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18.10.2005 The latest bad news from Empire Online received wide publicity this week, including mainstream comment in leading UK newspapers and on Sky News. Having commented last month that its poker action had been flat over the past three months, the company has now warned that net profit for 2005 will be about 10 percent below the consensus market forecast as a result of recent radical operating changes in its relationship with PartyGaming plc.
The announcement perhaps predictably caused a dip in Empire's share price as investors adjusted their expectations for this year and beyond. The consensus forecast before the bad news was for pretax profits of GBP 34.2 million on revenues of GBP 67.7 million, according to a spokesman for the group.
Although growth in new subscribers had remained "strong" across Empire Online's gaming sites, the group warned that there had been a slowdown in poker 'rake' - or gaming revenues - since PartyGaming decided to shift all of Party Poker 's own players across to a new operating platform.
The move was an attempt by PartyGaming to cut the amount of 'rake' it passes on to Empire and other so-called 'skins' for bringing players to its site. By barring players from third-party sites like Empire from the new platform, PartyGaming hopes that these players will sign up directly with PartyPoker.
Empire said the decision to keep outside players away from PartyPoker's own customers would mainly impact the value of its existing customer base, which would not generate as much 'rake' as it did before the separation.
However, Empire said the rate of growth in new customers was still strong, and that the value of each new player on the Empire Online network was unaffected by PartyGaming's move.
"Empire Online is confident that the growth strategies it has in place across its trading platforms, such as Noble Poker and Club Dice ... will deliver substantial net profit growth in 2006 (albeit at lower levels than previously expected) and beyond," said the group in a statement.
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