What Does 888’s Purchase Of bwin.party Mean For The US Market?

Steve Ruddock July 17, 2015 1272 Reads
888 bwin US online gambling deal

It was a big day in the iGaming world, with 888 entering into an agreement to purchase bwin.party for a combination of $1.4 billion in cash and stock.

This is the latest sale/merger in what appears to be an industry-wide consolidation trend that began in 2014 with Amaya’s purchase of PokerStars, followed by the merger of Gtech and IGT, and the Scientific Games acquisition of Bally Technologies.

888’s takeover of rival bwin.party not only bolsters its own offerings across several verticals, but it also prevents it from losing ground to another bwin.party suitor, Amaya Gaming, who along with GVC Holdings made a strong play at acquiring bwin.party.

Had Amaya won the bidding war, the company would have likely acquired some of bwin.party’s assets – likely the company’s U.S. interests – and tightened its stranglehold on the online poker industry.

888’s offer of £898 million was a bit lower than the GVC/Amaya offer of £908 million, but came with fewer risks and fewer regulatory constraints in bwin’s estimations.

“This is a transformational opportunity for 888 in the consolidating online gaming industry,” Brian Mattingley, Executive Chairman of 888, said of the deal.

The deal is expected to be finalized by early 2016.

What this means for regulated U.S. online poker

Had Amaya been able to leverage bwin.party’s U.S. assets, those assets would have provided it with a readymade platform in New Jersey, as well as a completely untainted brand to eliminate any roadblocks in California and elsewhere – albeit with the a product many feel is inferior to PokerStars’ platform.

However, with the company on the cusp of being licensed in New Jersey and with legalization in California unlikely for the foreseeable future, losing out on bwin.party isn’t much of a hit to PokerStars’ U.S. plans.

That being said, the potential for almost absolute consolidation of the U.S. market by 888 could make it more difficult for PokerStars to steamroll the competition in New Jersey.

PokerStars would have had a far easier go of it if it could isolate each competitor and pick off several smaller sites one by one, rather than face one entrenched opponent.

What this means for interstate online gambling

When the deal is completed, and assuming PokerStars hasn’t launched, 888 will control 99% of the online poker traffic across Delaware, Nevada, and New Jersey. South Point’s RealGaming is the only licensed online poker room in the U.S. not powered by 888 or partypoker.

By buying its main U.S. competitor, 888 has seemingly removed the only voice of dissent preventing New Jersey from entering into an interstate agreement with Nevada and Delaware.

Thus far New Jersey has remained independent, despite several hints at joining the Delaware/Nevada interstate network. This shouldn’t be much of a surprise considering the market dynamics.

888 would be the sole beneficiary of an interstate online poker agreement, so it’s almost a certainty that Borgata and bwin.party have been against any potential interstate agreements. It should be noted that Nevada and Delaware didn’t implement their interstate agreement until Ultimate Gaming was out of the picture.

Considering that only 888 would benefit from linking up with Delaware, it’s likely that the same concerns of 888 gaining an unfair competitive advantage were being voiced by bwin.party and its partner Borgata in New Jersey.

With that barrier now removed, 888 is essentially free to link up its products in Nevada, Delaware, and New Jersey, which would create – for the first time in the regulated U.S. market – a viable, appealing online poker network. If traffic were combined across all sites, the interstate network could see average cash game traffic of 400+ players, and peak traffic close to 1,000 players.

New Jersey joining Nevada and Delaware might also reignite interest from casinos with presences in both states that have put their online poker plans on hold due to market constraints.

Won’t PokerStars lobby against interstate?

Still, the sooner an interstate agreement is signed the better, as other poker operators, namely PokerStars, would once again complicate matters.

If PokerStars launches in New Jersey before an interstate agreement can be reached, one would think they would slide right into the “no” column vacated by bwin.party. After all, PokerStars would only be operational in New Jersey, so any interstate agreement the state enters would be a negative from its point of view.

The problem with that logic is that PokerStars presumably has very little leverage in New Jersey.

The general feeling among the average person is that New Jersey is doing the company a solid by licensing the company in the first place, and Stars might not want its first act in the Garden State to be stopping what poker players want more than anything: interstate online poker between New Jersey, Delaware, and Nevada.

Stars is also a forward-thinking company, and allowing interstate online poker in New Jersey could be a boon for it down the road if it manages to partner with casinos in other states exploring iGaming expansion such as Pennsylvania, or if it eventually partners with a casino in Nevada.

This isn’t as crazy as it first seems, considering the five-year “bad actor” ban imposed on PokerStars by Nevada is almost at its halfway pointAB 114 was enacted in November of 2013.

There is also language in AB 114 that allows the Nevada Gaming Commission to waive these prohibitions if they see fit.

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