Q&A: A true power player

eGR North America editor Martyn Hannah speaks to Caesars Interactive CEO Mitch Garber to find out how his firm has achieved market dominance

Mitch Garber is a man whose thoughts are never far away from work. When I call to tell him that Caesars Interactive has topped the inaugural eGR North America Power 25 rankings, he is enjoying a well-earned break with his family in Greece. But despite the allure of the sun, sea and an ice-cold beer, his mind constantly whirs over the herculean task of running one of the world’s largest online gaming companies. “I’m never really on vacation,” he says. “But I am in a beautiful holiday-type place with my family, so am I on holiday – yes and no.” [private]

Garber’s work ethic and vision have transformed Caesars Interactive into a social mobile gaming powerhouse via three key acquisitions – Playtika, Buffalo Studios, and Pacific Interactive. Near fluent in Hebrew, Israel has long been his go-to hunting ground for small tech-start-ups with huge growth potential, which is exactly what he found in Playtika. But it’s not just social where Caesars has been successful; its RMG arm continues to keep its head above the water in the rough and turbulent seas of New Jersey and Nevada.

Below, Garber talks openly about how his firm has become a tour-de-force in the social and RMG sectors, and how he plans to increase the gap back to its rivals.

eGR North America (eGR NA): Congratulations on being named number one in the inaugural eGR North America Power 25. What are the main reasons behind your success in social casino?  

Mitch Garber (MG): We have been successful in the social mobile sector for a couple of reasons. Number one, the person who runs that side of the business, Robert Antokol, the founder of Playtika, is the best in the world at what he does. He has emerged as a great CEO. When we met him he had 13 employees and today he has over 1,000 following two smaller acquisitions of Buffalo Studios and Pacific Interactive. He has integrated those two acquisitions extremely well and grown all of the businesses synergistically better than I could have imagined.

The focus on casino style games has also led to our success. A lot of other companies have been in the hit-driven business, so they may have an Angry Birds or a ‘Ville’ type game that may be strong for a period of time, but then they need to come up with their next hit. By focussing on casino style games, we know the games have been hits for almost one hundred years. So we don’t really spend our time thinking of the next innovative game idea, we try to think of innovative content for evergreen games, and Robert has done a great job there too.

eGR NA: And how about your real-money division?

MG: I don’t think we are doing anything great when it comes to real-money, but we certainly have very strong brands. It’s hard to take a lot of credit for Nevada where we don’t have any online competitors, but we see ourselves as spokespeople for the regulated industry. We are proving that regulated real-money online poker is a workable business, a regulated business, that can be managed, controlled and monitored in the most secure and lawful way possible, and that should open the door in other states. And with the WSOP events growing in the way they have been in the last 10 years, under the leadership of Ty Stewart certainly the synergy between our land-based events and online real-money poker is also why we are successful.

eGR NA: Why did you decide to grow your social casino business through acquisition?

MG: In 2010 I called a meeting to talk about how slowly real-money online gambling legislation was coming about, and that if we were truly going to be a big interactive gaming company we would have to take another track. We saw that Zynga Poker was becoming a real business, and I quickly realized that in the build versus buy argument, I really didn’t know how to build it. But if I could find somebody who had built a reasonably successful version of a social mobile games business, we could help grow it to be much bigger. And we did exactly that.

One of the advantages to that approach was that I have a lot of experience with Israeli businesses – I have bought four of them in my life and speak Hebrew almost fluently – and have a lot of confidence doing deals in Israel. So it was very comfortable for me to go looking in Israel for a great start-up company and that is what we found in Playtika.

eGR NA: Will growth now be driven organically, or will you look to get the cheque book out again?

MG: It’s both. Caesars Interactive generated $70m in EBITDA in Q2, so it has become a very large business. But at the same time, I have always been very vocal about being acquisitive. If we can find the right acquisition that fits in with our existing business, we will pursue it aggressively. Once we started the trend of social mobile casino style games in the gaming industry, a lot of the acquisitions that maybe we would have done got done in the consolidation phase. So when we started out we were the only acquirer of these types of businesses but now we are not. This means there are fewer businesses to buy and more people looking to buy them.  That said, when I look at our President Craig Abrahams our GC  Michael Cohen, I think we have the best M&A team out there.

eGR NA: Who do you see as your closest competitor?

MG: We certainly look at DoubleDown Interactive and what Churchill Downs is now doing with Big Fish Games. Zynga has also done a good job in slots. So we have strong competitors and we welcome the competition. We are obviously very motivated and proud to maintain our leading market share and strengthen and grow that position. We can keep growing because we believe we have the best conversion and monetization talent group in the industry, and that gives us an advantage.

