888 Acquires Remaining Stake in the All American Poker Network

On Dec. 11, 2018, 888 Holdings announced that it was buying complete control of the All American Poker Network (AAPN) from its business partner Avenue Capital and other minority stakeholders. This represents a transfer of a 53% ownership interest from the sellers to 888. The deal is valued at $28 million – all cash – with $10 million to be paid immediately and the remaining $18 million due at the end of March 2019.

About the All American Poker Network

The AAPN was set up in March 2013 as a joint venture between 888 and Avenue Capital. Its formation was probably spurred by the anticipation of a boom in state-regulated online poker in the United States. This was a reasonable expectation at the time as Delaware, New Jersey and Nevada had all passed the necessary legislation to permit fully legal online poker in 2012 and 2013.

888 did establish a presence in each of the three licensed internet poker states. It partnered with WSOP.com in Nevada and New Jersey although 888 also accepts players under its own name in New Jersey too. Meanwhile, it was selected as the software provider for the three Delaware online poker rooms that are operated in conjunction with the state’s racetracks.

Network Performance

The historical performance of the AAPN has been, to put it mildly, disappointing. Though it is the largest of the state-supervised virtual poker establishments in all three of the states in which it transacts, the total number of customers involved is minuscule. With an average of 220 real money cash game players simultaneously active, the network is about one-fifth the size of offshore, unregulated competitor Ignition Casino Poker and one-third as large as the Winning Poker Network. It also pales in comparison to 888’s own international player pool, which has about 1,150 individuals at the tables on average at any given time.

When a liquidity sharing agreement between New Jersey, Nevada and Delaware came into effect on May 1, 2018, some observers foresaw this as just the development required to kick the AAPN into overdrive. Small player pools lead to low tournament guarantees and difficulty in keeping high-stakes ring games running, so it was felt that combining traffic among the three states would lead to positive results. As the only operator with a presence in all three jurisdictions, 888 would allegedly be able to capitalize on this new situation better than its rivals.

However, the actual impact of poker player volume sharing was minimal. Although combining traffic from three states into one pool did allow 888 to take the NJ internet poker crown away from PokerStars, the actual revenues booked left a lot to be desired. In New Jersey, the state with the largest market for regulated online gaming, internet poker rooms powered by 888 software collected just over $7 million in gross gaming revenue for the first 11 months of 2018: only 8% higher than the same period in 2017. Incidentally, the AAPN as a whole recorded a loss of $3 million for the year 2017.

Growth Impending?

Notwithstanding these anemic financial results, the press release from 888 indicated that the acquisition of the AAPN would promote the firm’s “future growth strategy in the US.” It’s unclear exactly where this growth is anticipated, but all signs seem to point to the about-to-open Pennsylvania online gambling market.

Pennsylvania has about as high a population as New Jersey, Nevada and Delaware combined, so its online poker economy could turn out to be worth as much as that of these three states put together. If Pennsylvania winds up joining the multi-state gaming compact, then it would become an even more valuable area for 888 to serve.

Mount Airy Casino in Mount Pocono has already had a relationship with 888 dating back to 2015. However, the future of this arrangement is in doubt because the casino reached an understanding with PokerStars in August “to enter Pennsylvania’s online sports wagering and gaming market.” It is possible, though, that Mount Airy will offer two separate internet poker skins, one powered by PokerStars and another by 888. Additionally, Harrah’s Philadelphia, owned by Caesars along with the WSOP brand, has received an internet poker license, and we can expect 888 to be the software provider.

Other Verticals

All this focus on poker may just be window dressing. Other products, like casino gaming, may be the real impetus behind 888 taking control of the AAPN. By freeing its poker endeavors from being under the control, even partially, of outside entities, 888 may find itself with more leeway to act as it wishes with other forms of wagering.

The numbers don’t lie: internet casino revenue is quite a bit larger than poker profits. During the same period in which its online poker revenue barely surpassed $7 million, 888 showed a solid $34.1 million casino win.

Yet, the real moneymaker may turn out to be sports. In September, 888sport opened for business in New Jersey: the first foray by 888 into the U.S. sportsbook scene but undoubtedly not the last. As more and more states legalize sports betting, 888 may find that it ultimately dwarfs both its online poker and casino operations in terms of profitability.