Gaming Media Group Profile
InsidePoker Business speaks to GMG CEO Crispin Neiboer
The Poker Channel was one of the more spectacular launches during the UK’s mini poker boom in 2005, promising lavishly produced shows and the creation of a live tournament brand. But over the years its business model has changed to be a lot more humble, and considerably more profitable, driven by the cash cow of poker site Poker Heaven. And as a result it has attracted the attention of some major acquisitive firms.
The Poker Channel is part of the Gaming Media Group (GMG), headed by Crispin Nieboer, previously a commercial manager at UK satellite broadcast giant BSkyB. He launched the channel and its sister poker site Poker Heaven with private funding back in 2004, with what he admits were some grand ideas. ‘I was initially a corporate boy with ideas of a multi-million pound programming budget and that we were going to create the new WPT,’ he says with a rueful laugh.
The programming is now mostly advertiser-funded and sponsored coverage. And in quieter times, the site broadcasts live coverage of cash games or tournaments on Poker Heaven where players can see themselves on TV. But the main shift in GMG’s business plan was its decision to broadcast directly into European homes, neatly bypassing local advertising restrictions.
The EU directive on freedom of broadcasting means the UK-based Poker Channel is bound only by the UK licence, and as such can broadcast into Europe and beyond with dotcom adverts both for itself and its advertisers. And with France already a major market for GMG, it has suddenly appeared on the radar of those sites looking with a greedy eye on the newly regulated French market.
GMG’s shareholders have appointed Cavendish Capital to look at options for a sale, with press rumours giving the firm a possible valuation of £25 million. With EBITDA of £0.7m from the first four months of the year that would be a very healthy multiple for the start-up, but you can’t help but feel there is a lot more to come from the business.
Based in West London, the head office of GMG is an unassuming place. There is no faux grandeur or lavish production studios. ‘For us it’s never been about being a floated business with big headlines, it’s been about being a smart company that can respond quickly to a changing market,’ Nieboer says.
Everyone on the team seems focused on growing the company and returning a profit, which is no doubt due to a large number of the staff having options. And the end result is an impressive, lean and focused operation. And the addition of a B2B arm is a smart move in a business where few operators are targeting the small to medium sized operators. But there is no doubt GMG is at a crossroads. Is it sale or scale?
The scaling up of the business at the expense of profits is an avenue the shareholders have so far deliberately avoided. Nieboer maintains they were never building a business simply to sell it, but after the hard work has been done in establishing a profitable business there is a real opportunity to scale up now. InsidePoker Business sat down with the CEO to talk through its options and analyse the growth of the business so far.
InsidePoker Business What was it like coming from TV to poker?
Crispin Nieboer It was interesting. It’s a very different culture. I was a finance boy at Rothschilds, did some time in TV and then I moved into online gaming. I was quickly comfortable with the data side of the business, but it took me longer to learn how gamblers think.
IPB How would you characterise GMG?
CN We deliberately call it Gaming Media because those two words need to work together and most of our staff wouldn’t have come here unless we had that contract with the Poker Channel. The money-making machine is Poker Heaven, the Poker Channel is less about EBITDA and more about building something that is unique in the market.
IPB What are the revenues at the firm?
CN Poker Heaven’s run rate EBITDA is £1.5 million from revenues of £11.3 million and the Poker Channel’s run rate revenues are £1.6 million and EBITDA of £0.35 million. But we’ve had a very healthy performance in the first four months (Nov-Feb) with revenues of £4.2m and EBITDA of £0.7m, well ahead of forecast.
IPB That is a very low cost base on the Poker Channel…
CN A lot of that is down to experienced TV people who know how to do it cost effectively. It is very easy to get skinned alive on TV. Of course, if we didn’t care about profits we could do something amazing in terms of scale. I used to say at Sky you could never launch a channel for less than £10m. But now I am very focused on cost effective programming and that means high repeat rates and computer generated content.
IPB How independent are the two businesses?
CN They were always set up as very separate businesses and they still are. The way we structure it is Poker Heaven pays Poker Channel each month and the head of The Poker Channel has his bonus linked to the revenues he receives from Poker Heaven. There is a very healthy debate each month about the amount of sign-ups Poker Heaven receives.
IPB So do you regret some of the big productions you did in the early days?
CN We needed to invest to build up the brand of the channel, build up our supplies of programming and convince advertisers this was a place they could spend money. In the early days we were writing cheques left and right and some of those deals I regret. But we would never have been able to get European distribution being a low-rent channel.
IPB Where was the focus when you first launched?
CN The focus was on the channel, and as 90% of these channels go bust I spent a lot of my time on the TV business. For Poker Heaven we recruited Grant Williams from [defunct sports betting site] ukbetting.com and he helped us get started from a tiny cost basis.
IPB What has changed as the site has grown?
CN As Poker Heaven grew we brought in a VIP manager, a CRM manager and then an affiliate person. As we developed we took customer service in-house and got our own licence and design team. We now have our own SEO person and a CTO and have started to build off the back of the Boss network to build a differentiated offer that gives us a unique CRM platform.
IPB How does the CRM platform work?
CN Its main objective is up-tiering people on rake, giving them personalised promos that are linked to what they do. We use outbound calling on promos and personalised promo structures to up-tier rake, reduce churn and extend player lifetime value. We know what the Boss network average values are and we know ours are a lot higher. We started to speak to some other Boss sites and eventually we rebranded our CRM team here as InTouch Gaming and started to resell it.
IPB What is the intention with InTouch?
CN We are at the small end of the market, we’re not trying to make out we are competing with the likes of Dragonfish, but there is nobody else really doing this. We can rebrand the player zone very quickly, and that is a part of the business we are very excited about.
IPB Can you explain your business model now with the Poker Channel?
CN The 2005 Gaming Act allowed a lot more on advertising, and for the first time we could do real money dotcom advertising. Since then we have been able to do that after 10pm on our UK channel. We are a pan-European broadcaster, but the EU says we have to follow UK rules and under Ofcom we are allowed to broadcast these ads across Europe along with branded programmes. We’re not the only ones. A lot of the Scandinavian channels on ViaSat are broadcast out of Uxbridge.
IPB Where does the business go from here?
CN We know there is a strong proven cross-sell between poker and casino, and the other area we see growth is choosing the markets where we want to be in the top five and being much less aggressive in the other markets. France is the first one and we are focusing hard on that.
IPB How big can you be as a company? Could you be as big as Everest?
CN There is no reason we can’t be a top ten site, but to do that we would have to recapitalise and change our strategy from short-term profitability to being about scale.
IPB How focused are you as a business on sale?
CN We have had some unsolicited approaches recently that are causing us to think. The management team here all have stakes and if the right offer came along we would be very interested. We are considering our options. The shareholders decided to appoint Cavendish to advise on strategic options/potential sale. While we’re flattered by the interest, we’re letting Cavendish do its job for now.
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