Big Names, Big Losses
The business side of the online casino industry always has a lot of deals with one company purchasing another, and in an environment where this essentially absorbs the licenses awarded from the purchased to the purchaser, the fact of the matter is that it’s often more complicated than that.
This is why the recent announcement that Scientific Games posted a net loss in 2018, despite some of their best revenues ever, is so shocking. They started 2018 off with a purchase of the NYX Gaming Group, a big name in the online casino industry, and many industry figures thought this would mean big profits for them by the end of the year. Unfortunately for many, these figures were wrong.
Bloated Operating Costs to Blame
The net loss came in at about $352 million (or €310 million). While they had certain sub-sectors have more or less revenue than before, the fact of the matter is that they took in about the same amount of revenue as they did in 2017, or at least it wasn’t off by much.
What’s so interesting about this news, and the real point as far as we’re concerned, is that their operating expenses completely exploded last year, and that’s what led to the overall nine-figure loss that was worth about a third of a billion.
A lot of these increased expenses had to do with restructuring that actually came from the NYX Gaming Group purchase–the same purchase that had industry experts thinking SG would be on their way to their best year ever. The fact of the matter is that it came back to bite them in a major way.
Increase Income in Digital Gaming
It’s not all doom and gloom, and their purchase of NYX had a major upside:
In 2018, Scientific Games had their best revenues for the online sector that they had ever had and nearly tripled their previous record for a total of about $270 million.
Unfortunately, even if there’s a huge improvement in revenue, if operating costs and other expenses increase as well, then it’s not nearly the good news that you might think. In this case, their expenses just related to services they offer were over $500 million and amounted to more than a 21 percent increase from 2017.
In short, overall revenues in the online space increased, but they decreased in other areas. On top of that, they had enormous increases in expenses, most of which do not seem to have been anticipated from the attitude they’ve had about this announcement, and when you put all of that together, you get a 2018 that was in the red.
About Scientific Games
Scientific Games is a very large gaming company that has a sizable stake in the online gambling industry, particularly for online casinos that operate using the NYX Gaming Group’s OGS platform. They have plenty of other deals and interests in various markets, but this is where they have really tried to stake their claim the most recently.
The announcement that they lost money in 2018 is surprising to a whole lot of people, but there’s very much a silver lining: They absolutely killed it when it comes to the online sector, which is where they’re wanting to focus more, so we have a lot of hope for them to turn it around in 2019.