If a week is a long time in politics then it currently seems like an eternity in poker. For just a week after meeting 888 CEO Gigi Levy to discuss the firm's potential deal with Ladbrokes and his thoughts on the US market, Levy had quit, takeover talks with Ladbrokes had collapsed and the FBI had stepped in to halt the US activities of PokerStars, Full Tilt and Absolute Poker.
Levy announced he was stepping down to 'pursue other interests' and just days later it was revealed that 888 and Ladbrokes had dropped discussions of a merger. But after an initial dip, shares in 888 soared in response to the events of 'Black Friday' in the US.
'My 5 years at 888 has been the most phenomenal of periods,' said Levy. I am proud to say that after all of the challenges the company is performing extremely well and is very well positioned for the future. The coming years in online gaming belong to big, responsible, regulated and professional companies and 888 is set to be one of the winners in the sector,' he added.
Levy said he would remain on the board for a time, to help with the appointment of a replacement and denied any link to the protracted Ladbrokes deal. However, in the wake of Levy's departure it emerged that the plug had been pulled on the deal, apparently due to the two firms being unable to agree a price. Ladbrokes chief executive Richard Glynn said, 'It was very amicable between us but at the end of the day, I simply decided it was not in the interests of shareholders.'
There has been speculation that Ladbrokes decision to walk away from the deal was somehow linked to events in the US, the theory being that 888 has not struck a deal with US authorities to give it immunity from retrospective legal action in relation to its activities in America prior to 2006, but this has been downplayed. The company's recent marketing agreement with Caesars, approved by Nevada regulators, is sure to strategical position the firm in anticipation of any possible regulation in the US.
Shares in 888 Holdings shot up 8% in reaction to the news from the US and how these events pan out are sure to impact on 888's prospects going forward. InsidePoker Business met with Levy, in the days before his resignation, and 888's head of B2C poker Maytal Ginzburg to discuss, among other things, the release of its casual player-focused Poker 6 client and the rationale behind the new poker client.
IPB What is 888's general perspective on the poker industry in 2011?
MAYTAL GINZBURG Surviving is becoming a lot more challenging as sites have focused on highly skilled players and the focus has been all about that clientele. There has been a huge shift in player behaviour over the past few years: players have less time but also become better players faster than in the past. The information is easily available, higher skill levels are reached quicker and liquidity attracts them to a site. So, for operators it's become even more important to get them, but at the same time they all improve so quickly that the ecosystem is not healthy and you end up with lots of sharks waiting for fish, who themselves are not coming to the sites because they have lost money too quickly or are intimidated by the offering. We want to attract players who will play for casual entertainment, and we therefore needed to deliver social platforms that are easy to use yet provide all the interactive features users expect. We had to focus on a low risk/high reward offering that players could understand quickly and easily.
GIGI LEVY The online gaming industry has been trailing the rest of the social media world in this regard. A few years ago a City analyst came up with a formula about how sites had to generate enough fish to keep the big players coming in. But the speed at which these players have improved has got quicker and the likes of PokerStars and Full Tilt have cornered the market in terms of liquidity. So we focused on getting lots of players. You might get less out of them in rake but the numbers make up for it and that's the strategy we intend to continue with.
MG It's been a conscious decision because there has been a shift in trends of how users consume information and content online. We had to make sure the offering we produced met their needs. It took time and we put a lot of focus and effort into it. We have got to the heart of what poker is about: a social event that is entertaining and players have found it relevant.
IPB 888's Poker 6 software is targeted at the more casual player, how? Features, add-ons, what is casual about it?
MG It comes down to making it as easy as possible for players to access tables and play. That means one-touch access to the lobby, quick access to table seats, 3D graphics, videos and editorial content. These excellent features are integrated and geared at the user in the poker client, resulting in higher liquidity and the improved performance of our poker product.
IPB Poker suffered in the first half of 2010, how did Poker 6 help you recover? What were the factors that made it the first half of 2010 difficult for the poker division?
GL We were focused on the launch of Poker 6 to start with, but generally speaking, the whole sector found it difficult because of the World Cup, marketing expenses and the overall environment for poker. But we have turned it around because we have managed to get casual players in large numbers, this also attracts skilled players, which is good for the ecosystem in general.
IPB You are licensed in France but have not been active in the market, whether it's through promotions and marketing your offer or regulatory lobbying. It seems you became licensed through necessity. If that is correct, why is that so and what plans do you have?
