DoubleDown causes double-digit social fall at IGT

DoubleDown causes double-digit social fall at IGT

Tuesday, November 22, 2016 Posted by Andy McCarron
Interactive down but lottery and gaming provide earnings boost

A strong performance in the lottery sector both in North America and Italy and an increase in gaming machine sales helped gaming giant IGT overcome a disappointing result from its social casino operation in the third quarter.

Total revenues for the three months to September came in 5% up at $1.26bn and adjusted EBITDA rose 4% to $430m. The figures were helped by a 6% rise in same-store lottery revenues outside Italy, while Italy fared even better with a 7% rise in like-for-likes.

However, operating income for the interactive businesses, including the Double Down social casino business, fell markedly, down 22% to $66m.

On a conference call with analysts, chief executive Marco Sala said the performance of DoubleDown continued to be “challenging.”

“Competition in the social casino market has intensified with a proliferation of new operators that offer compelling content and player experiences,” he added. “DoubleDown has proven competitive content and stable monetisation rate, but no longer enjoys the early-mover market advantages. We recognise this and are focused on restoring its leadership in this attractive market segment.”

This entails investing in a new platform and the company will also be taking a multi-app strategy focusing in particular on the company’s back catalogue of ‘stepper’ titles. Sala warned, however, that the turnaround for the business “won’t happen overnight.”

Asked by the analysts over whether a structural change had occurred in the social casino space, Sala said that at present Double Down was struggling with market share rather than there being any issue with the overall market.

Better news came in the lottery segment where North American revenues rose 22% to $307m reflecting both strong same-store comparisons and also an “incentive contribution” from the New Jersey lottery. Excluding this, North American lottery revenues were 10% up year-on-year. Lottery wagers at the Lottomatica business unit in Italy rose 17% to €1.97bn.

Sala told the analysts the company had secured important lottery contracts in the previous six months including the Florida lottery that IGT will operate through to 2031 and a six-year extension for the Texas lottery.

Said Sala: “At this point the average revenue weighted duration of the North America’s top 20 contracts is 8.5 years. Combined with the recent win of the nine-year Italy Lotto concession, we have tremendous long-term visibility on a significant portion of our consolidated sales and profits.”

In terms of gaming machines, IGT said that the KPIs for the group were good with the installed base rising by 1,000 units to 58,000. The company shipped 9,000 machines over the three months which was significantly ahead of the year previous.

The news that the Greek government has finally given the go-ahead for OPAP to introduce VLTs next year presages good news for 2017, suggested Sala. He pointed out that IGT was contracted to provide 5,000 machines from OPAP’s total allowance of 16,500 and that the company was now “ready to go.”

Totally Gaming says: The news on DoubleDown is interesting, if disconcerting for IGT. The admittance that it has now lost early-mover advantage is accepting the obvious; but comments about more nimble competition should act as a warning to all. The audience for gaming, whether social or real-money, is ever more discriminating and operators will need to produce engaging product is it is to retain its customer base.


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