PartyGaming conference call

[Vallerius]

I listened in on the PartyGaming conference call this morning, I transribed what I thought were the most pertinent bits of information so that I could use some quotes in a news article I'm writing. Participants on the conference call asked many interesting questions about affiliate marketing, Las Vegas Sands, World Poker Tour, Bodog, Italy and more, and PartyGaming CEO Mitch Garber did a great job in addressing the questions. PartyGaming CFO Martin Weigold also sat addressed questions, all of the comments and responses I have desribed below come from Garber.

The most interesting statements appear near the bottom after the call has been opened up for questions. The second-to-last paragraph, by the way, is the one in which Garber discusses PartyGaming's affiliate marketing plans, in case you wish to just skip ahead to that topic.

Please note that only what I have placed in quotations marks are precise quotes from Mitch. If I have not placed particular comments in quotations that consider those comments to be summaries of what Garber actually said.

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"(Passage of the UIGEA) was a blow to our business for sure, but one thing that I am very pleased to say is that our group has absorbed and has now recovered from this incident..."

"…company has been fully focused on three key areas:"

"First and foremost, we needed to stabilize the business, something that we’ve already achieved….. (provides a series of stats supporting his claim)…… And so you can see we still have extremely strong liquidity….

"Second, we’ve repositioned our business strategy. PartyGaming is no longer a poker-led, U.S.-dependent and one language gaming operator. We are rapidly becoming a multi-lingual and multi-currency non-US company….

"Third area of focus…. was on realigning the cost base to best to deliver the strategy. A rationalization exercise culminated in a painful but necessary company-wide redundancy program that took our total headcount down by just 40 percent…."

Five business segments… poker, casino, bingo, backgammon and sports betting… the first multi-lingual version of PartyPoker.com was launched three weeks ago… more expected over the coming weeks and months… multi-currency expected early in new year.

…also added to product base. After soft launch in late November, PartyBets.com is now live and is being progressively marketed to our poker and casino customers. Virtual racing was added to PartyCasino range in late November, and partybingo was formally launched in UK earlier this month.

"Our appetite for M & A has not diminished…" …integrated GameBookers successfully. "We will continue to pursue deals that are accretive and can add either management or product expertise to any of our operational lines and we will be pushing further into new territories as a main and key objective of M & A and in our organic business plan."

"I am pleased that we have not only stabilized, we are through the worst and are recovering well."

(At this point the conference call is opened up for questions. What follows are statements from Garber in response to questions.)

"World Poker Tour has been a leader…. It has not been limited to the U.S, in fact a lot of the proliferation of poker-related television programming across Europe and the rest of the world is coming from World Poker Tour in one way or another, so we think that in a smaller way we can replicated what we did in the U.S. by using World Poker Tour as the engine to get our brand on television without doing direct offline television marketing and commercials…." The deal with WPT will last for at least three years…

"Las Vegas Sands’ entrance into the online gaming market is a very positive sign for our business and I think it should be a positive sign for our stock. They have taken a very smart and cautious approach in partnering with Cantor Fitzgerald for the UK only. I think the regulatory environment in Nevada is such that Las Vegas Sands cannot afford to take even a modicum of risk in any other country today, and that’s probably in their thinking, but clearly they’re setting themselves up for a large online presence in the future, and if I had to guess, I would guess that they also see their presence in Macau and soon in Singapore as a launching pad to have a strong Asian Internet presence as well…. Clearly there are opportunities in markets that have yet to be tapped, and I think Las Vegas Sands is probably thinking about that, and I think that quite frankly we’ll get there first."

Not seeing increased competition in Europe…. "As far as Europe-facing (let’s call it rest of world-facing) poker sites that don’t have U.S. players in them, there’s no one really close. If you look at the liquidity on 888’s PacificPoker for example, we’re four times the size. If you look at Ongame’s poker room, we’re a multiple of about five. It doesn’t mean there’s no competition, but clearly among the legal online poker sites we are where the liquidity is, as we were when we had U.S. business before the Safe Port Act passed…… We really are almost as far ahead I would say currently versus non-US taking poker sites as we were once when we were taking U.S. ahead of the field."

"….What I do know is that many of those (private) site operators (who have continued to operate in the U.S. market) are feeling choked by payment processors who are feeling choked by banks that don’t want to release the funds to those sites out of fear that the business is going away or that there’s going to be massive chargebacks at some point. Bodog pulling out of marketing in the U.S. sends a sign to me-- knowing Bodog as I do. They have been extremely aggressive, provocative marketers. That has actually been the secret of their success, so for them to pull away from the one thing that has made them very successful, it makes me wonder what is really going on, and the true answer is I don’t know what’s going on."

"… Our online marketing and affiliate marketing program is as strong as it’s ever been. We have to work a little bit harder to keep our affiliates happy, given that a lot of them were referring U.S. business and non-U.S. business and now cannot refer those U.S. customers to us, so from an online perspective we’re slightly more creative, still doing lots of search engine optimization work, which has been very successful for us. We’re looking at viral marketing as well. We see that the Youtube’s of the world are creating an incredible amount of views and we’re looking at ways to capitalize on that new phenomenon. We’re also developing some of our own content to be broadcast on our website as part of a new community that we’re building inside Party. I guess essentially it’s going to be very geography specific. Some geographies don’t allow television commercials, some geographies don’t allow gaming advertising, some geographies only allow online advertising, so broadly speaking we have new creative, we have product specific creative. I think we have some very good affiliate programs that we’re rolling out in the New Year, and that’s our strategy for 2007.

"We are currently not in that (Italian) tender, however, I will tell you we are in discussions with groups in Italy which could provide meaningful partnerships for us if we choose to go the licensing route in Italy."

[big fish]

excellent! thanks for the summary of the conference call. it is good to hear that he thinks the las vegas sands move is one that will be good for the industry.