Welcome to the June 2020 newsletter for the Waterhouse VC Fund.
The Fund specialises in gambling assets and businesses that are related to the gambling industry. We aim to leverage our unique expertise and existing assets to generate yield and capital growth for investors over the long-term.
Since inception, $100,000 invested in the Waterhouse VC Fund has risen to $282,000, as at 31 May 2020.
Time to play
Playtech is the world's largest supplier of technology for online gaming operators, providing software and content to sports betting, virtual sports, casino, bingo and poker operators. They are most known for being an all-in-one provider of the ‘back office’ software for a gambling operator, such as payments, marketing, and the customer relationship functions involved in maximising the lifetime value of punters.
Their flagship offering, Playtech ONE, is tailored towards operators who are inexperienced in software development but have large customer databases that can be monetised online. For example, land-based betting shops, casinos and even media companies. Clients have typically been based in countries where gambling is newly legalised and those who are looking for an all-in-one solution that can quickly jumpstart their online offering.
The US is a massive growth opportunity for Playtech and they have US experience having been active in the US prior to the bans on online gambling there in 2006. Land-based casinos, state-sponsored lotteries and media companies are among the companies looking to ride the recent online betting boom as gambling is legalised across the country. Plus, Playtech will have the opportunity to bring their European customers to the US and share the spoils there too. Playtech’s sportsbook is already one of the largest traders in US sports due to their activity in Mexico whose most popular markets are the US sports markets.
Playtech has regulatory approval in New Jersey and has begun the licensing process in other US jurisdictions. The company’s leading tech stack gives it so many options to take advantage, such as joint ventures with media brands or B2B deals with land-based casinos.
You might be thinking, why can’t these companies just hire the right people and develop these capabilities themselves? First, with all the new technologies and betting products being launched, operators need to spend huge sums on R&D to match what Playtech can offer out of the gates, on top of the huge sums needed to spend on marketing. Playtech has been developing its software since 1999, it is incredibly sophisticated and difficult to replicate, many people have tried and failed to do it.
Playtech currently spends about €80m (A$130m) per year on product development. In an industry with notoriously slim margins, only a handful of operators would think of spending similar amounts - for most, the clear option is to use Playtech and share in the revenue.
Second, Playtech’s size enables it to access exclusive brand licensing deals, like DC Comics branded casino games in 2016, investments that can only be justified by being able to spread the cost of content over a very large customer base.
Finally, Playtech’s relationships with so many operators means it sees the largest number of end users. By collecting user data across all operators, regions, players and games, it can better understand the customer, deliver better personalisation and have the most product ideas.
It’s these strengths in B2B, as well as continued investments in the US market, that led to us being investors in Playtech.
Playtech is also a major operator in its own right. Through the acquisition of Snaitech, Playtech directly owns and operates a leading sports betting and gaming brand in Italy. We’ll touch on this, and their financial trading business, in a later newsletter.
For wholesale investors that want to follow gaming’s global growth, please follow us on Twitter @waterhousevc.