Party Gaming - Pessimism in September - upbeat in December

Things change fast in online gambling, and the view from the top at Party Gaming seems in tune with that. In September CEO Richard Segal had a depressing effect on the share prices of industry public companies when he took a rather pessimistic view of the online poker scene; this week it was a different opinion, widely reported especially by the UK media.

In an interesting interview with Reuters, Segal gave a tantalising glimpse of things-to-be at Party Gaming, prompting the wire service to write that: "Thanks to the Internet and television, poker exploded outside its U.S. homeland in 2005, and PartyGaming Chief Executive Richard Segal sees technology boosting that boom further in 2006."

The report continues with a review of 2005, in which Internet poker took a firm hold, sparking three big London stock market flotations, generating revenues of around $2 billion and launching games and books that are now topping Christmas lists around Europe.

PartyGaming takes about half of that $2 billion pot, and it has big plans for further growth, Reuters reveals. And Party Gaming is assessing acquisitions and everything from mobile phones to interactive television to access more players.

"The beauty of it all is that we've invented nothing new," Segal told Reuters in a recent interview at PartyGaming's London headquarters. "We're just taking games that have been around for decades and putting them in people's homes."

After a high-profile 4.6 billion-pound ($8.1 billion) flotation in June, the owner of Party Poker and Starluck Casino, saw its market value soar to more than 7 billion pounds ($12.3 million).

Cautious words in a September trading statement sent its shares into a dizzying fall from which it has finally recovered by taking a more aggressive stance against its competitors.

In 2006, PartyGaming plans to launch its new PartyCasino site to run alongside its existing Starluck Casino, as well as two new games.

"There will be two new products next year," said Segal. "In the first half there will be a person-to-person skill game and in the second half there will be another more akin to casino (gaming)."

PartyGaming will also launch a "shared purse," which will help players switch from game to game.

"If you want to go from playing on Starluck Casino to PartyPoker, it's currently the equivalent of going from eBay to Amazon," said Segal. "It's not just one click away, but that will change."

Apart from making life easier for players, the shared purse will make it easier for PartyGaming to cross-market its various games to them.

PartyGaming gets 80 percent of its revenue from the United States. But in the second half of 2006, PartyGaming plans to launch its games in six new currencies and languages.

"From an investor's point of view, it will do us well to reduce our dependence on the United States market," said Segal.

But he sees problems in Asian expansion with the regulatory environment, low penetration of broadband Internet and credit cards and with fraud. "I think Asia is more medium-term than short-term," he said.

Although casino games and sports betting are transferring to mobile phones successfully, poker is proving problematic because the games can take longer, during which time mobile signals can fail.

"A sports bet is very easy to place--it's just one text each way.," said Segal. "But imagine you're playing poker and have a royal flush in your hand, and then you lose connectivity ... We don't want disgruntled customers. It's early days, and we're still looking at test results, but the indications are not getting us overexcited about mobiles," he added.

Digital television, by contrast, is proving a promising medium on which players might soon interact.

"The more distribution channels customers have to play on, the better," said Segal. "And interactive television is something we're looking at seriously."

Asked whether PartyGaming was looking to buy a sports betting operation, he said they were not interested in acquiring companies that took sports bets from the United States, but they would consider opportunities elsewhere.