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European vacation

Ben Blaschke by Ben Blaschke
Tue 27 Feb 2018 at 06:48
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Novomatic is targeting both the US and Asian markets with its recent acquisition of a 52% stake in Australian slot machine developer Ainsworth Game Technology.

WHEN Austrian gaming giant Novomatic Group confirmed the completion of its AU$500 million purchase of a 52.2% stake in Australian slot machine company Ainsworth Game Technology on 5 January 2018, it concluded a slice of business almost two years in the making.

It was at the annual ICE Totally Gaming trade show and exhibition in London in February 2016 that Novomatic owner Johann Graf and Ainsworth founder Len Ainsworth first sat down and drafted a plan that would see Novomatic become Ainsworth’s majority shareholder by acquiring 172.1 million ordinary shares. But signing off on the deal was easier said than done, with regulatory approval needed from multiple gaming jurisdictions including those of Australia, South America and the United States. In total, 236 licenses held by Ainsworth across those jurisdictions had to be reassessed and approved for completion of the acquisition.

Yet the effort was very much worthwhile, according to Novomatic CEO Harald Neumann, with Ainsworth opening the door to the lucrative yet largely untapped markets of the United States and Asia.

“Our strategy for Asia, with Ainsworth being our distributor, is about making sure we have the right distribution channels there,” Neumann tells Inside Asian Gaming. “It is my opinion that in past years we have not really focused enough on the Asian market, which we have changed now with the hiring of Robert Dijkstra as Novomatic’s VP of Business Development and Sales, Asia Pacific, and I expect over the next 12 months we will start to understand what sort of opportunities we have there.

“We will put together our new Asian strategy in the next 12 months depending on regulatory requirements in Asia and of course our products.”

First priority under the new partnership isn’t Asia, however, but the US, where Novomatic is looking to increase its market share in the next five years to 10%. That’s quite a challenge given Neumann expects it to take two years before Novomatic and Ainsworth “can honestly say we’re a combined effort in the US” by creating and migrating to a single game development platform. But Neumann also recognizes the enormous head start Ainsworth will be able to provide in pursuit of the company’s US goals.

“US citizens have typically not preferred playing European games because the US casino market is very different and is much more entertainment-based with less volatility and different math models,” Neumann says.

“Ainsworth already has good US coverage of 4% or 5% and they understand the US market too, they are licensed everywhere, they have distribution networks, they have networks to all the casino operators, so now we will use both channels – Novomatic and Ainsworth – into the US casino market.”

On a broader scale, the Ainsworth acquisition includes five heads of terms relating to how the two companies will work together, including development of online products, game assets, the selling of Ainsworth products into Europe, non-exclusive distribution of Novomatic products by Ainsworth into North America and finally the exclusive distribution of Novomatic products by Ainsworth in Australia and New Zealand, including non-exclusive distribution across the rest of Asia-Pacific.

The appointment of Dijkstra, former Managing Director of Ainsworth Europe, in January specifically targets that last stipulation.

“From a Novomatic point of view, we are first of all going to do our own business and take our own product into Asia,” Dijkstra explains. “At the same time, one of our heads of terms is that Ainsworth will become the exclusive distributor of Novomatic products in Australia and New Zealand and a non-exclusive distributor in certain countries throughout Asia-Pacific including the Philippines, Macau, South Korea, Singapore, Malaysia, Cambodia, Laos, Vietnam, Sri Lanka and Nepal.

“Obviously Ainsworth doesn’t really distribute third-party products, it does sales of its own products and part of my new role is to go out and help support Novomatic products while at the same time also doing our own sales into the region.

“If you look at Novomatic products in the region now, our ETGs perform very well at Resorts World Genting in Malaysia where we have around 650 machines on the floor. We are also in Singapore with just under 100 machines.

“A new development that we’ve had for America is a linked progressive which will be an extremely important product for Asia too. Also important are the Otium bingo products that already have a presence in the Philippines where there is big bingo product potential.

“There will be developments specific to the Asian market but it will be very much driven by what we’re doing in the US because tradition has shown that a lot of what is successful in the US also does very well in Asia with some adaptations.”

Part of Ainsworth’s role, Neumann adds, will be to help Novomatic understand the Asian market better, including the effective use of Asian imagery and the development of math models better suited to this part of the world.

Likewise, Novomatic recognizes adjustments Ainsworth will need to make to successfully spread its wings into Europe as per another key agreement in the heads of terms.

“There is a huge opportunity for them to bring their products to Europe,” Neumann says.

“The only difficulty there is that casino products are usually too expensive for arcade markets – they are a different kind of market – so long-term I think if Ainsworth wants to be successful in Europe like we want to be successful in the US then both companies have to adapt their products to the specific markets.

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“Having said that, we are very satisfied with the games Ainsworth are developing and we see them playing a big role in helping our ambitions in the US and Asia. We see the Asian market as having a lot of similarities to the US casino market which means that our success in the US will also support our success in the Asian market.”

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Ben Blaschke

Ben Blaschke

A former sports journalist in Sydney, Australia, Ben has been Managing Editor of Inside Asian Gaming since early 2016. He played a leading role in developing and launching IAG Breakfast Briefing in April 2017 and oversees as well as being a key contributor to all of IAG’s editorial pursuits.

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