Insight
AUSTRIA Novomatic
Harald Neumann Chief Executive Officer, Novomatic
“We have scaled back our acquisitions, not halted them completely. At ICE, we indicated that we had acquired around 150 companies over the previous years, but slowing down does not mean that we have stopped all activity. In markets such as Spain, Germany, Netherlands, Eastern Europe, etc., we are still acquiring arcades and adding more operations to the division.”
Strategic global expansion of Novomatic’s core brand values
Speaking to G3 at the Global Gaming Expo in Las Vegas, Novomatic’s Chief Executive Officer, Harald Neumann, outlined the company’s short- to mid-term growth plans for international markets, including its product plans for the all- important US gaming and sports-betting market.
How does NOVOMATIC capitalise on its dominant market position in Europe and success in Latin America to grow its international footprint in the US and Asia?
NOVOMATIC enjoys a significant market share in Europe and we continue to increase this share by diversifying into new product segments, such as sports betting and online, depending upon the relevant market regulations. In Asia there are a number of interesting projects, for example, we are working on a significant project where we have sold several hundred machines and this is very interesting as there are opportunities to supply a lot of equipment to the large casino resorts. However, our focus is most definitely the US market at this time and, specifically, three distinct product segments.
“A big market opportunity outside of the US and Europe right now is Africa. We have an established business in South Africa and having a huge quantity of used machines, mainly from the German AWP market, Africa could therefore be very interesting for the placement of refurbished machines. We can offer a competitive price and a good opportunity for operators, especially as the African machine product is very similar to its European counterpart.”
Te first segment of interest for NOVOMATIC is the large-scale casino slots sector in which, over the last few years, we have grown to understand this market, especially as it is so different from the European model. Te US is a more time-on-device market and we have a plan to release a series of market-specific game titles for US players. I think that this year the launch of our new MacGyver™ game could be one of the successful titles for the US and there will be more coming in the next six to twelve months. We know that we have to adapt our games to appeal to the US player and our development team is working to accomplish this into 2019.
Te second area of interest is the VGT (Video Gaming Terminals) sector. We brought a range of new multi- games mixes for our VGTs to the G2E show 2018.
Te final product sector is sports betting. We recently hired Felipe Ludeña as International Sports Betting Director. Felipe has worked for several high-profile sports betting companies, including Grupo Codere, and has an incredible knowledge of the market both geographically and from a technology perspective. He has been tasked with evaluating the NOVOMATIC sports betting technology, both to assess how competitive it is for the US market and, as his top priority, European markets that could be interesting for NOVOMATIC – Spain, Italy, Germany – for example. NOVOMATIC has already partnered with Sportradar to co-develop products and services collaboratively. Te first market we have implemented this strategy is in Italy, but there are also opportunities for the US market.
How crucial is it to NOVOMATIC to achieve significant market share in the US, and what segment will see the breakout product? Slots, ETGs, sports-betting, online, mobile etc.?
We have been successful with our ETG products in the US thus far, with a significant and successful installation at Foxwoods in Connecticut (NOVOMATIC installed 54 dealer-assisted electronic tables at
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Foxwoods in 2017) and another installation at Pechanga in California. Currently, there are strong opportunities for NOVOMATIC in the US, especially within the VGT market as well as the Octavian myACP system that we are planning to roll out into states such as Illinois this year. However, for the future, the scale of the opportunity in the Class III market means that this is the most important for NOVOMATIC moving forward.
What are the biggest opportunities for NOVOMATIC in international markets and how is the company seizing these opportunities to build long-term growth?
A big market opportunity outside of the US and Europe right now is Africa. We have an established business in South Africa and having a huge quantity of used machines, mainly from the German AWP market (NOVOMATIC had to exchange thousands of machines due to regulatory change in the street market), Africa could therefore be very interesting for the placement of refurbished machines. We can offer a competitive price and a good opportunity for operators, especially as the African machine product is very similar to its European counterpart.
At ICE, NOVOMATIC stated there would be no further acquisitions going forward, but since then the company has added almost 700 employees, where is this growth and expansion concentrated within the company?
We have scaled back our acquisitions, not halted them completely. At ICE, we indicated that we had acquired around 150 companies over the previous years, but slowing down does not mean that we have stopped all activity. In markets such as Spain, Germany, Netherlands, Eastern Europe, etc., we are still acquiring arcades and adding more operations to the division. At present, however, the focus is on consolidating the rapid growth of recent years, driven in particular by acquisitions of companies. At the same time, synergies were also started with the increase. Te focus is on optimizing internal processes and structures across borders.
This year you have stated that regulatory challenges are the greatest hurdles facing the business. How is NOVOMATIC dealing with these challenges, of which Germany is such a big pressure point right now, both for machine gaming and online?
Yes, regulation is the most difficult challenge facing the company, but it is also helpful in the sense that it is ‘cleaning’ the market. Regulation has two affects – if you take the example of Austria, it was challenging for our business in Austria due to regulation changes, but regulation also means there are fewer rivals in the market too, which is a competitive advantage. Regulatory environments both inflict damage and also protect us – it is a double-edged sword. I believe
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