PokerStars, Where is it Leaking?

Lets Crunch the Numbers!

Today we are looking at PokerStars, okay, the Latereg news hounds are not econominists great with math, but we had to have a go. Baazov the former CEO of Amaya (PokerStars) has sold huge blocks of shares this month, not once but twice. He has cashed in to the tune of $300m, this takes his shareholding from 24.6m shares down to 5.6. He now owns just 3.8% of the total stock. So when we saw financial reports from Amaya telling shareholders that all was ‘rosy’, we put our conspiracy theorists and reporters ‘Sculder and Mully’ on the case. You need graphs when you do this sort of thing, so we took an 8 minute youtube course (see above and please don’t complain).

Loss of Poker Revenue

Amaya spokespeople have told their shareholders that 2016 was a great year and in fact it was. But it was how they ‘spun it’ that interested us. Amaya made more money than 2015 but that was because of the revenue from the introduction of casino products. The core product’s (poker) revenues have declined and they mark that down to “fluctuations in the exchange rate of it’s core currency the $”. We are not so sure.

A spokesman said;

Our proactive changes to the poker ecosystem and customer acquisition initiatives continue to reverse certain negative trends and we are starting to see organic growth in that business, our casino offering exceeded expectations as we introduced limited marketing campaigns and focused on our cross-sell efforts, and we continued to build and develop our sportsbook

From the figures above, we can see that Amaya revenue from poker declined by 4.6% year on year, or in hard cash – $40m. That is a lot of cash, but it was hardly noticed as the casino revenue grew from $136m in 2015 to $264m in 2016. Shareholders are happy as Amaya closed the year on a $136m net profit (EBITDA of $524m) against the 2015 net loss of $20m.

Is Poker declining?

Poker news sites will say online poker is declining when they look at Amaya figures, simply because they are the market leader with over 65% of online poker traffic. That is too easy, look at other online poker operators, some are doing very well. Take a look at these 3 operators, a stand-alone, a room on a network and a network:

Unibet has done well over the past year, it set up it went alone and now has its own network and revenues have increased dramatically. Betsson is steady with a slight increase year on year. 888Poker has declined but that can probably be put down the withdrawal from the Australian market after the soon to be introduced laws that ban online poker. A company will not be heavy on marketing to a country that they will not be able to serve and therefore numbers will go down.

Cash Game traffic decline

Without doubt there has been some pain in their cash game revenue for certain operators. The industry is seeing a rise in tournament play, but numbers rise and fall throughout the year, there is no definitive study of cash game numbers, as of yet.

What Will 2017 look like for Amaya and the PokerStars Brand?

We are predicting a further decline in poker revenues for Amaya. PokerStars is making many changes and for the first time they are following trend and not setting it. In 2016, PokerStars made $7.8m less poker revenue from UK players than it did in 2016. Over the same period PartyPoker has increased poker revenues. Their partnership with Rob Yong at Dusk Till Dawn and the WPT tie-in seems to be driving player registrations. PokerStars have just re-branded their live events ‘PokerStars Fetivals’. This is in response to the industry trend which is now going after recreational players. The brand is certainly making changes and some will not go down well with players.

Downward Spiral?

Next month, the Australian Government will ban online poker. That market is worth 2.5% of poker revenue for PokerStars or roughly $21m. PartyPoker and other brands will take existing players from PStars and a larger percentage of newcomers to online poker. If PokerStars withdraws from the Russian market, revenues will be hit heavily.

It could be a downward spiral for Amaya. The StarsCasino brand is making good money with cross-over from the 2.5m active player accounts. PokerStars advertises “100 million players” (that is players registrations/mostly dead accounts). Of course if the PokerStars product loses active players, casino revenue will not be as strong.

The announcement in changes to the VIP scheme has disappointed players who rely on rake-back. The changes will reduce rake-back by 85%. Many players will turn away from the brand as a result. However, the group effected represent just 5% of total poker revenue (or $40+m).

With $1billion revenues, we don’t see too many worried faces at Amaya, oh wait a minute, that Baazov chap!