Virtue Fusion gives Playtech its bingo wings
Playtech's acquisition of bingo business Virtue Fusion in February fits with both the Israeli software business' European and business-to-government (B2G) pushes. Here's why.
APOLOGIES in advance to any reader weary of reading about Playtech, but we’re not really to blame. Playtech is “ the compaÂny just does too much.
The Israeli software supplier completed its third deal in little over two months in February, with the purchase of British bingo supplier Virtue Fusion.
Virtue Fusion is one of bingo’s most liquid netÂworks, with peak traffic of more than 6,000 players, and will swell Playtech’s existing bingo network by roughly seven times over, significantly boosting Playtech’s bingo offering.
The UK company has more than 20 licensees inÂcluding Bet365, Crown Bingo, Ladbrokes, Mecca, Paddy Power, Sky, Virgin and Playtech joint venÂture partner William Hill, and in February signed a deal to provide an end-to-end solution for PartyGaming for the launch of Party’s Foxy Bingo brand, acquired as part of Party’s own purchase of Foxy-owner Cashcade, in Sweden.
The deal is for an initial consideration of £29m (33.4 million), plus a bonus payment of up to £7m based on EBIT perÂformance in 2010, to be paid in the first quarter of 2011.
Like Party’s acquisition of Cashcade, or 888’s of Wink in December last year, Playtech’s purchase of Virtue Fusion is intended to fill a relative chink in its armour. Indeed, speaking to EGRmagazine.com, Playtech chief executive Mor Weizer said the comÂpany is “always recognised as the market leader in casino and poker and the only missing part for us was bingo”.
The reason for the chink is that bingo, a historically an unappealing gaming vertical for opÂerators when compared with the far higher margin poker and casino. This was parÂticularly so given the revenues from pre-UIGEA America, where poker is huge and bingo a marginÂal game at best.
Post-UIGEA, however, liberalised Britain, bingo’s heartland, was of new significance for operators seeking to stem the losses of pulling out of the US, and bingo has come of age. And with the opening of the giant Italian egaming market, potential growth for bingo in Europe is there.
While bingo in Italy does not have the recÂognition it does in Britain, it at least enjoys a far higher prominence than it does in the US. And with the forthcoming regulation of egaming in France, where the same broadly applies, the necessity to strengthen one’s hand in that vertical is obvious. “We realised last year that it was the fastest growÂing part of the industry and that we should be leadÂing the way in online bingo too,” Weizer says.
However, Weizer denied that the decision to acÂquire the business implied that Playtech has concludÂed that it would be unable to reach that point organiÂcally. “We could have done it organically, but time to market is expensive. Also, this was not just about inÂvestment: [the deal] also gives us access to some of the biggest bingo operators out there,” he said.
Playtech’s move to strengthen its position in the bingo market follows its acquisition of casino gaming software company Gaming Technology SoÂlutions in December 2009, and the formation of its SciPlay joint-venture with US lottery giant ScienÂtific Games to deliver online technology to governÂment-backed lottery operators in January.
Like GTS, which Playtech will use to develop skill games that are allowed under regulated markets, the Virtue Fusion acquisition fits into Playtech’s focus on regulated markets such as the UK, where Virtue Fusion is one of the biggest bingo suppliers.
As a low-stakes game associated more with church hall fundraisers and grandmothers socialisÂing, bingo is also typically one of the earlier verticals to be regulated in new markets. “Bingo will play a key role in regulated markets and I think what hapÂpened in Italy [where bingo was regulated next after poker] will happen elsewhere,” Weizer agrees.
Italy, currently Europe’s biggest online gaming market, regulated bingo at the end of 2009 (alÂthough a court then ruled that the decrees coverÂing the vertical were illegal, before the decision was overturned this month).
The Virtue Fusion deal also fits with Playtech’s new business-to-governÂment (B2G) strategy following the formation of the SciPlay joint venture with Scientific Games, which boasts 120 customers worldwide including UK NaÂtional Lottery operator Camelot and the Chinese state government. “It complements our B2G apÂproach given that it will be the first product to be regulated,” Weizer said.