Aristocrat Leisure’s Strategy Has Proven To Work
Despite the uncertainty in current macroeconomic conditions, Australia’s $20 billion provider of gaming technologies, Aristocrat Leisure Limited, finds itself in a unique position. The gaming giant has previously dedicated $1.8 billion of its revenue, constituting more than 40 per cent of its income, to the development of 12 mobile video games. With these products in its pipeline, it highlights Aristocrat Leisure’s growing emphasis on its digital business after the sector was the key reason for the firm’s $752 million normalised after-tax profit.
Additionally, the limitless potential of the digital business prompted chairman Neil Chatfield to stipulate that the firm’s future was both digital and global. The outlook was largely in line with the firm’s move in February 2020, where Aristocrat Technologies Europe Ltd has signed a licensing agreement with Inspired Entertainment Inc. The agreement will witness the expansion of Aristocrat’s product where it will supply game kits for the video lottery market in several European markets such as Greece and the United Kingdom.
More importantly, the shift towards a digital platform may be a blessing given that large numbers of people are now being asked to self-isolate. This is especially true in the case of its operations in Italy where statistics revealed a significant increase in the activity among current users of digital titles of such as Shadow Legends. Likewise, JP Morgan believed that the company is likely to experience a jump in digital revenue due to the implementations of work-from-home and self-isolation measures.
Presently, Italy is the only market which boasts both a massive number of coronavirus cases along with a strong digital presence for Aristocrat Leisure. Its stellar performance hails from existing activity which is rising exponentially. This is evident wherein 2019, users clocked in an average of six daily sessions, relative to the current twenty-two sessions daily for its 20 for Vikings: War for Clans and Raid: Shadow Legends games.
The experience in Italy provides a snapshot of the feasibility of digital games within a short time frame. Therefore, as the virus continues to spread to other markets, a similar pattern may be observed in the demand for mobile entertainment. Meanwhile, Aristocrat Leisure noted that its active users and downloads have been stable even though new downloads have not been on a steady rise. Thus, it is apparent that users affected by the virus are increasing their usage of existing digital entertainment as opposed to searching for new titles.
On the other hand, the pandemic may have some downside effects on Aristocrat’s land-based revenue should consumers avoid casinos in North America, Latin America and to a lesser extent, Europe. This is because the firm is the leading revenue generator among slot machine manufacturers in North America and the region’s revenue share, modelled by Credit Suisse, is expected to come in flat in FY20. Likewise, this may be the case in Australia where Aristocrat Leisure rents machine and the government’s stringent regulations will, in turn, threaten participation in revenues.
By Caroline Wong
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