Realms of profitability

Gaming Realms boss Patrick Southon admits the company operates in a starkly different mobile gaming landscape to his Foxy Bingo heyday but remains confident licensing deals will bolster profits next year

Gaming Realms chief executive officer Patrick Southon has hailed the success of a raft of licensing deals after the supplier achieved profitability last year for the first time since its 2014 launch.

Southon says struggling with the loss-making social gaming arm has held the business back, but using its acquired Slingo brand in conjunction with a range of licensing deals is now beginning to pay off.

“We did a licensing deal with ITV for Love Island for example, which is very much a brand that appeals to that demographic,” he says of the young, female-skewing group of players Gaming Realms seeks to attract.

The supplier’s deal with ITV also covers major brands such as Britain’s Got Talent, The X Factor and TOWIE. Separately, it has rights to IP belonging to Freemantle and Sony, the latter enabling the creation of a Who Want To Be A Millionaire-branded Slingo game.

Southon leads Gaming Realms alongside a handful of his fellow former Foxy Bingo execs, including chairman Michael Buckley, executive director Simon Collins, and chief finance officer Mark Segal. Broadcast deals are a familiar negotiating ground.

“We know ITV from old because we had a deal with them on Foxy,” Southon says.

“We were looking for that sort of deal because we didn’t have the capital to make our own B2C products into a brand. When licensing a brand like X Factor you don’t have to spend the as much money on above the line advertising because people already know what it is.

“All you’re doing is converting the audience into real money players. So it’s like a build-a-site-quick ingredient.”

Gaming Realms reported £0.8m EBITDA for the 2017 financial year, following a £2m loss in 2016.

The bulk of the profit was attributable to the real money gaming (RMG) side of the business, where profits rose 113% from £1.3m to £2.7m in 2017.

In contrast, the social gaming arm remained loss making, albeit significantly less so than the previous year, reporting a loss of £0.1m, compared to £1.8m in 2016.

Total revenue dipped by 7% to £31.6m from £34.0m – again attributable to social, which fell by 13% to £6.9m from £7.9m the previous year.

RMG rose 5% to £22.7m from £21.5m, but Southon is less concerned about the topline. It's margin he’s looking to improve as Gaming Realms ramps up the number of licensing deals on its books.

“Next year, revenue will be flat or even declining but we should be more profitable because we’ve got a lot more licensing deals lined up,” he says.

The gaming landscape has changed considerably since Southon’s Foxy Bingo heyday, and catering for a mobile audience has presented its own challenges he admits.

“The way to succeed in mobile bingo is to take the word bingo out of it because it’s rather like sticking a square peg in a round hole,” he says laughing.

“It’s a different world out there. When we were doing bingo at Foxy, there wasn’t anything like Candy Crush, or even social games,” he says.

“People play all those games now happily and they’re executed much better than an old legacy bingo platform, so it requires a really leftfield way of thinking to succeed in this space”.

All that said, Southon is confident that Gaming Realms is making games that people want to play. “We have 18 games and nearly 40% of our revenue comes from our games. I think that’s because they’re very specific to the audience, they’re very popular games,” he explains.

Going forward Gaming Realms intends to build between 10 and 15 games per year. Last month it relocated it two-strong games team to Colchester, where a partnership with the University of Essex is hoped to bring fresh blood into the company.

Southon says the industry has a clear appeal to tech-minded university leavers. “It’s very mathematical, its design, its probability, the skills required to do it are quite in-depth, so its not simple,” he says.

“Everyone talks about how you have to have good maths engines to make a good game and we have the experience in-house to train students up and hopefully engender them with the ideals that we have”.

Looking ahead, expect regular announcements from Gaming Realms. The latest two-year global extension of its GVC deal in New Jersey is a sign of what’s to come.

“We’ve had such a turgid time trying to become profitable and dealing with the social hiccup, that we’re actually all just looking forward to delivering some profitable scaling numbers and not really thinking about anything much else,” Southon says candidly.

With an exit improbable in the near future, he says he will continue to assess the performance of different parts of the business. “We have the social part and the platform part, so we’ll look at pushing as much as we can in the areas that are going to do the best.”