Bwin.Party Digital Entertainment Nears Finalizing US Deals, by Greg Tingle


Bwin.Party Digital Entertainment PartyCasino PartyPoker World Poker Tour Gibraltar Gaming

Jim Ryan, the co-chief executive of Bwin.Party Digital Entertainment is a very busy man.

In fact, he's invested three of the past five weeks in the United States pushing a presentation that advertised to investors the strengths of the world’s largest publicly-traded online gambling - gaming firm. Ryan’s presentation included a one-page chart that listed the top online poker brands in the U.S. market. The names of once fierce competitors PokerStars and Full Tilt Poker, were crossed out in red. Is Party the only real game left in town? Time will tell.

“Where you see the red lines, those organizations have been indicted, so although one can’t predict the future, it’s unlikely you will see those brands back in the U.S.,” Ryan said during an interview. “The brand that has the most consumer awareness is in fact the PartyPoker brand.”

Ryan’s company happens to own both PartyPoker and the World Poker Tour, two of the top online poker brands that did not have their U.S. operations shut down by the U.S. Justice Department in April because they were not facilitating for-money online poker play in America—in the case of PartyPoker since 2006. They also own PartyCasino, a top online casino destination website. The fact that Ryan, who is based in Gibraltar, has recently been spending so much time in the U.S. demonstrates he is optimistic and hopeful for a U.S. comeback. “My focus is on the U.S.,” says Ryan, who is in the final stages of negotiating partnerships with two U.S. companies. “Even though there is no guarantee that online gaming will ever regulate in the U.S.”

For years Ryan and his staff at PartyGaming, which merged with Bwin earlier this year, had to sit on the sidelines, watching how much money PokerStars and Full Tilt Poker were snatching. It was a difficult thing to watch for the top brass and workers at PartyGaming, which was the biggest online gambling company in the world thanks to its domination of the U.S. online poker market until Congress passed the Unlawful Internet Gambling Enforcement Act in 2006. PartyGaming exited the U.S. market and saw its stock price take a massive hit, while PokerStars and Full Tilt kept their U.S. facing .com websites on air. Party competitors enjoyed somewhat of an unfair advantage, with the rouges using the U.S. market to expand globally at PartyGaming’s expense. “We were beyond the point of frustration,” says Ryan.

Next PartyGaming struck a non-prosecution agreement with the U.S. Attorney in Manhattan, paying $105 million and admitting its U.S. operations had for years violated U.S. law. Meanwhile, PokerStars and Full Tilt continued to operate in the U.S. and claimed that their U.S. operations did not violate U.S. law, pointing to legal opinions the companies had received from top American legal eagles. To many, it appeared like PartyGaming had given a lucrative business away. Even at the company’s headquarters there were doubts until April 2011, when federal prosecutors in Manhattan closed down the U.S. operations of PokerStars and Full Tilt, naming them illegal gambling businesses, and indicted some of their key execs. "I think Party has been vindicated now in getting out when they did and in dealing with the Department of Justice," says Behnam Dayanim, a partner at Axinn Veltrop & Harkrider, who negotiated PartyGaming’s agreement with federal prosecutors in downtown Manhattan.

With all that said, Bwin.Party Digital Entertainment is not exactly holding a management party quite yet. It's so close, yet so far, from reclaiming online poker’s crown. Operating in highly-regulated and taxed European markets while competing against well-run companies like PokerStars is not for the faint-hearted. Bwin.Party’s stock, which trades on the prestigious London Stock Exchange, has dipped by 50% in 2011. Big corporate mergers can be problematic, but the outfit has also suffered a setback in Germany, where the nation’s top civil court recently decided to uphold an online gambling ban, and been dissed by higher gaming duties across Europe. When the company attempted to take advantage of the April U.S. shutdown of PokerStars and Full Tilt, Bwin.Party found that while some new European players were attracted to its poker brands, revenues remained flat-ish. It wasn’t until Full Tilt’s European regulator suspended Full Tilt’s license in late June that Bwin.Party’s increased advertising and promotional expenditures started to pay dividends. PartyPoker is now the second-biggest online poker room in the world, according to PokerScout, averaging 4,150 cash players during any given time. PokerStars has 22,800.

Ryan, who joined PartyGaming as CEO in 2008, has been waiting for this moment for what seems like forever. He long ago took Bwin’s Norbert Teufelberger to a McDonald’s in La Linea, Spain, and chatted to him at length about the pros of combining Bwin’s strong online sportsbook business with PartyGaming’s poker brands, resulting in the merger that was first announced in 2010. Ryan also fine-tuned his company’s business-to-business capabilities over the last few years with an eye toward finding a U.S. partner with whom he can re-conquer America. "We had to be realistic about where we sat in the food chain," says Ryan. "We figured if the U.S. regulated it would be unlikely that we would secure a license directly, that the laws of the land would be written to allow existing land operators and equipment manufacturers in the U.S. to secure the licenses." Ryan is optimistic about current efforts in Washington, driven by the American Gaming Association and powerful casino companies like Caesars Entertainment and MGM Resorts, to potentially get some sort of online gambling legislation through a divided Congress. Ryan notes he is also preparing for the possibility that online poker gets regulated first on a state-by-state basis.

"We have to be ready for both federal or state," he says. "It feels good to have American taxpaying companies finally driving this.".

If an offshore operator is to succeed in American, Bwin.Party Digital Entertainment looks like the firm to place bets with.

Bwin.Party has identified Australia and New Zealand as places to further expand their business, even sponsoring high profile poker players such as Tony G and Stewart Scott (a former Crown Casino 'Aussie Millions' champion.) PartyPoker is one of a number of rumoured brands set to take over the sponsorship spot at James Packer's Crown Casino that FTP once enjoyed. Party look to have as much chance as anyone, probably more so.

In the meantime, poker and casino game players in regions such as Australia, New Zealand, Canada, Italy, South America, South Africa and beyond can continue to enjoy their gaming.

Poker playing celebs such as Leonardo DiCaprio, Matt Damon and Tobey McGuire are understood to be open to sponsorship approaches from Bwin.Party.

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