Q&A: Emil Sunvisson, CEO, Cherry
Published 7th November 2014
Cherry has undergone many transformations since it was founded more than 50 years ago. How is the current business now structured across the different areas, and how much of this is now online gaming?
Yes, there have been many transformations. The biggest change happened in 2006, when Betsson and NetEnt were separated from Cherry. Back then, Cherry was 100% offline, and today more than 50% of our business is online, and that’s growing online at 40% per year. So the online share is only going to increase over the years. In terms of structure, we currently operate three business areas; online; offline, which is the restaurant casinos, and Yggdrasil, which is online games development.
You formed Cherry Affiliates in 2011. How pivotal has the programme been to Cherry’s recent growth, and what share of your business is driven through the affiliate channel?
Affiliate marketing is an important part of our growth strategy, and and the idea when we set up Cherry Affiliates was to promote all our brands via one connection, and to be able to provide the best possible support for our affiliates. Organic traffic from SEO and purchased marketing in TV and digital media is however still a very important acquisition channel.
I think the sector in general is still undervalued considering the growth, profitability and cash flow of many iGaming companies.
The Internet has seen Cherry diversify beyond Sweden. What are your main territories now, and how much of the business is concentrated in Scandinavia?
We are still focused on the Scandinavian markets, as that’s where we have the majority of our business and revenues. Our core markets are Sweden, Norway and Finland.
Of the Nordic iGaming markets, only Denmark is fully regulated. How does this affect the types and scale of marketing you are able to undertake?
We are not doing anything in Denmark, because we don’t have a licence. Looking at the situation in the other Scandinavian markets, although we have the regulatory uncertainties, in practice, it’s been very stable. In Sweden, for example, the practical restrictions on our marketing are quite
limited. It doesn’t affect our business.
Sweden announced its intention to update its iGaming law, but to date has only started an investigation into how to prevent offshore advertising. Do you anticipate any changes on this front over the next 12-24 months?
The recent election has created a political vacuum in Sweden, with the nationalistic party Sverigedemokraterna as the only real winner. It will be difficult to form a strong majority government, and the chances of a quick change in regulations have decreased. My personal guess is that
we will not see any changes in regulations over the next 24 months.
You have built your online business in grey markets which to date have proved sustainable. Have the risks of investing in listed iGaming operators active in these markets been overplayed, in your view?
Looking at the grey markets, I think the legal situation has become clearer, even if many question marks remain out there. There have been a number of court cases, helping define what you can and can’t do. All the grey markets face potential threats from increased restrictions, but the trend today is more toward liberalization with free competition under local regulation. I think the sector in general is still undervalued, considering the growth, profitability and cash flow of many iGaming companies.
In a short time, Yggdrasil has taken a very strong position in the lottery segment. Our view is that lottery is the last untapped vertical within the iGaming industry.
You are an investor in Yggdrasil Gaming, which develops lottery games as well as slots. Do you see greater opportunity in this area compared to the pure online casino side?
Yggdrasil has a portfolio of slots, video scratch, video keno and lottery games. The market in the games development sector is also very competitive, but the number of competitors is much less than the operating side, in particular within the lottery segment. In a short time, we have taken a very strong position in that segment. Our view is that lottery is the last untapped vertical within the iGaming industry, a vertical potentially worth 30bn euros in Europe alone. All the other verticals, such as poker, casino, bingo, are very competitive, while lottery is still dominated by the old, traditional companies. We think over a few years, that the online migration will be significant and that new private operators will grow at the expense of the incumbents.
What’s the thinking behind the Klubblo joint venture, how will it work, and how will it benefit the wider Cherry business?
Klubblo, which is short for the Swedish Club’s Lottery, has a simple idea. The player selects which sports club they want to support. That could be any club, where your kids play soccer, it could be a rowing club, a fencing club, whatever. A large share of the generated game win,
between 30% to 40%, will automatically be transferred to the sports club’s bank account. Our idea with Klubblo is that we will take a step to becoming a natural gaming partner to Swedish sports, and hopefully one day, when we have regulation, we will be in strong position to fully realise that. In the mainstream, you have Svenska Spel, and they give lottery money to Swedish sports, but the share of revenue that flows to grass roots level is very small.
What proportion of your business is being driven by the mobile channel, and how has this grown over the last 12 months?
The mobile channel is growing significantly faster than the rest of revenues. In particular, we see increased growth from tablets, and have released a dedicated version for our EuroSlots.com online casino. Normally, when you enter a casino from a tablet, you get a graphically up-scaled version of the mobile site that doesn’t have the same functionality you would find on a regular PC.
What will be the major transformational issues in iGaming over the next 12-24 months?
Regulation will be a big theme, as will be mobile conversion. I also think you will see a big drive towards gamification, so you will see more games and product development geared towards engaging players, e.g. with different type of assignments or missions creating a gaming site, rather than a site with games.
Cherry's online brands: