When it comes to the casino software sector in the UK, there are a handful of dominant players accounting for the bulk of the market. Between them, Playtech, Microgaming and NetEnt serve the majority of top tier casino providers, in addition to holding strong representations in other verticals. So how are these companies faring in 2017 so far, and with 2018 right around the corner, how are they positioned to take account of the new emerging challenges in this market?
Playtech have been enjoying rapid growth since 2010, fuelled by an ambitious acquisition strategy spanning right across the broader gaming industry. In 2015, the company best known for its slots products started broadening its horizons in financials, ramping up the pace of their M&A activity. In 2017 so far, Playtech can lay claim to two successful acquisitions – that of Australian developer Eyecon, famous for their Fluffy Favourites slot, amongst others, and more recently, the acquisition of UK-based broker Alpha, in a deal worth £117 million.
Analysts view their strategy as an attempt to consolidate their position ahead of the pack, and by branching out into multiple different verticals, Playtech are not shy about throwing their weight around. In part, this is a defensive move from the company, helping fend off the rise of credible challengers in an environment that becomes increasingly competitive with each passing year. However, it also leaves them potentially vulnerable to bigger downturns – the bigger they are, the harder they can fall.
Nevertheless, the position today means Playtech are arguably the most dominant force in slots and online casino games, not to mention their relentless grip on the big sports betting brands. Interestingly, Playtech stick to insisting on exclusivity amongst their licensees, in a move designed to crowd out the market for other competitors. When you consider Playtech can boast big wins such as a £6.2 million win on Beach Life in 2012, and £4.5 million more recently through one of their bingo sites, it’s clear they have the clout to pull off this kind of strategy.
So are the others taking heed, or blazing their own trail through 2017 and beyond?
Microgaming has had a busy year in 2017 so far, with plenty of licensing deals, big wins, new game releases and corporate developments along the way. By revenue, Microgaming remains one of the big three players in the casino software market, but have now chosen to adjust their strategy as far as licensees are concerned. Traditionally, Microgaming operated in an environment where licensees were free to use their software in conjunction with other licensed providers, a move that was designed to help them capture market share against more established competitors. But with the release of their Quickfire platform, which allows easier, speedier gaming in-browser, Microgaming have started to follow the same path as Playtech, in terms of insisting operators exclusively rely on their software.
This creates an interesting power struggle in the industry, effectively forcing casino operators to choose one side or the other, as a term of their games licenses. One of the major advantages for Microgaming, however, remains their key focus on developing arguably the best slots amongst the big three. This, combined with huge jackpots and famous slots brands, like Mega Moolah, ensure Microgaming will still be there throughout 2018 and beyond, effectively securing their business through brand recognition and game quality.
Additionally, this year has seen Microgaming open their new headquarters in the Isle of Man, cementing their shift in focus away from specifically Scandinavian markets to serve a much broader client base.
Formerly focused almost exclusively on the Scandinavian markets, NetEnt saw their opportunity to expand worldwide and took it. Today the company competes directly with Playtech and Microgaming in the slots space, as well as its ventures into live gaming with the NetEnt Live platform. NetEnt differ from the other two in the sense, that they do not (yet?) insist on signing exclusive agreements with their licensees – perhaps a shrewd position amidst competition increasingly looking to lock up the market.
NetEnt is growing quickly from its rather more humble beginnings, and it’s expected to play an increasingly prominent role in shaping the future of the industry, with innovations in VR, for example, already making their market in 2016-17. This includes their core casino business, but also verticals like bingo, with NetEnt having already reached agreement with 888 to provide these services across some of their key national markets.
Shares in NetEnt have performed well on the year, up from 68.00 in May to 75.60 in September 2017. With 2018 fast approaching, NetEnt will look to capitalise on these developments, by continuing to release new games on a regular basis, while pushing for broader hookups with gaming operators worldwide.
Prospects for 2018 and Beyond
As far as Playtech is concerned, the flurry of acquisition activity over the last few years is just getting started. The company intends to conclude more deals in 2017, in a bid to position themselves even more firmly in the driving seat in this industry come 2018. But given the pace of acquisition and the rapidly growing nature of the company, Playtech will need to ensure they are maximising the value of their assets if they want to leverage their new position in the market.
As for Microgaming, 2018 is expected to look more towards tying up Quickfire integrations, as it plays market catch-up against the bigger fish that is now Playtech. Microgaming are already signalling intent, with the release of newly licensed games like Halloween continuing to expand on their slots catalogue. Microgaming have also made waves in VR gaming, although the sector still seems some way short of realising its potential, it’s a statement of intent for a company that continues to innovate and experiment with new concepts across its verticals.
NetEnt will look to continue their growth in international markets, bringing new games on stream for licensees while seeking to establish a greater number of tie-ups with operators. While the lack of an exclusivity strategy could be problematic for the company over the coming twelve months, particularly if operators flock to competing offers come renewal time, the risk of remaining open to cooperation with other providers could well help NetEnt establish a stronger foothold internationally, beyond their current key markets.
One emerging threat to their dominance is the rise of smaller boutique software companies, most notably Yggdrasil Gaming, who consistently get the nod industry-wide for producing some of the most engaging and entertaining slots games. A key battleground for each of these companies, slots remain the key driver of growth for casinos, and their most popular game type by far. With Yggdrasil and others producing games that are of a quality far beyond those on offer from the big three, it will be worth paying attention to this upstart company as it aims to replicate the success of the more established names in the industry.
With new game releases planned across the industry, and an increasing trend towards brand licensing deals, the market for casino software providers is only hotting up. While the front three have a significant hold of the market already, with licenses spanning the full breadth of the industry across the UK and beyond, others are hot on their heels, determined to carve their own growing niche in this lucrative market.
Whatever the future holds, one thing is for certain – this is a market that does anything other than stay still. Casino software providers must continue to push the boundaries of the possible, and drive forward with innovations that make the gaming experience even better for their licensees, and in turn, for players. While it’s impossible to predict where the chips will fall in a year, three years, ten years time, it’s clear that only by striving for excellence – both in their software and commercially – can these companies remain at the forefront of this industry.