We have understood how to produce strong content without necessarily having the best access to branded games, some of our competitors who own the content have better access than we do any yet we have still maintained our leadership position. So I think it is our ability to develop proprietary content and our conversion and monetization ability that continues to allow us to grow and I think we have a lot of growth ahead of us.

eGR NA: What are your thoughts on wearable technology and in particular smartwatches?

MG: The shift from desktop to mobile was quite easy to predict, but when it comes to wearables I don’t really have a prediction. I can tell you, today, it looks like it is very difficult to play games on today’s wearables. Smartphones such as the iPhone 6 and 6 Plus and tablets like the iPad are exactly the right size, while the Apple Watch is exactly the wrong size. There is so much growth ahead in mobile that we are going to let wearables become a big industry and see if there is a place for games to be played on them. If there is, I want to be at the forefront of it.

eGR NA: What trends do you see emerging in the social casino sector in the coming years, and how will Caesars Interactive capitalize on them?

MG: The internationalization of the games is going to be a big part of the future, and I think most of our competitors would agree. A lot of our current market share comes from Australia, the UK, Canada, the US, and other English speaking countries. So there is a lot of growth in the rest of the world by customizing games and localizing them. Few companies have succeeded in going to Asia, but I still I believe there is growth potential there as well.

eGR NA: Your social casino business currently dwarfs your RMG arm. Do you see that balance shifting in the future?

MG: The real-money gaming industry is really a long-term play. I have been in internet gaming in one way or another since 1997, so clearly I have patience for the long game. We have been fortunate that social mobile games came along and that the World Series of Poker has been a very successful business. I was hopeful that we would see a federal bill and we came close. But given that that now is an unlikely outcome then state-by-state is the next best thing.

What we have seen in the past couple of years is this business can be effectively run and regulated by authorities in New Jersey and Nevada, and therefore should be encouraging to New York, Pennsylvania and California. I am confident, but I don’t have great hope that it’s going to roll out very quickly, I think it will roll out over time. That said, I got into the gaming industry when I was in my twenties and now I’m in my fifties so I certainly don’t want to be interviewed by eGR NA when I’m turning 75 still talking about the state-by-state roll out of real-money gaming.

eGR NA: How is your relationship with 888 working out? Any plans to develop or acquire your own real-money gaming platform?

MG: I think the business is too small today for us to develop our own platform. But as far as the relationship with 888 is concerned, my career has in some part been defined by personal relationships and how good they have been. So my relationship with Gigi Levi [Former 888 CEO] and then Itai Frieberger [888 COO] has been and continues to be excellent, and the inter-company relationship equally is very strong. I really like the guys, I really like the company, and they have done just about everything that we have asked them to do within reason and taking market size into account. And realizing that it’s not a highly profitable area yet, it’s about doing everything you want to do, but balancing it with the fact it’s not a big enough market today.

eGR NA: What are your thoughts on PokerStars entering the market? Do you think they will grow poker in New Jersey?

MG: PokerStars has always proven to grow the market wherever they have been. It’s hard to criticize their ability to grow markets, as they have done a very good job of it. But I believe they did that job unfairly back in the time when they were facing the US. But this is a whole new PokerStars yet still with the same great engine and very smart poker people, so I think that they have an opportunity to grow the market, and if they can grow the market then we should benefit from their ability to do that. David Baazov is a very smart guy and I believe he will be very successful.

eGR NA: Will Sheldon Adelson succeed in his quest to ban most forms of online gaming at a federal level in the US?

MG: I think he is a financial bully who doesn’t use facts and who doesn’t understand the business, but has a view and is prepared to finance it. And unfortunately we are throwing good money after bad in order to fight him because he is very powerful from a financial perspective. At the same time, we have got over two years’ experience in Nevada and New Jersey, and there isn’t a single allegation of money laundering, fraud, sponsorship of terrorism, anything that Sheldon Adelson is spending a fortune to convince people would be the case if online gaming remains legalized in the US. The fact is, there is legalized online gaming in the US and those things don’t happen.

eGR NA: Finally, what are your thoughts on daily fantasy sports?

MG: The way daily fantasy sports is operated today appears to be gambling. However, fantasy sports is a great pastime enjoyed by millions of people. So we are talking about an industry that has to figure out a way to operate within the law, and it can be a very exciting business. So we are sitting back on the side lines until there is more clarity on how the daily business can be effectively and legally operated. But we do see it as being a future opportunity for everybody.