Light & Wonder is thriving across personal, social and online channels and has entered new capital markets. Now CEO Matt Wilson is looking for growth opportunities in Asia and through iGaming in the US.

Light & Wonder’s quarterly results reaffirm its decision to divest its sports betting and lottery divisions.

Third-quarter 2023 revenue grew 12.8% to $731 million, supported by record returns from iGaming and social casino gaming. For the supplier, it is the fifth quarter in a row with double-digit growth compared to the previous year.

But in the eyes of CEO Matt Wilson, companies can only be world-class at so many things. “We said we can’t be the best lottery company and the best sports platform and the best social casino company and so on – you just can’t do all those things. That’s why we chose to be a content company that operates three very complementary businesses.

Light & Wonder: The first of many?

“There’s a lot of competition out there, and these old ’80s-style conglomerates that combine lots of different companies doing different things only fit into one portfolio because they’re owned by the same owner,” Wilson adds . “This model doesn’t work.”

SIMPLIFICATION OF THE LIGHT & WONDER BUSINESS “has unlocked a huge amount of value,” says CEO MATT WILSON

Light & Wonder seems to be a trendsetter in this regard. IGT is currently conducting a process to divest its Global Gaming and PlayDigital businesses to focus on its lottery business. Recent reports suggest Playtech may shift its focus to B2C – a bid for 888 failed earlier this year – and divest its B2B business.

If Light & Wonder has gained a competitive advantage by downsizing, others will follow suit.

In the case of IGT, Wilson sees similarities and fully supports a simplified strategy. “We have added enormous value,” he says. And if competitors keep a close eye on Light & Wonder, they may also track the company’s other strategic moves.

On the way down under

The supplier then secured a secondary listing on the Australian Stock Exchange, thereby opening up access to new capital. That’s 15% of Light & Wonder’s market capitalization, now trading on the ASX – well above management’s expectations.

“We thought there was some interest down there in the Light & Wonder story, but once we were listed we activated a large number of investors,” says Wilson.

He has form in that regard, having gone through the process during his tenure at Aristocrat. For him it is his home turf, so he is well known in the Australian investment community, but points out that it is a largely untapped public gambling market.

“In Australia there is a superannuation program that requires every employer to invest money in the market for their employees.” That means billions of dollars are looking for a home every quarter. A quick look at the ASX register shows many mining and banking companies. Light & Wonder, on the other hand, offers a technology investment with a globally addressable market.

“I think we hit an open door,” he adds.

Could another company replicate this strategy? As a company with Australian management, operations in the country and a track record in the market, Wilson believes Light & Wonder had an ace up its sleeve. “But I could imagine other gaming companies looking at this market as a potential investment opportunity,” he adds. “I wouldn’t be surprised if someone replicated the same strategy.”

The possibilities of Light & Wonder in the Far East

The secondary listing on the ASX provides a firmer footing for the Asian region. Macau remains the main event, but Asian opportunities are expanding to Japan, Thailand and Vietnam for land-based gaming, and with igaming thriving in the Philippines, there is a huge opportunity which extends across multiple markets.

Macau, who lived there between 2007 and 2012, is close to Wilson’s heart. He recently returned for the first time in a decade and sees a can-do attitude that suits a place like Las Vegas. “When I lived there, they even said they were going to build a bridge from Hong Kong to Macau, which was an hour by ferry and 30 miles away. And they are building a bridge.

“You underestimate China at your peril; They do things with such a big sale, I think Macau will get back on its feet.”

“Underestimate China at your own risk”

However, he believes that the Philippines is the biggest story in Asia. “The CEO of Pagcor wants to double gross gaming revenue in a short period of time. This is ambitious; You have to do things differently to unlock that.

“That goes hand in hand with a lot more integrated resorts. I think they buy a lot of equipment for their own locations. He has stated on record that he will purchase 3,000 slot machines starting in January 2024.”

