BLUE OCEAN OPPORTUNITIES IN THE RED OCEAN OF SOCIAL CASINO

19 October 2015

Agenda

Background on me and Amaya

Blue Ocean Strategy Overview

Formulating a Blue Ocean Strategy

Tools

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LLOYD AND AMAYA

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Been there, done that

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• Merscom• Playdom• 519 Games

Start Up

• Merscom to Playdom• Playdom to Disney• Spooky Cool Labs to Zynga

3 exits

• Disney• Zynga• Amaya

Big Co

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WHAT IS AMAYA & POKERSTARS?

Canadian-based Amaya Inc. is a global gaming leader listed on the NASDAQ and Toronto Stock Exchange. Amaya owns and operates the world’s largest poker brands, PokerStars and Full Tilt. Amaya brands lead the market not only in the offline world, but also sponsor the most successful live tours around the globe.

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Amaya: Global Gaming Leader

$1.45-1.57B2015 PROJECTED REVENUE

OVER $400MANNUAL FREE CASH FLOW

95 MILLIONREGISTERED CUSTOMERS

AROUND 71%MARKET SHARE OF THE ONLINE POKER INDUSTRY

24/7/365ONLINE SUPPORT IN 26 LANGUAGES

MORE THAN 1,750STAFF GLOBALLY

“PokerStars is the dominant player in the industry due to a passion for delivering a high-quality, secure and authentic online poker experience to millions of poker players around the world. PokerStars has been the leader in establishing industry best practices in areas including e-commerce, security, game integrity player fund protection, customer service, responsible gaming and marketing.”

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PokerStars: The World’s Largest Poker Site

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140 BILLIONHANDS OF ONLINE POKER DEALT

12 LICENSESMOST IN THE POKER WORLD

2 MILLIONHANDS PER HOUR DEALT

$200M WONIN TOURNAMENTS EVERY MONTH

2.8 MILLIONS FANSAND FOLLOWERS OF POKERSTARS SOCIAL MEDIA

225,000 PLAYERSWORLD RECORD FOR ONLINE POKER TOURNAMENT

$1 MILLION GUARANTEEDWINNINGS IN THE SUNDAY MILLION TOURNAMENT

$10 MILLION GUARANTEEDWINNINGS IN THE WCOOP MAIN EVENT

$1.36 BILLION PAYOUTIN TOURNAMENT WINNINGS BY THE END OF 2015

WHY BLUE OCEAN

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Blue Ocean Strategy

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Creating uncontested market space and making the competition irrelevant

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Red Oceans vs. Blue Oceans

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Red Oceans vs. Blue Oceans

Critical for social casino

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Higher ROI competing in a Blue Ocean

High UA costsAnd getting higher

Very competitiveBloody red Billion dollar competitors

Lets start with an example

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Circus Industry

Declining industry Expensive “Star” performers

Competition not limited to other

circuses but other entertainment

options

Negative sentiment about use of animals

in circuses

2 large players setting the standard (Ringling Brothers

and Barnum & Bailey

14Very Unattractive!!!

Relevant Factors in the industry

PriceStar performersAnimal showsAisle concessionsMultiple Show arenasFun & HumorThrill and dangerUnique venueThemesRefined watchingMultiple ProductionsArtistic music and dance

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Redefining the circus

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Specific Actions

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Cirque du Soleil

Created a hybrid between the circus and the theatre

Retained the symbolic and glamorous aspects of circus, such as the tent and the more breathtaking

aspects, such as acrobats

Incorporated more comfort, sophistication, elegance and theatrical plots; this brought not only the richness of theatre but a whole new demographic of customers

It looked across market boundaries and created new ones

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FORMULATING A BLUE OCEAN STRATEGY

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You must begin by reorienting your strategic focus

from competitors to alternatives, and from customers to

noncustomers of the industry

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Formulating a Blue Ocean Strategy

Reconstruct Market Boundaries

Focus on the Big Picture, Not the Numbers

Reach beyond existing demand

Get the strategic sequence right

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RECONSTRUCT MARKET BOUNDARIES

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Look across……..

Alternative industries

Strategic groups within industries

The chain of buyers

Complementary products and service offerings

Functional or emotional appeal to buyers

Time

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Who are our alternative industries?

Console games Movies TV

Books Casinos iGaming

Blogs Travel Traditional Games

Sports eSports

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Strategic Groups in our Industry?

Console Gamers

Casino Visitors

Social Gamers

Real Money Online Players

Mobile Gamers

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Chain of Buyers

Who are the purchasers?• Players• Parents

Who are the influencers?• Friends• Partners

Who are the users?• Players They are NOT

necessarily the same

group

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4. Look Across Complementary Products

Products are not used in a vacuum

What is the total solution buyers seek?

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5. Look Across Functional or Emotional Appeal

• Some industries compete on price and functionRational

• Others compete on feelingsEmotional

• Functional companies over time become more functional

Rational to emotional

• Emotional companies become more emotionally oriented

Emotional to rational

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6. Look Across Time

Who has done it? Apple with itunes redefining access to music

This is the MOST difficult one

Compare value the market delivers today to the value that can be delivered tomorrow

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Insight into how a trend can change value to customers helps find new market spaces

FOCUS ON THE BIG PICTURE, NOT THE NUMBERS

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Strategic Planning

Most companies’ strategic planning

processes keeps them wedded to red oceans

The process drives companies to compete within existing market

space instead of looking for new market spaces

Typical Process:• Current Industry conditions and

competitive situation• Discussion on how to increase

market share, capture new segments or cut costs

• Outline of goals• Budgets and spreadsheets• Output: a large document

where people spent time filling in boxes and running numbers instead of thinking outside the box

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Alternative approach

Start by drawing a strategy canvas (value curve)

Unlock the creativity of a wide range of people within the organization

Open the company’s eyes to blue oceans

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Reach beyond existing demand

Key component of achieving value innovation. Move away from:• Focus on existing customers• Driving finer segmentation to

accommodate buyer differences (tailored offerings)

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Look to NONCUSTOMERS!!Focus on commonalities in what buyers value!

Reaching beyond existing demand

Noncustomers before

customers

Commonalities before

differences

Desegmentation before finer segmentation

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Four Actions Framework

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A New Value Curve

Reduce

Eliminate Create

Raise

Eliminate-Reduce-Raise-Create Grid(Example)

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EliminateIn-app purchases

RaiseSpeed

Fun

ReducePaid user acquisition

CreateProduct Placement

Subscriptions

Drawing a strategy canvas

It shows the strategic profile of an industry by highlighting the factors that affect competition among industry players

It shows the strategic profile of competitors identifying what they invest in strategically

It shows the company’s strategic profile

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Strategy canvas

Captures the current state in the known market space

Determine the important factors in the industry (examples)•Genre• In-app ads• In-app purchases•Social Calls•Real-World Elements•Cross-Promotion Bars•Product Placement•Fun•Platforms•Time Killing

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Reorient your strategic focus from:• Competitors to Alternatives• Customers to Noncustomers

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Potential canvas for social casino

3 characteristics of a good strategy

New Value Curve should have FOCUS

Divergence

Compelling tagline

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Thank you

Lloyd Melnick

lloydm@pokerstars.com @lloydmelnick Lloydmelnick.com