Why is Bwin.party in Such a Financial Mess?

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Bwin.party is in hot water. The news this week has been filled with stories about how the profits of the company as a whole are down 6.2% on this time last year, and how when you look just at the online and mobile poker arm of the company, you see a drop of nearly 29% in the same period. I wanted to know why it’s all going so wrong for a company which was once one of the strongest players in the industry.

There’s countless reasons why Bwin.party’s luck has been on the turn, and I’ve not got room in this post to go into detail on all of the misfortunes which have led to this state of affairs, but I’d think there are definitely a few stand-out causes for such a slip in revenue.

Losing Zynga

Zynga Poker LogoOf all the issues that Bwin.party has faced this year, one of the most recent and humiliating has to be when its partner Zynga decided to close the real money poker arm of its operation. The UK only service – Zynga Poker – had been facilitated by Bwin.party’s position in the industry and real money know how. However, players never really warmed to Zynga Poker, and the platform never really got off the ground.

Deciding to cut its losses, Zynga announced that it would be withdrawing from real money gaming, leaving its partnership with Bwin.party technically intact, but representative of very little. The loss of Zynga Poker won’t have been the greatest loss of revenue in the world, but it does mark an investment that’s come to nothing. This can’t be good news for the company.

PartyPoker Tax Bill

Party Poker logoIf you want to understand what’s really going on with Bwin.party’s revenue stream over the past year, you could do worse than thinking about how the Place of Consumption tax in the UK and other new taxes throughout Europe have impacted vital sources of income. A couple of weeks ago, PartyPoker – Bwin.party’s flagship poker site – published details of what it was expecting to pay in tax for the last year.

Throughout Europe, but especially in the UK and Germany, new incredibly high rates of tax have meant that PartyPoker (and Bwin.party’s other sites for that matter) is facing unprecedented levels of taxation which are eating away at revenue even before the company can even glimpse the cash. This is both incredibly annoying, and very damaging for a company whose profits are on the turn anyway.

The Future

It seems that even for such a huge entity as Bwin.party, the answer to the problem of falling revenue (especially if one of the main causes is the PoC Tax) is consolidation. It’s no secret that Bwin.party has been seeking someone to buy it out for some time now, and it’s a well-known fact that talks have been underway about a possible buyout, but what does remain a mystery is the potential buyers.

Rumours have been swirling for some time that a possible buyer might be found in Amaya – who has been on quite the spending binge the last year or so – however neither Amaya nor Bwin.party has confirmed talks have taken place. An alternative saviour may come in the form of William Hill who – fresh from failing to broker a deal to buy 888 Holdings – may be in the market for something like Bwin.party.

Whatever the future holds for Bwin.party, it’s clear that if the numbers continue to decline, player confidence will slip, and it may find itself in freefall if a solution isn’t found.

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