The world of gambling has been dominated by mergers and acquisitions in recent years, with slots studios especially liable to be snapped up. Cole Rush discusses what the effects of the phenomenon have been with a number of figures who have been involved with the sector’s major mergers.
M&A activity runs rampant in the gambling world. Suppliers acquire studios after those studios buy other studios, creating juggernaut gaming forces to be reckoned with. To anyone within the gaming orbit, change is a constant.
The slots space, in particular, is constantly in flux. As new studios launch innovative games and mechanics, mergers and acquisitions peer around every corner. Suppliers seek to bring new ideas into the fold without muddling what made the innovations great in the first place.
The result of this hodgepodge of M&A is an industry hyper-focused on streamlining game development and gameplay. There are numerous pathways to success, but M&A may be the most surefire of them all.
The Lay Of The Land
So why do businesses in the slots sphere to M&A? Speaking with a handful of suppliers – each of which has been involved in M&A to some degree in the past few years (or months, in some cases) – their reasons vary.
Raph Di Guisto, who founded Silverback Gaming, which was then acquired by GAN, notes the deal helped GAN offer a bigger portfolio of games.
“Silverback was acquired recently by GAN to boost the company’s games portfolio,” he says. “The acquisition provides GAN with exclusive rights globally to all current and future Silverback online games, which the company expects will include 50 unique new slot games in the next three years”
Portfolio boost—a no-brainer, and a common throughline in slots-based acquisitions.
The Light & Wonder camp has similar reasoning, as Rob Procter, Light & Wonder’s VP of game development, explains.
“We’ve invested in expanding our portfolio with some of the world’s most creative igaming studios, ensuring that we can offer players a broad and diverse range of games and meet the needs of operators and players across our global markets.
“So far, we’ve acquired high-profile studios Lightning Box, ELK Studios, Authentic Gaming, and Playzido, all brands that are incredibly strong additions to the Light & Wonder family.”
Tom Wood, CEO of Raw iGaming, highlights a couple of recent acquisitions.Among the range of motivations he lists are integration in new markets, bringing skilled staff on board and support for new features such as free-to-play gaming.
“We purchased the aggregation and games platform Leander Games as well as the development studio Sapphire Gaming,” he says. “In today’s market, slots and igaming have become somewhat commoditized, and having an RGS and some games just isn’t enough.
“Through the purchase of Leander, we were able to get direct integration across Europe, the UK and South America for our innovative products, [plus] access to a knowledgeable and successful games development team based in Argentina. We also see an opportunity in aggregation where we believe we can innovate and provide a better service for operators and third party, high-quality, games studios.
“Besides a team of very talented developers, Sapphire Gaming gave us a new modern games framework as well as support for social gaming features and distribution.”
Across the board, none of these ideas are world-shaking. Of course, a business will seek to acquire new portfolio elements or fill a gap in its offering.
But the summaries above give us a full picture of a gambling industry in motion. Studios launch, make their mark, and often come into the fold of a bigger studio or a supplier that works in fields beyond game development.
But how does it all come to be, and what are the forces driving slots M&A? Turns out businesses and slots experts are eyeing acquisition targets with very specific goals in mind.
Market Share & Product: Two Sides Of The Same Coin
Acquiring a slot company can serve many purposes for the acquiring company. Two reasons rise to the surface most commonly: increased market share and new, innovative products.
The industry is saturated with content and heavy hitters. Some suppliers look at acquisition opportunities as a path to market share, but it can depend largely on the quality of your product. In other words, you can succeed on product alone, you can effectively buy market share, or you can do both in tandem, provided you have the resources to do so.
Tom Wood of Raw says: “If you are doing standard products, it might be a requirement to buy market share to meet your expected distribution and revenue goals. If you are willing to take the risk of innovation and deliver something entirely new to the market, in many cases operators will listen[…] and you can achieve success if your ideas and content resonate with players.”
Highlighting one of the industry’s biggest recent slots-focused acquisitions, Tom Waterhouse, Founder and Chief Investment Officer at Waterhouse VC, says the most successful businesses tend to combine organic growth and acquisitions.
“There is no doubt that slots are highly commoditized, and we believe that the best operators are those that can effectively combine their operational expertise with strategic acquisitions,” he says. “We saw this recently with Evolution’s €340 million acquisition of Nolimit City.
Raph Di Guisto of GAN and Silverback doesn’t think it’s so cut and dry.
“The barrier to entry in the US regulated markets can be so costly that in the end getting all the compliance and legal fees is akin to buying market share.” he says. “But once those barriers are crossed and the right integrations made available, usually, we see that the quality and quantity of games…is what allows [a studio] to retain market share.”
Rob Procter of Light & Wonder posits that M&A isn’t a necessity to secure market share in the slots industry. “There are some big studios out there that have found the right blend between conducting M&A, allowing us to enter markets that we didn’t have access to before, and creating our unique products.
“One thing is for sure, I don’t think anyone can buy their way to success.”
Mixed opinions abound on the issue of market share. The consensus seems to be that it can be bought – under the right circumstances – but that it’s not always the best path to success. Is a good product enough for a studio to succeed? The jury’s out on that one, too.
Tom Waterhouse of Waterhouse VC keeps it short and sweet: “Unique slots products are usually mimicked very quickly so operational expertise and strategic acquisitions are critical to achieving continued earnings and market share growth.”
