Q&A: Yaniv Sherman on preparing for Pennsylvania and the idiosyncrasies of the US market
Yaniv Sherman, head of commercial development at 888, tells EGR NA about the firm's plans for the US
Q: How are preparations going for Pennsylvania?
A: We have a partnership with Caesars in Pennsylvania, and our joint venture, the All-American Poker Network (AAPN), also has a land-based partner in the state, so the relationships are there. The bigger question is how the business model will work, because on the commercial side, with the license fee and the tax rate, even if you are a local player, you need to be very cost-efficient.
Think of New Jersey with a 54% tax rate. It’s very hard to show a decent return at these rates. Even with multiple skins it will still be a challenge to develop a market. The key will be deploying as many products as you can, which is where poker and sports come into play. We need the ability to market to recreational and mass market players and cross-sell them down the line. Everyone is currently huddled around Excel spreadsheets trying to figure out how the business model works.
Q: Are you ready for sports betting as well?
A: The number one agenda for us is to be ready. 888sport is live and active in several regulated markets, and we have a tier-one proposition with Kambi as our partner. So if sports betting regulates we need to make sure we are quick to market. The ability to put three products into the market is inherently an advantage.
But of course if this rolls out state-by-state, it may happen over a longer period. In that case, we still have our own agenda and we may opt to develop a solution of our own, which is something we are actively investigating. So we have a short-term plan and a long-term plan. We also have a B2B agenda and are talking to several partners about a B2C agenda but the key is having a platform that is certified and working in the US. From there, adding sport to it is far easier than deploying a whole new proposition into the market place.
Q: What do you think is unique about the US market?
A: I think the US market is traditionally very product-centric and the solutions you have today for land-based businesses don’t make the cut if you just try to bring them online. For online you need to compete with Netflix, not other land-based casinos. Sports betting currently is not a very online experience. It’s very tied to the land-based property and when you transport that online, the ability to bring a high end experience will be key.
Q: Globally, 888 is on the record as being keen to do both small and “transformational” M&A. Why have you not been able to get anything over the line yet?
A: It’s certainly not for lack of trying as I think we’ve been very disciplined in our agenda. We’ve been looking for product synergies or something that can help us enter new markets. There’s a few interesting assets out there but with our overall regulated agenda you need to find the right match, and there’s not an infinite number of targets. When we do execute, we need to tick one of these boxes because there’s no point doing M&A just for the sake of buying stuff. So while were being very active in discussions, it’s got be the right deal at the right time.
