Q & A / PA L A I N T E R A C T I V E / J I M R YA N
of being profitable in this market, but to do so we are
going to have to invest. We view the development of
our position in the New Jersey market as a marathon as
opposed to a sprint, and we are committed to this market
for the long term.
Q
A
Why has the US egaming market been so mediocre to
date? What changes need to be made?
The problem with New Jersey is there were any number
of unrealistic expectations set for the marketplace
before it went live. We had a very realistic view as to what
the prospects for New Jersey were. If I take you back to my
bwin.party days, specifically to my PartyGaming days, we
generated about $40m a year in New Jersey pre-UIGEA.
And we had about 40% market share. So if you reverse
engineer that, it leads to a $100m a year poker market.
Granted, the poker market isn’t anywhere near that level
at this time. So what are the issues? As it relates to poker,
it is the size of the liquidity pool, which pre-UIGEA used
to be an international pool. So I think poker will remain
challenging until liquidity is increased. For poker and
casino I think growth will be driven in a large part by an
improved awareness of the online offerings and the ease
of consumers being able to get money into the system.
Q
A
How does the US market differ to Europe? Are those
differences partly to blame for the US industry struggling
to gain traction?
There is some great content in Europe, but I am not
seeing that same content in the US yet. There is a reason
for that. I think people are scratching their heads as to
whether they should invest in content given the current
size of the market and the fact that New Jersey may be
one of only a few that will legalise online casino as well as
poker. The US consumer would certainly love to see and
be able to enjoy some of the games found on European
sites. Offering those games would help improve the
entertainment value of the offering and increase site visits
and session times. But this is just part of the evolution of
the market place. As the competitive set straightens itself
out and organisations realise the market opportunity is in
excess of $200m split between five or six players, I expect
to see the better content finding its way over and being
deployed.
Q
A
What are your thoughts on the opportunity presented
by social gaming in the US market and will you be
playing an active role in the social sector?
The social gaming evolution of our business is a very
easy step for us to make, and we will make that step
in 2015. We will seek to do B2B deals with operators in
the US who are interested in having a social casino or
poker offering. We will also do it for our own Pala brand,
as we wait for the state of California to move forwards
with online poker legislation. We have got assets, and a
back office platform, and are building the team to help us
with this evolution of our business model. We have got a
couple of willing customers at this point in time, so there
is a lot we can do in the social market. We also see it as
a facilitator to helping us find partners in other to-beregulated markets. We see it as a unique way to bridge
the gap until further state regulation comes along, and to
generate revenues. We think it is logi cal; why wouldn’t we
go in there and help land-based operators launch a social
gaming offering? Then if and when the state regulates we
68
happen to have a real-money gaming offering that we can
use to take them to the next level.
Q
A
And what about daily fantasy sports? Is that an
attractive market for Pala?
We are watching it. We have got to be mindful of the
regulatory environment, and I think we need to do a
little bit more learning. It’s quite interesting to us that no
US land-based operator has embraced the model yet.
Given that we are operating with the intention of being
regulated in US states that pass online gaming legislation,
what we don’t want to do is put ourselves in harm’s way
by going down a strategic path that may preclude us from
operating in any given state market. I don’t mean to imply
that it would, but my message is clear that we are at an
early stage with daily fantasy sports. Early discussions
we have had at this point in time are to white label. Our
development calendar is full. We have launched casino, we
are going to launch poker in Q1 in New Jersey, and we have
got a couple of customers for social gaming.
Q
A
What do you make of the New Jersey regulator’s
investigation into Pala and yourself – especially about
your time at UltimateBet?
The cheating scheme that occurred at UltimateBet
during my tenure at Excapsa is unfortunate and very
regrettable. The cheating scheme occurred from 2003
to 2007 and I was the CEO of Excapsa for 23 months. So
going through the New Jersey regulatory process, the
regulator has to make sure that you weren’t involved, you
didn’t have knowledge, and you didn’t participate in any
way shape or form. And I didn’t. I didn’t know the scheme
was going on when I was there, had no involvement,
and didn’t participate in any way. I actually see this
investigation as quite positive in that you’ve now got a
regulator who is looking at the matter in depth and has
concluded to date that Jim Ryan and Pala Interactive are
suitable enough to be given a transactional waiver and
that we are suitable enough to offer our games to the
consumers in New Jersey. All of this is normal process for
any applicant. The disclosure I guess is somewhat unique,
but I like the transparency, so I am good with it. There can
be no questions moving forward, and I look forward to
the conclusion of their investigation and drawing a line
under the matter.
Q
A
What’s the US online gambling industry going to look
like in 12 months’ time?
In 12 months’ time you could flip a coin as to whether it’s
going to be pretty much status quo, or whether you are
going to see another material state coming into the fold.
My prediction is that you will see New Jersey start to turn
the corner, as hopefully Visa and MasterCard will come out
with their new regulated egaming coding and systems for
online gaming transactions. I think there is a reasonable
prospect for online poker regulation in California too.
Significant progress was made during 2014 and we just ran
out of time. So we go into this session with a lot of building
blocks that can be used in 2015, but there are three issues
that need to be addressed in California. The issues are the
racetracks, the ‘bad actor’ provision, and ensuring that
draft legislation is compliant with the requirements of the
Department of Justice. That seems like a manageable path
to me, so in a year’s time I would say New Jersey will be
growing and legislation will have passed in California.
W W W. E G R M A G A Z I N E . C O M