GL We started marketing our products but the results were disappointing: costs per acquisition were, and are, still very high, lifetime value of players is still not very interesting, the restrictions on the product offering allied to the tax that French authorities have set up is very high and so on. But the main issue is that it is not a profitable business, therefore we are waiting to see what happens and how it develops on a regulatory level. In any case, poker on its own is a losing business in France. If it's combined with casino and bingo then there is scope to grow the proposition.
IPB Barrière Poker, in partnership with the lottery monopoly Française des Jeux, has licensed the WSOP brand from Caesars to operate wsop.fr and host and market WSOP events in France. Do you feel 888 has missed out on that as it would have given you a great lever in a regulated market?
GL There were no other synergies to be had. Caesars develop their brand the way they see fit, we don't host live events of that type and it wasn't on the cards.
IPB What is your outlook on the poker sector?
MG It's about developing and maintaining the differential factors that make players come to 888's poker site: continue innovating and offering new promotions. We will carry on with our UK focus and offer a gaming platform where people can communicate. The future lies in giving players a game that is enjoyable, interactive and most importantly that you can have fun with while playing.
IPB What is different about 888's PokerCam as a poker feature?
MG The PokerCam allows players to talk to each other and see who they are playing against. It's created a great buzz because players see the tables and at the same time meet their friends and opponents. They get to talk to people across the world. For example, we have had a retired Australian man sipping white wine on his porch talking to two young female players from Lithuania! It creates great interaction and it shows that players actually crave that exchange of communication because it's friendly and fun.
GL It also creates greater trust in the product, many players fear they are playing against bots and this obviously puts that theory to bed. The other important aspect is that how you look and act can deceive you or help you win. This is a vital ingredient of the game that to a large extent has disappeared with online poker. The PokerCam has brought it back and there's also a lot less trash talk when players are face-to-face!
MG It also allows players to join virtual teams and challenge each other through tournaments. They can partner with other teams and set up games where it will be city versus city or country against country. It attracts casual players because they can take part in games like no strings freerolls, games where the buy-in is as low as 8 cents and they can win an iPad. It enhances the user experience and makes it more attractive for those players, instead of operators focusing purely on the skilled players. But it's not just about the software. You have to communicate to players in a language they understand. That means no hardcore poker terminology and jargon but rather communication that makes it accessible and fun for them to take part.
IPB Why doesn't the poker industry develop more of these features if they are so successful?
MG The sector has realise that players learn and improve quicker than in the past and it's about keeping in touch with evolution: of the product, of the sector and of what players actually want. It's about finding the balance with all these elements. These products also take time to develop, especially when you are catering to basic players and their needs, which are socialising and having fun.
GL It's also more than just focusing on the product. We took a team and told them to reinvent the product. They produced the most coherent poker product the industry has ever had. We then asked ourselves what we needed to achieve our goals with promotions, positive feedback and marketing, liquidity, and celebrity endorsements. It took a year to realise all this, others have tried to do it before us and we've succeeded at it, but it shows how difficult it is.
IPB How does it affect game play: does it slow it down or increase it?
MG The biggest risk we were running was that casual players avoided the product because of a lack of interaction, which is why so many have gone to Zynga. In terms of game play, they stay four to five times longer on the client than they used to. It shows the product is connecting with them and is relevant.
IPB You have said the full impact of your agreement with Caesars and its approval by the Nevada Gaming Commission (NGC) won't be seen at this stage. When will it be seen and what will be the effect?
GL When the US regulates we feel we will be in one of the best possible positions to benefit from it. The full impact of our agreement with Caesars will obviously be seen at that moment.
IPB How much interaction did 888 have with the NGC? What can you tell us about the whole process that led to your approval?
GL The Nevada Gaming Commission is the best regulator in the world and the whole process has taken 18 months. It was tough but fair. The lengthy process was because the Commission investigated everything: the executives, anti-money laundering measures we have in place, how we go about under-age gambling and ID verification, technical and regulatory compliance and so on. It concluded that we met their criteria and we were approved after a very serious process and we have done so on merit.
IPB When do you think the US might regulate and how likely is this?
GL It's impossible to say with any accuracy. Every time you think a bill is going to be pushed through it is then abandoned or sent back to the drawing board for amendments. Some think a federal bill will happen at some point, others think state bills will come first. That second scenario is maybe more likely, with federal legislation following in the slipstream.