The Gaming Industry as a whole has been experiencing a tumult over the past 16 months in the sectors of total revenue and executive personnel. The list of publicly traded companies reporting such problems ranks as a who’s who among Gaming companies, both online and live: Svenska Spel, Magna Entertainment, Youbet.com, Boss Media and World Poker Tour Enterprises are all reporting major changes in executive management and/or financial difficulties for the past year and a half.
World Poker Tour Enterprises (WPTE) have established their high stakes live WPT events as the poker world’s second most prestigious tournaments, behind only the annual World Series of Poker. Since its debut in 2002, the WPT – and more specifically the WPT telecasts – have proved to be some of basic cable’s highest rated shows and have spearheaded a meteoric rise for WPTE. However, WPTE has reported a net loss of $2.8 million for the first quarter of 2008 following a shift from WPT tournaments telecasting on The Travel Channel to The Game Show Network. This has led to a $0.14 loss per diluted share for shareholders of the gaming giant.
While WPTE looks to rebound with upcoming WPT tournaments and telecasts, the situation is much grimmer for online sports book, Magna Entertainment. In what is without question the busiest quarter for the sports betting industry (the Super Bowl in February and the Kentucky Derby in May comprise the lion’s share of that business,) Magna is reporting a first quarter deficit of $46.5 million. This has dropped the NASDAQ listing of Magna Entertainment below the minimum $1 listing price to $0.40 and has led the New York based stock exchange to issue a formal warning to Magna – either get the stock above $1.00 by August 11 or face de-listing. Magna has now reported consecutive annual losses of $105.3 million, $87.4 million and $113.8 million for the 2005, 2006 and 2007 fiscal years respectively.
All in all, Magna Entertainment is operating with an accumulated deficit of $556.5 million with additional debts of around $220 million set to mature in the next year. Chairman and Interim CEO, Frank Stronach issued this statement to address Magna’s current situation:
We are very disappointed with our first quarter operating results, some of which can be attributed to weather and track drainage issues at Santa Anita Park beyond our control, and some of which reflect short-term disruptions as we continue to build out our Gulfstream Park commercial joint venture with Forest City. I remain fully committed to implementing the company’s previously announced debt elimination plan, and to seeing the operating results dramatically improved. I remain optimistic about MEC’s medium term prospects.
Competing sports book, Youbet.com is also reporting recent fiscal underperformance. Incurring what is being listed as a 51.2% drop in net first quarter income from the 2007 Q1, Youbet has emerged from a disastrous systems malfunction in its United Tote subsidiary with a devalued stock price of $1.16, hovering dangerously above the $1 NASDAQ minimum.
As a whole, the Industry did not perform up to years past during, in particular, the Kentucky Derby weekend. Much of this turn has been attributed to an ongoing row between Churchill Downs and the Kentucky Horsemen’s Benevolent and Protective Association and the general downturn in the American economy.
Meanwhile, executives at two major Gaming firms have offered formal resignations in the past weeks.
After being acquired by the GTECH controlled GEMed, Boss Media CEO Michael Hallen announced his resignation during the first quarter company review. The split appeared amicable as Boss Media’s Chairman of the Board stated:
Michael has been a great leader and made significant achievements for Boss Media. We strongly regret to see him leave.
Hallen has been replaced by GTECH’s New Media and Sports Betting Division in Asia leader, Rahul Parekh who looks to spearhead the owner’s of Paradise Poker Asian growth with presumed emphasis on the Indian and Chinese markets (which constitutes approximately 45% of the world’s total population.)
Finally, after coming under fire from international gaming conglomerates and the European Union itself, Svenska Spel is under new leadership. Top executives, Annica Axelsson, Mathias Hedlund and CEO Jesper Kärrbrink have all left the floundering Swedish gaming monopoly citing ethical differences with the direction that Svenska Spel is taking.