Meanwhile, Raph Di Guisto argues the product is square one, and a well-honed strategy is crucial to ongoing success. “A great product is probably the only place to start,” he says. “However, it certainly isn’t the only thing required to succeed in the industry. Studios need to have the right distribution in place, but they also need strong marketing and account management teams to push performance with operators and make sure the product gets the right exposure in the right markets.”
It’s much harder than it was two or three years ago to go to market with a solid product and dominate,” says Light & Wonder’s Rob Procter. “The market is commoditized. Putting all of your eggs in one basket is a very risky play that rarely pays off. Nowadays, to be successful in any of the key strategic markets, you need to have more than one string in your bow. One solid product isn’t going to be enough.”
Wood says there have been plenty of cases were a good product alone was not enough to succeed.
“I think that has always been the case,” he says. “There are many examples of great products in igaming or even outside where either the market timing wasn’t right, the distribution failed, or that it just didn’t achieve the consumer exposure needed to deliver the required numbers to survive. It’s not always the great or best product that wins the race; there are a lot of factors that decide that outcome.”
The natural conclusion, then, is that a holistic approach encompassing great product, regulatory knowledge, distribution, and smart M&A plays will drive success.
Even if all the pieces are there, the puzzle still requires assembly. Slots suppliers and studios need to make their mark.
Carving Out A Niche
There’s a delicate balance required to release high-performing slot games and M&A factors into a successful development strategy. Game-makers can’t just throw everything at the wall to see what sticks. On the other hand, though, there’s no set formula for a successful game.
Some studios rely on reimagined hits of yore while others try to bust into markets with new ideas. More often than not, slots companies do some combination of the two.
“You can’t just think outside the box,” says Wood. “You must throw the box away and try to look at things from a completely new perspective.
“At the same time, you can’t make products and features players don’t recognize and require a tutorial or a prolonged time on device to understand how they work. Casino players won’t give you time to educate them unless there is a compelling reason. This increases the complexity of grinding a successful niche solution.”
Experimentation is fickle; it can yield amazing results or a dud. At the end of the day, it comes down to resources. If a studio has the backing of a major supplier, misfires won’t threaten the entire business.
Rob Procter says: “There’s a fine line between consistently releasing games that are confident sure-fire hits that stay true to our brand, and games that we’ve taken a punt on by introducing new mechanics and features, that may or may not work.
“We’re always trying different things to stand out from the rest of the crowd, we’ve innovated in areas we perhaps haven’t before and I genuinely believe our portfolio from the last six months shows this, and we’ll continue to do that going forward.”
As for Silverback and GAN, Raph Di Guisto says passion is important. Also, studios shouldn’t shy away from playing competitors’ games.
“Our biggest success factor is that everyone at Silverback is making games because they love doing it. It’s not a job for us if we’re enjoying every minute of it. We play our games a lot and we have a lot of fun building them. We play other supplier games too, and we follow industry trends carefully to make sure we’re aligned with our players.”
It seems the industry isn’t as focused on sticking in a single lane. Instead, success comes from a wide approach covering various aspects of the industry and appealing to the varied tastes of players. This brings us to our concluding question…
What does M&A mean for players?
M&A has certainly made an impact on the industry, but has it changed things for the end user? In Di Guisto’s view, it has done, and for the better.
“While it can be said that the number of big suppliers is getting smaller because of all this M&A, we’ve also seen in recent years a huge number of new startup studios who are trialing all sorts of innovative products in the hope of becoming the next target of such M&A activity,” Di Guisto says. “I think for the players, this means a lot of money is being invested in new products which may or may not succeed and which allows them to redefine the sort of games they might want to play.
“So I think for the player all this activity is guaranteed to fuel the innovation engine which keeps the players engaged and is great.”
When an up-and-coming studio gets acquired by the right business, it can catapult that studio’s mechanics into the spotlight, provided there isn’t too much red tape to contend with.
“We admire [the businesses we’ve recently acquired] for good reason,” says Rob Procter. “We strongly admire everything they’ve achieved and the path that they’re on, and there is a mutually beneficial advantage to joining forces.
“The last thing we want to do is derail them, so we leave them to their own devices where we can, letting them do what they’re truly good at.”
This means the players get more of the great games they’ve come to expect. Procter continues: “On our side, we enable them to work at a faster pace and on a much bigger scale, so from a client’s point of view we’re giving them access to more games faster, and in new markets. We accelerate and give them the platform to grow.”
Tom Wood notes that the purchasing entity has a lot of power in M&A deals, and they can make or break a studio’s prospects for ongoing success. In the end, that success (or lack thereof) reaches the players. Wood is no stranger to M&A, either, having acquired studios during his tenure at SG Digital and now Raw.
“If the purchasing entity decides to change a successful studio’s direction or loses key employees during the acquisition process, then M&A can impact the games they produce,” he says. “Integration post-M&A is always difficult. It can cause temporary issues that impact game quality. However, usually purchasing entities have a strategy and vision, which typically means improvements in the organization and games they produce. I’m sure the intention is always to create a better product for operators and their players.”
The M&A train chugs along, ever-increasing its breakneck pace. Doing M&A the right way in the slots arena can yield amazing results for everyone involved, from the supplier right down to the player.