Matkowski has extensive experience in the video games sector, having worked on titles including The Sims 3 and Def Jam ICON for Xbox 360 and Playstation 3. He has also worked for AOL and Condé Nast.

Tilli Kalisky, head of publishing: MIT graduate Kalisky has experience of working with a number of social media companies including mysupermarket, PLYmedia and VocalTec, having worked for venture capital firm Greylock Partners as an associate partner.

Dennis Hettema, head of incubator: Hettema worked for bwin in its online marketing department, and is co-founder and owner of social app developer Hettema & Bergsten, which developed the Google+ game Aces Hangout, backed by bwin. As head of incubator he is responsible for prototype development.