Wilson admits that before his visit he did not understand the extent of the opportunities in the Philippines. Now? He believes the goal is to create a gaming hub that can compete with Macau.

Building on a strong base in Asia

According to Wilson, Light & Wonder owns around 50% of the Asian machinery market. It has another ace up its sleeve for the region. Wilson credits his dominant position to the game developer behind 88 Fortunes, Qin You, who “has truly mastered the art of making games for the Asian population. We love them,” says Wilson.

As a local, Wilson says, you understand exactly which works appeal to Chinese audiences and create authentic titles that enable the provider to capitalize on opportunities in the region.

But Light & Wonder is now an omnichannel company with thriving online and social media spaces. With Pagcor preparing to open its own online casino, is there any hope for a meaningful online push?

Manila, Philippines
Any expansion into the Philippines’ iGaming market would require strict regulation, Wilson warns

This would require more legal certainty around the streaming model – where a physical device broadcasts via a web browser – as Light & Wonder takes compliance and its regulatory conditions very seriously. “We would only open this market if the regulations were really clear and we could do it in a way that didn’t endanger anything.”

But as digital-first providers ramp up their plans for world domination, Light & Wonder is encountering competitors that don’t have the same compliance obligations. Without the obligations and revenue that come with land-based operations, iGaming operators can – and do – take a more relaxed view of what constitutes gray or black markets.

White, gray and black puzzles of suppliers

At a time when they are digitizing their portfolios, can the traditional land giants really compete with rivals who can pursue growth wherever and however they see it?

“If I’m honest, I think we’re at a disadvantage,” Wilson says bluntly.

“We compete with companies that place bets on black markets where they pay no taxes. The margins are better, so they are better capitalized to make investments,” he explains. “Regulators need to carefully examine who is operating in their ecosystem and whether they are comfortable with it.”

The general response from regulators is that their jurisdiction covers only a small part of the territory. Light & Wonder wants to change that. It made its point and Wilson believes it is having an impact. “I think you’re starting to see some momentum with new states looking at laws that say you can’t operate in black markets here – it can’t appear that regulators are supporting black market activity.”

Is 2024 the year igaming takes off in the US?

If Matt Wilson has managed to lead Light & Wonder into the new, simplified era and open up new capital and possibly new markets, US igaming remains a work in progress.

Mature markets in Europe and the UK, he explains, are now digital territories where players are first exposed to gambling via a computer or smartphone. Online is the player’s route to the market.

In the USA, players’ path to the online market leads through the casino floor. As the only show in town for 40 years, players are “already a bit conditioned to like certain types of games.” Wilson points out that Light & Wonder specializes in these titles and franchises, although he’s confident that digital-first titles can take hold over time.

“There’s still a lot of room for many different types of games, but these types of tentpole franchises that players have been playing for many years are taking hold,” he says. “Blazing Sevens is a brand in our portfolio. It’s been around for 40 years. We are reviving that from land-based business to move into our digital ecosystem.”

Engage players in the omnichannel ecosystem

While the casino section is what the US player knows and loves, that doesn’t mean there isn’t interest in other channels. Light & Wonder research shows that land-based players tend to dabble in social casino or igaming when permitted.

“If you look at the younger demographic, that younger cohort of players, they’re almost demanding it. You have to be digitally enabled, otherwise you miss the opportunity.”

Even if it’s something that hasn’t quite surfaced yet. Wilson admits that it is “not progressing at the pace we would like, but you have to believe that in the next five to ten years there will be a big step forward in the digitization of gaming markets around the world – because that’s what’s happening right now.” Black markets.

“It’s already happening. Let’s regulate it, for taxes that benefit states, and push some responsible gaming initiatives around the issue.

“You can do it in a healthy and safe way. I think the more governments come to terms with this, the more regulation there will be.”

With Light & Wonder now thriving in all three industries and opportunities opening up in the US and Asia in 2024, it’s hard to say that Wilson has brought the company back to life.