Access Achieves Survival through Diversification

Australian gaming companies are treading water as they wait for the other shoe to fall with the federal government. Some have already closed up shop while others have merged business with other companies. One company, Access Gaming Systems (AGS), has used the moratorium to spread its wings into other markets around the world and has found a great deal of success.

In addition to providing software for online casinos and lotteries, the company has developed a broad range of standard lottery and casino games as well as the Game Developers Kit (GDK) which allows gaming operators and independent software developers to create games for their systems.

AGS started looking into the European market a couple of years ago, and the company's CEO, Stephen Mulcahy, said the idea has paid off in the long run now that things have slowed down in Australia.

"I guess we were kind of lucky in that a few years earlier we had moved to Europe," he said. "We had built a rather small, but very significant client base there and we wanted to expand our business there."

Mulcahy said it was important for AGS to focus on Europe versus other parts of the world due to the company's business plan.

"Our business is different than a lot of the other suppliers out there like Boss Media and Cryptologic," he said. "We don't go after the unregulated markets like the Caribbean and other places. We only do business with major gaming operators in fully regulated jurisdictions. Those places are typically in Europe, Australia, Canada or even the United States--basically the kind of place where it is very difficult to get an Internet gaming license."

The reason for shying away from unregulated jurisdictions, according to Mulcahy, is a lack of staying power in the long run.

"Our view is that the quick and easy path to making money is gambling in the unregulated jurisdictions," he said. "But long term that market will get legislated out of existence through government laws that prohibit the use of credit cards and block those sites and all sorts of things."

Having offices and support staff throughout Europe gave AGS the ability to cater more to their clients needs.

"Our clients that we built up in Europe--like the Austrian National Lottery and their sister company, Casinos Austria, and the French Lottery, which is our biggest client and the third largest lottery in the world--were able to grow with us being in their backyard," Mulcahy said.

The Austrian National Lottery and its casino subsidiary have taken progressive steps in the past and continue to be a leading gaming company in Europe. They were, for example, the first European casino to offer cash-based gaming on the Internet. "What tends to happen," Mulcahy explained, "is when one European country does it, the others watch and see what kind of publicity is created from it, and if there is no bad media they proceed and allow it in their own country.

"Two-and-a-half years ago they were the first to allow lottery gaming for cash on the Internet. They have been followed by the Germans, and the French."

Although AGS found much success in Europe, it wasn't without a trade off. The company's Australian business shrunk by 70 percent, while its European business grew by 70 percent.

The situation in Australia has taken its toll on the company, but Mulcahy admits things could be worse.

"We are also very lucky in that there was one company that was allowed to keep trading in Australia-- Lasseters--because they were operational before the moratorium, and they were one of our clients," he explained. "Some of our competitors had nothing left and we at least had a little left."

The Australian Parliament is expected to levy a vote on the future of the moratorium this month. Mulcahy doesn't see the ban getting an extension, but he does see the issue becoming a whipping boy in the fall.

"I think the current bill proposed by the government will fail," he said. "The government will then say: 'Hey, we tried to do something good here and we failed.' There will then be kind of a limbo until the federal election and the federal government will make Internet gambling an election issue.

According to Mulcahy the movement to ban Internet gambling was destined to fail with the way the Australian federal government went about it.

"In the end what they did was totally hypocritical," he said. "They tried to take the moral high ground but the legislation didn't show that. They weren't going to allow Internet casinos in every home, but they allowed operators to stay in business by going outside of Australia for their players. That position is so morally bankrupt and totally unjustifiable.

"At the end of the day the reason it had ended up like that was because of the influence of Australia's richest man, Kerry Packer. That was the policy he wanted, and when you are a big fish in a small pond you get what you want."

Some gaming companies feel that Asia is the key market in the next couple of years to target. Mulcahy agrees that there is a great deal of potential in Asia, but he feels the combination of gambling-friendly governments and a solid base of interactive gaming will make Europe the hot spot first.

"The European market will be the biggest market for online gaming," he said. "I think next year you will see the first major instances of interactive television gaming and that will be the next step for Europe."

It is that kind of high expectations that have Mulcahy and AGS forecasting banner years ahead in terms of the bottom line.

"We are predicted a doubling of our revenues over the next 12 months based on our activities in Europe," he said. "The moratorium kind of put a freeze on our revenue because as one area was shrinking another was growing, but that trend will change as our European business grows. We are not forecasting anything in Australia, so if something happens it will be a bonus."