CEO interview: Per Eriksson, NetEnt
NetEnt already held around a third of the EU online casino market and experienced another record year in 2015 with profits up a staggering 50% and revenues up an impressive 30%. iGaming Business discussed new initiatives and the innovation culture that keeps on driving Net Ent with chief executive Per Eriksson.
iGaming Business: You showcased several new product initiatives at ICE this year. Where will you be focusing your efforts from a product perspective during 2016?
Per Eriksson: The product focus is still very much on mobile, ensuring we continue to progress as we have in recent years, consistently growing and getting bigger every day. We are also looking into many new areas, VR is one, another is 3D sound. We are experimenting a lot, making sure that we learn from all the projects we do, even if some are not going to become important parts of our future. What we have seen from working in areas such as VR is that we can take things we learn and use here to improve our more traditional, existing games. It's not dissimilar to the US and their drive to put a man on the moon: they experimented heavily during the process and a lot of innovative new materials were produced. That is what we try to do with VR. We don't know exactly when we will launch it as a standalone product, but will try to do so as soon as possible. In the meantime, we will develop a lot of features that we can adopt and integrate into the traditional games.
iGB: What is the mobile share of revenue across your business now?
PE: Game win from mobile games accounted for 30% of the total in the fourth quarter of 2015, up from 28% in the third quarter, and by 144% compared to the same quarter in 2014.
iGB: You also showed at ICE how products are being developed with five customer “personas” in mind. How are these feeding into the innovation process at NetEnt?
PE: We are trying to foster a culture of innovation, although it sounds very cheesy when you say it! It's a culture where you have a flat organisational structure and every individual can make their own decisions, and where it's also OK to fail. That way you learn from your mistakes as well as from what's good. You are also offered a lot of great incentives if you come up with good ideas, so we see it as developing a culture where everything is possible. We also have people from 47 different countries, which is changing the culture of the company. Many people perceive us as a purely Scandinavian company. Yes we come from Scandinavia, and there are quite a few Scandinavians in our organisation, but we have people from around the world, and that helps us to see things from different angles and fresh perspectives. As a company, we have regular innovation weeks, where you are given time to do other things as well as your normal job, from meditation to yoga, and we also have expert speakers come in and share their knowledge and perspectives on the future, so you get inspired. We end innovation week with Dragons' Den, where people pitch their ideas with the winners getting a trip to Las Vegas, where they also attend G2E.
I think the important thing about innovation is to not just talk about it, but to live it. That was part of the purpose of this exhibition here; to actually show what we are doing and working on. The VR is not a new product we are releasing, it's more about sharing what we are working on internally, and it's the same with regards to the research we are doing into future players. If we want to continue to be the front-runners building the best games, we need to understand the players and their future needs.
These five concepts were the trends that emerged after co-creation sessions we had with players, because you can't really ask a player: “What do you want?”, because they would only be able to focus on what they know today. Those five concepts we showcased are not a case of “either or”; they will co-exist, and the traditional way of playing online casino will continue, but they open up the opportunity for these players to have other types of experience, such as VR, or playing socially together.
iGB: Millennials are the holy grail target group for operators and developers these days, but how much traction are you seeing? Are they still at around 5% of the player base?
PE: Yes, somewhere around there I think. However it varies between the different operators. Some of our operators are very mobile-focused and they will have lots of customers who have never even tried online casino games before.
iGB: Are you just referring to your sportsbook-focused clients here?
PE: No, some are coming from the sportsbook but others are like: “What is this?!” We have seen that response to branded games such as Guns N' Roses, “Oh, Guns N' Roses, that's cool. You can win money?!”
iGB: Some of your rivals commented ahead of your New Jersey launch that players may not take to your games as readily as they did in Europe due to the very different casino playing habits in the US. How have your games been received there?
PE: They love it. We were a little bit worried as well, because we heard the comments from other people saying, “They are so different”. We were also thinking about what types of our titles would best suit the American markets. However, we are now convinced that European games work very well in the US.
iGB: Are you talking to stakeholders in other US states ahead of regulation there, such as Pennsylvania?
PE: Yes, we are having regular talks there. You never know when it will happen. We hope it will be as soon as possible. We also think when Pennsylvania comes online we think other East Coast states will follow soon after, as they are all watching and need tax money. It's also quite interesting watching operators still having to advertise to residents that igaming is now legal. The lobbying that is going on there against it means that people are afraid of doing it. Resorts Casino has opened up a large area within its land-based property for online gaming, allowing the normal land-based casino player to see: “OK, I can get in there, I can register, I can sit here, I can interact.” It also makes sense in helping attract younger people to come there and socialise, and experience a new way of playing casino.
iGB: Profits grew faster than revenues last year, off a strong operating margin. How have you managed that step change in the business?
PE: We are scaling up, and also when we expand into new markets, it doesn't cost us as much to enter as it did, say Italy, a few years ago. For that regulated market, we had to to completely rebuild some of our games due to the spec they needed to have. We have since learned to build games in a more modular way, so when certain features are needed, we can just fix it.
iGB: You have access to a lot of data and intelligence on how your games are performing across the different operators. How do you use this?
PE: It's very confidential. When I talk to operator X, I will never say to operator Y, that: “X is doing this.”. What I can do is say: “This is the common and more effective way of doing it.” But if X is doing something extraordinary, I will never share that to the rest of the operator community. It's a partnership where we are trying to help each other to become better, because if the operators are successful, we earn more money. So it is in our interest to help and assist them with as much data as we can, and we do know quite a lot! Some operators are so eager to learn, others think they know everything already, and they are the ones who are struggling the most, as they don't listen to what we and others have to say. They think they know everything. We also learn from the operators. We particularly saw that when we co-developed games with William Hill. There were people internally who questioned why we decided to do that, but we got new ideas, new angles and fresh solutions to problems.
iGB: Can we now expect to see you target more omni-channel and retail businesses going forward, following the collaboration with William Hill on the Koi Princess game and other projects last year?
PE: Yes, for us, retail is quite easy compared to the online. We give them our IP, then that's more or less it. We just make sure it works in the machine. Online we are hosting everything, all the games are played on our servers. So retail is an interesting way for us to gain new, incremental revenue.
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