The Italian Job

Long before Black Friday, the balance of power in the online poker sector was shifting inexorably towards Europe and one market in particular. The huge growth in Italy following the regulation of the market caught most of the big players napping, and added some new names to the list of industry heavyweights. None more so than Italian network provider Microgame. With the long awaited introduction of cash games finally due this summer, Italy has a claim to be the largest online poker market in the world. And Microgame is at the centre of this dynamic and exciting market.

The firm, founded in 1986 as an internet service provider, is unique in the sector. In fact it doesn't resemble a traditional online poker business at all. In 1998, the firm began its transition towards becoming an online gaming business, and according to its CEO Fabrizio D'Aloia began working on a sports betting, and latterly a poker, platform tailored for the Italian market.

'We started with a well-defined strategy as a B2B operator and it was to offer a one stop shop for the gaming operators interested in the Italian market,' says D'Aloia. Microgame's platform was tested on the international market from 1999 until 2002 and it was ready to exploit the new Italian market as soon as it opened its doors. 'We were the first B2B operator in the Italian market and we now have around 30% market share with 60 operators managing 150 websites and 2.2 million gaming accounts,' says D'Aloia.

'Our total turnover for 2010 was €1.5 billion with around €1bn coming from the poker market.' It's a huge business, and one that can compete in terms of liquidity with the largest poker networks in the world. It should, therefore, be a concern to everyone in the industry that it has ambitions beyond the Italian borders.

People's poker

Microgame already holds a licence in France, although it is holding off making a significant move in that market until the tax situation becomes more operator friendly. And it has ambitions to launch in a regulated Spanish market from day one using a similar strategy to that of its business in Italy. Microgame works with a number of small, local, land-based partners who introduce players to the game through retail locations and act as a bridge between the online and offline worlds.

It's a smart strategy, although not one without its difficulties. It was Microgame who were to blame for delaying the introduction of cash games in Italy as it needed to get all its ducks in a row regarding regulatory requirements for its network members. And managing a network of 60 operators means building up the profile of the central brand, People's Poker Network, is also key to the business.

The marketing euros spent on the People's Poker Tour in the live arena is proof that the firm understands it can't rely on local partners to grow the business alone. And it needs to have a poker brand that competes with the marketing power of PokerStars. But there is no doubt Microgame is as well placed as any European firm to cash in on the growth of regulated poker within the European online poker market. And its ambitions to expand into Spain, France and Germany in the coming months and years should be viewed with caution by any operators currently in those markets.

This is no small time firm with small ambitions of a modest market share. InsidePoker Business spoke with the effusive CEO of the business at length about all areas of the business, including their ambitious plans for live poker and a launch in Spain.

IPB What differentiates the People's Poker network from other poker sites in the Italian market?

FD People's Poker is the only platform designed and developed in-house specifically for the Italian market. All the other platforms are coming from the dot com world and adapted for the Italian rules. Only our platform has been designed around the needs of the Italian market. The concept of our network is very simple: we aggregate all our customers around the same platform and a single brand.

IPB How does the single brand structure work with so many partners?

FD The People's Network is a family brand that we use for all network products such as bingo or games where customers need to share assets to be competitive. The brand is well recognised in Italy. We manage all the common aspects of the poker network including all financial processing, tournament scheduling, collusion detection, network ecology and all central marketing including live events and tours. We also manage the common pot for marketing, which is invested in equally by an operator according to his market share.

IPB With such a huge range of network members, there must be some discrepancy in terms of size. Are some network partners more important than others?

FD In the network, no member is over 6% of the total liquidity. The network is well distributed in terms of contribution and no customer is more significant than the other. This is very important to us because it means there is no one with more privileged needs than another.

IPB You mentioned live events were important for the brand, and of course we have seen the recent deal with the WSOP in Italy. Are they a key partner for you going forward?

FD Live poker is a very significant part of our strategy, and the partnership with the WSOP is part of this. The online and live poker worlds are two different sides of the same coin. We are interested to offer a complete experience to our customers. And the exclusive partnership with the WSOP is part of this experience, because all poker players have the dream of playing poker in Vegas.

IPB How is the partnership with the WSOP beginning to work in Italy?

FD It started at the end of last year when People's Poker became the central hub for all WSOP activities for Italian residents. The booking of tickets for the main event and other side events can be done through Microgame. And we are managing all the online satellites, while at the same time promoting the WSOP brand all over Europe through our network of live events.

IPB Are there plans to launch new WSOP Italy events?

FD We are working towards a very important live event that will be held in a very important Italian location in order to maximise attention in terms of media and players. It is still in progress, but there will definitely be a stronger integration of the WSOP brand in the Italian market with special events.

IPB Would you be looking towards making an announcement soon?

FD Our timeline is to make an announcement on this in the last quarter of this year or the first quarter of next year.

