PartyGaming Severs Four Skins

The share value of several public I-gaming industry companies fell on Monday following PartyGaming's announcement that its soon-to-launch integrated platform will only be available to players at PartyPoker.com. The software will essentially separate players who come directly to Party Poker from those who come by way of Empire Poker and Party's other three "skins."

Worsening matters was the revelation by Empire Online that the number of new players on its network had only increased by 24 percent between the second and third financial quarters, compared to a 62 percent increase over the same period last year. Empire Online's share price took the biggest hit on Monday, dropping 33 percent to reach an all-time low of 121p--compared to its float price of 175p in June and its all-time high of 288p when it was approached with a purchase bid by Sportingbet. Monday's decline amounted to a $300 million decrease in overall value to $620 million.

PartyGaming's integrated platform will enable PartyPoker players to integrate new non-poker games, such as black jack, as well as take part in new betting options, such as side betting and splitting pots. The platform also enables customers to access the company's casino, bingo and poker products under a single accounts, providing much better cross-selling opportunities. It will not, however, be available to players outside PartyGaming's newly drawn boundaries.

The separation means that the skins--Empire Poker, Coral Eurobet, Multipoker and Intertops--will no longer be able to take advantage of the massive liquidity injected by PartyPoker's 9 million players, who represent 80 percent of the aggregated network.

Liquidity is clearly one of the main drivers of new traffic, and according to Empire's house broker, Numis Securities, "This causes some near-term uncertainty surrounding Empire's player activity and yield per active player, given that the liquidity will be reduced."

The decision by PartyGaming to segregate its network would appear to accomplish a means of securing its own growth while limiting that of a client that has lately been growing into a seemingly formidable rival. Richard Segal, CEO of PartyGaming, stated that the move is "in the best interests of our customers and shareholders."

Meanwhile, Empire Online CEO Noam Lanir called the move "a temporary setback," and said PartyGaming was "showing their concerns about our dramatic growth compared to them and the entire industry."

Paul Leyland, a leisure analyst at Seymour Pierce, told eGaming Review that he felt Empire Online had been overvalued, but that the share price fell yesterday for the wrong reasons. "Empire has more than enough players to survive on its own," he said.

He added, "It seems like a churlish decision by Party, especially as it appears to lack the marketing skills Empire has in attracting new customers."

PartyGaming's announcement came the same day that Empire issued a trading update to inform the market that "strong network growth continues." This is indeed true: The number of new real-money players rose by 24 percent to 53,148 over the last quarter, while net gaming revenues increased by 24 percent to $31.4 million and estimated net operating profit increased by 30 percent to $16.1 million compared to the previous quarter. Despite the upbeat presentation of the numbers, investors perhaps noticed that the rate of growth is slowing (from an increase of 62 percent last year to 24 percent this year).

Empire wasn't alone in suffering falling share prices on Monday. Even PartyGaming, which would appear to have secured a little security from the threat of a growing rival, saw its share price fall 11 percent to a record low of 71p.

Other notable I-gaming stock slips on Monday were 888 Holdings (down 11 percent), Neteller (down 9 percent), Sportingbet (down 5 percent) and World Gaming (down 7 percent).