The PokerStars You Knew Is Gone – Here’s What David Baazov Is Replacing It With

April 2, 2015
The PokerStars You Knew Is Gone – Here’s What David Baazov Is Replacing It With

The earnings call for Amaya Gaming regarding its fourth quarter performance was most noteworthy for its big news regarding the future of PokerStars: in daily fantasy sports, sports betting, and New Jersey.

It’s hard to imagine that Amaya could have made any more news in the online gaming industry with a single earnings call. PokerStars is going to change in large and measurable ways in the near future, and not just in the poker sector.

PokerStars = Daily Fantasy Sports company

All other news that came out of the call paled in comparison to the blockbuster move that PokerStars would be entering the daily fantasy sports market. The announcement was just a few sentences from Amaya CEO David Baazov, but it might be the most interesting development in the online gaming industry this year:

We have also taken the strategic decision to enter the daily fantasy sports category and are pursuing parallel tracks of internal development and strategic acquisitions. We expect to provide more details on this strategy in the second half 2015 but see a clear crossover from poker and daily fantasy sports.

Baazov expanded on PokerStars’ DFS plans in the question and answer session:

The goal is to be up before the NFL season starts. We clearly see a strong demand for it. A lot of the specifically US players that were formerly PokerStars players would like to see us launch fantasy sports. So I would say that that’s the goal, really launching it by the NFL season.

It’s a clear, strong crossover with poker. And given the size of our database, you couldn’t actually acquire somebody and leverage their entire platform because nobody’s software that we’ve seen can currently support our volume that we would have if we launched fantasy sports.

A daily fantasy sports offering would get PokerStars back into the lucrative United States market it has been shut out of since Black Friday. DFS is still a relatively young and growing market that Amaya/PokerStars can enter and perhaps own in a short time period.

Little is known beyond that about Amaya’s plans for DFS, which left lots of room to speculate:

  • Will PokerStars be handling its DFS platform in house, or buying out an existing site?
  • Will we see DFS outside of the American market? Such as fantasy soccer in regulated European jurisdictions?

Analysis from here.

Sports betting going live

PokerStars wasn’t done on the sports front after its DFS revelation. From Baazov:

I am happy to say this morning PokerStars took its very first sports bets as it began rolling out a beta version of its sports betting offering in select markets with the intention of expanding across the dot-com global network through the next two quarters of 2015.

Sports betting is a very large addressable market for the business and is a product that much of the current player base have been asking PokerStars to provide for some time. The business believes there is a strong crossover potential between the verticals, and PokerStars wants to grow the poker economy by attracting players from elsewhere who are currently making sports bets with other providers. The business anticipates this will help attract more recreational players to PokerStars poker games.

Last quarter, Amaya was saying the sports book would go live in the first half of this year, and the beta happened exactly three months in. The announcement of the first sports bet taken at PokerStars starts the clock on rolling out the product to the rest of the world.

Results from the upcoming limited launch — and the full launch later this year — will be watched closely as PokerStars enters that vertical. In a question and answer period, Baazov said a full launch could be expected by the end of Q3.

Baazov also added this nugget:

Notably, in conjunction with the beta launch of sports betting, players will be able to access their PokerStars accounts via their Web browser for the first time. Account holders will be able to securely log into the PokerStars website with their existing PokerStars credentials to access sports betting and their PokerStars cashier. The intention is to develop this service for casino and poker in the near future.

New Jersey’s new entry

At first, it didn’t seem like Amaya had much new to report on PokerStars entering the New Jersey market — an ongoing saga dating back to 2012 and well before Amaya purchased PokerStars. From Baazov:

And we continue to work with the New Jersey regulator toward final approval to launch our consumer business in that state, where a B2B online casino business already operates.

But in the Q&A session, there was this from Baazov:

As it relates to New Jersey, I would say that we feel this is coming. We would expect to receive and launch, I would say, in the next quarter.

That makes it sound like nearly a done-deal, although many never thought it wouldn’t take this long for PokerStars to get into New Jersey. It also marks the first time Amaya has given any sort of timeline on N.J. entry.

So will we see a PokerStars client going live in New Jersey by this summer?

Oh yeah, PokerStars still does poker

Lost amidst all the other big news Amaya was passing out about PokerStars was the online poker site’s core business: Online poker in the rest of the world. 

Baazov said Amaya hopes to “double the poker sector in the next five years.” That seems like a lofty goal, given the current climate for online poker, but it’s likely attainable in theory, if Amaya was throwing it out there in an earnings call.

In particular, Baazov noted efforts in new and emerging markets like Asia — where there is little online poker penetration — as the places PokerStars anticipates growth.

Notably, the company is making investments to grow its business in Asia, which is currently an emerging market for the game of poker but is historically a strong gambling market.

Recent poker pro and celebrity endorsements and the launch of PokerStars-sponsored live poker events and branded poker rooms and casinos in new areas of Asia, such as Manila, are recent examples of the strategy. These initiatives stimulate consumer interest in poker and establish strategic business relationships with partners, regulators, and governments in emerging markets ahead of potential regulation of online poker.

The most recent example has come in Japan, as PokerStars has added a Team Asia pro — Kosei Ichinose — and model Yuiko Matsukawa as a brand ambassador. Late last year, PokerStars held a festival aimed at attracting Japanese players.

PokerStars acquisition drives up earnings

The raw numbers for financials were up across the board for Amaya. Of course, that’s not a shock, as Amaya added PokerStars, now the largest part of its portfolio, in August of 2014.

From Daniel Sebag, Amaya’s Chief Financial Officer:

Starting with our top line, revenues were $369 million in the fourth quarter of 2014 compared to $37 million in Q4 of 2013, with growth driven by the consolidation of revenues from the two businesses we acquired in 2014. …

Adjusted net earnings in the quarter was $86 million, or $0.40 per diluted share, versus $11 million, or $0.12 per diluted share, in Q4 2013, with the increase reflecting the contribution of the acquired B2C business.

It’s hard to draw a ton of conclusions given Amaya’s transitional period — Q4 was the first time PokerStars was in the Amaya earnings report for an entire quarter. Of more interest to investors and everyone in the industry is how Amaya will fare in 2015, its first full year with PokerStars on board. “Looking ahead for full-year 2015 guidance, today Amaya announced that it anticipates full-year revenues in the range of $1.62 billion to $1.74 billion,” Sebag said.

Investigation addressed

Baazov, near the end of his prepared remarks, mentioned the investigation into trading surrounding Amaya’s acquisition of PokerStars, by Quebec’s Autorité des marchés financiers.

I do want to address the ongoing AMF investigation briefly. At this time, I do not have any additional information regarding the substance of the investigation, but I can provide you with these key facts.

Amaya thoroughly reviewed the relevant internal activities around the Ultra Group acquisition and has found no evidence of any violation of Canadian securities laws or regulations, nor has the company been provided with any evidence that any executive directors or employees violated any securities regulations.

The AMF investigation is to our knowledge the only investigation into the trading of our shares. We continue to cooperate with the AMF and respond to requests by all relevant parties. We are confident that once reviews are complete, the AMF will reach the same conclusion that we have, if there were any violations of Canadian securities laws, they were not perpetrated by the company, officers, or directors. The corporation intends to provide further updates on the investigation when it is permitted.

Image Richard Paul Kane /

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