Ferrier Hodgson has issued commentary on the state of play in gaming, pondering what effect online and mobile gaming will have on venue values.
The advent of ‘smart’ technology in phones and tablets has produced an incredible array of digital products to entertain users, including both traditional ‘games’ and gambling applications.
A specialist in restructuring and insolvency, Ferrier Hodgson reports that the current stable regulatory environment is seeing poker machine entitlements (PMEs) in the highest demand, fetching $250k or more per block of three.
“Today, the focus of regulators appears to be on alcohol-related violence, and the values that PMEs trade at are at record highs,” says FH’s Morgan Kelly.
Kelly told PubTIC the value is being driven by both the limited supply and high demand for what he says is “absolutely” the most consistent valuation component of licensed venues at the moment.
He says the NSW market is already seeing a tightening of SIA (Social Impact Assessment) rulings, where venues operating at less than their SIA will find when in time they undergo reassessment the magic number reduced to whatever they currently operate.
And on the eve of a Federal election, where the notoriously anti-gaming Xenophon party could find itself holding the balance of power, Australian operators could find themselves facing another hurdle reminiscent of the Wilkie era of a few years ago, where PME blocks were trading as low as $120k.
However, the influx of capital investment and technology to the emerging mobile gaming market could pose a different threat to the traditional venue model.
In late 2014 Scientific Games – a manufacturer of primarily lottery and loyalty products – purchased American giant Bally Technologies for around $5.1 bn.
But last November, Blizzard – a producer of computer role-play games such as World of Warcraft – purchased King Digital Entertainment (KDE) for a whopping $5.9 bn.
KDE is the creator of the immensely successful ‘Candy Crush’ puzzle game, which first appeared in 2012 as an app for mobile phone users to play. It has since been launched on virtually all computer and mobile devices.
Interestingly, Candy Crush makes the bulk of its revenue by selling players additional ‘lives’ or features to continue playing immediately, rather than wait a mere half-hour. The additions that can be purchased can largely be acquired without charge, if a user waits.
It is estimated that the game generates revenue for its owners of around US$438,000 daily, on top of any sale fees for the 51,000 daily downloads of the game itself. Given the non-essential nature of the in-play purchases and vast resulting revenue, the game would seem to be the definition of an addictive-type response.
While statistics around online and mobile gaming – and any subsequent effect on venues – vary greatly according to the party providing them, there is no doubt the anywhere-anytime nature of the burgeoning technology will have repercussions for proprietors and manufacturers of gaming equipment such as poker machines.
“Presently, gaming revenue is growing across all States and Territories and the PME market remains buoyant, indicating a high degree of confidence and ongoing demand for PMEs,” says Kelly.
“It remains to be seen the degrees to which mobile device gaming will be a major technological disruptor to the value of PMEs and the traditional gaming model within pubs.”