IPB What are your plans for the People's Poker brand in the live poker sector?

FD The People's Poker Tour is growing in terms of event quality perception. Our strategy is very different from our competitors. We take care of our players from the first to the last second. We look to guarantee the best experience, not just in terms of poker, but in terms of side events and things not connected with the poker such as hotel accommodation, excursions and entertainment. Our live poker events are built around a more complex concept of a poker experience connected with other entertainment. And we're also looking at increasing the integration between online and offline.

IPB How are you looking to make that link from online to offline work harder?

FD From the next event we will introduce a complete RFID (radio frequency identification) experience, where all the chips will be RFID tagged and the chip counts will be updated in real time. And this will allow other players at home to be informed about the event instantly and they will be able to support the players through our media channels. Players in the tournament will be informed of chip counts on the big screen at the casino and also be able to see messages from players watching at home. We work hard to change the traditional concept of poker live tournaments.

IPB What value do you think live poker tournaments have to an online business?

FD For us it's very important to develop a concept around poker and other games that is entertaining and open to the global player base. It's not just for professional players, but for recreational players and those from other poker rooms. For us the live event is part of the entertainment world, not just part of the gaming world.

IPB There are some major changes ahead in Italy with the introduction of online cash games. What effect will the cash games decree have on your business?

FD We will need to increase our anti collusion services and devote more resources to financial settling as this is more complex in cash games than in tournaments. But we expect a significant change with the introduction of cash poker, because we will attract new players and have a period of growth. We estimate we will double the current net profits in the poker market.

IPB How much of an issue has the delay in the introduction of cash games been for the existing market?

FD We experienced delays and this caused some difficulties as some players were not willing to wait any longer for a cash experience. Some are moving onto the dot com sites, and some illegal operators are moving to take advantage of this.

IPB Do you feel the regulators need to take a stronger role in closing down sites operating without an Italian licence?

FD In the future we expect more compliance to the laws of the Italian market. The Italian authorities have been able to look at what happened in the US market and in future they will apply more rigid compliance to Italian licensees.

IPB How do you plan to market to your database once cash games are finally available?

FD We will have to be very careful how we advertise cash poker, as it's a new experience for Italian players. We will introduce the cash model in a soft way, we will not want to be aggressive and will look to avoid any problems. We expect to have a conversion of most players from tournaments to cash as we believe some players are playing tournaments just because we can't yet offer cash. They prefer to play very fast sit-n-gos as a substitute for the cash experience. We will work hard to guarantee a good experience for our players and to grow this market.

IPB What are the growth opportunities for your online business in Italy beyond cash games?

FD After cash games the most important products for us are casino games. It's a new market for Italy and will start at the end of July. We are working hard to be the first to move on that new market and we have in place partnerships with the most important casino operators in the world. We are keen to offer casino games to our customers to capture a large market share from day one.

IPB Who do you view as your biggest competitors in the Italian market?

FD The biggest operator is the People's Poker Network and then we have the anomaly of PokerStars. They, until recently, operated in the US market and were recycling that money in Italy. They are not transparent in terms of company assets, and they are investing a large amount of money in marketing. This is very dangerous for the reputation of the entire market. In my view, the Italian regulators did not respond quickly to protect the image of the serious Italian operators and the Italian regulated market by suspending PokerStars' licence until questions were totally defined. This is creating serious issues for other operators. PokerStars is working like all the other Italian operators with no penalty or limitation applied after Black Friday.

IPB Would you like a penalty to be imposed on PokerStars because of Black Friday?

FD All the other Italian poker operators asked the authorities to apply some measure to avoid losing the reputation of the Italian market because of the PokerStars anomaly. But we don't have any information about what is in progress on the authorities side. As regards Full Tilt, we know they filed an application for a licence in Italy. The application is in progress, but we don't know if the authority is interested in granting the licence after their involvement in Black Friday. Of course, the pressure on the authorities is the same as for PokerStars.

IPB What other markets are you looking at to grow the business?

FD We are looking with interest at other large regulated markets. We have a licence in France and are also looking at Spain with interest. These are the three markets we are most interested in: Italy, France and Spain. The French market is not currently profitable and we are looking at the right time to jump in. The Spanish market will be different from France and we are looking to operate from the first stage. Germany is also very interesting, but we do not have enough elements to evaluate it at the moment.

IPB How would you build liquidity in Spain?

FD It would be the same as the Italian market. We would work with local operators to not just build liquidity but a relationship with the players. We would look to build up a network of small shops to introduce the players into the online world and create the trust relationship. We need to familiarise the players with online poker and trust is very important. It's important to have a direct and customised local relationship with the players and not just build around advertising. Players are people and should be approached in a one-to-one relationship with local partners who are established in that market. This is the key to our success in Italy and we are keen to operate this model in France and Spain.