As coronavirus sweeps across Italy, the Italian Government has implemented a lockdown with the intention of stopping the virus from spreading further.
The Italian Prime Minister has enforced a “stay at home” policy in which travel is only permitted for work or emergencies, while public gatherings and sporting events have been banned.
For Italian-based gaming company Newgioco, this has been detrimental to its operations in the country, with the emergency policies causing the closure of a number of its betting shops.
Speaking with Gambling Insider, Newgioco CEO Michele Ciavarella explained the current situation in Italy and how the shutdown could impact the market moving forwards.
What have been the main effects of the Italian coronavirus shutdown on Newgioco’s operations in the country?
The effect on Newgioco, like our peer group competitors in Italy, was a shutdown of land-based venues affecting the general walk-in traffic that our retailer operators and agents service. However, by extension, the effect of the shutdown measures was also the postponement and cancellation of major sports events, which was inevitable. The cancellation of sports leagues and events obviously affects the global industry.
Newgioco is nimble and thus we are adjusting operations as though we are in the off-season period by taking this time to foster our other gaming verticals, such as virtual sports, online casino, poker and other products. Despite the land-based shutdown, our clients are still seeking leisure entertainment from home or on mobile, in which we are seeing a measurable increase.
Do you see any invariably positive effects from the shutdown?
Yes, in fact we see this as an opportunity to take steps to find further efficiencies in business operations, find ways to accommodate flexibility in work hours for employee family-related matters, expanding our product verticals and test our disaster recovery models and ‘smart-work’ plan.
This situation also makes a strong case for our retail operators to encourage their walk-in clients to establish online accounts, so they can play from home or on mobile, which we are seeing quite responsively at this time. After all, necessity is the mother of invention.
How long are you expecting this to last? And what plans do you have in place if the shutdown were to continue for a substantial amount of time?
Based on the scientific information on the disease and effects of the outbreak being made available in the public domain, I believe we are seeing a typical bell-curve pattern of historical coronavirus spreads. It appears to be under reasonable control at ground zero in Wuhan, China and likely to be replicated as it makes its way westward around the globe. Italy is so densely populated, similar to various regions in China, that the rapid pace of spread and the tail off could possibly be similar.
Based on the timing of the shutdown orders and the reported incubation period, a few weeks until 3 April should be sufficient to get a better measure of the recovery period. That said, Newgioco is acting prudently to implement business manoeuvres and adjust accordingly. Our plan to focus on our ancillary business verticals is currently in place and we are seeing revenue adjustments occurring in real-time.
What effect do you see this having on the Italian gaming industry moving forwards?
Italy has been betting for about 2,000 years and has likely seen this type of event at some point in the past. Other than making diehards quite upset they cannot bet because there is little to bet on, I see this as having more of a social behaviour effect rather than an industry effect.
Due to the social atmosphere in Italy, it has been generally a land-based heavy market with a slight reluctance to switch to online/mobile play. It’s hard to say at this time if Italian bettors will switch back to land-based after they try online; but that, I think, remains a function of trust in the Government and banks, rather than the convenience of internet access.
Is the coronavirus situation currently impacting Newgioco’s operations outside Italy?
Due to the revenue over-weight from our Italian gaming operations, we see little external effect at this time. I think this is a positive for Newgioco because of the nature of the global spread of the virus. As our adjustments take hold, we expect to see a normalising of operations in a rather short period of time, which should not have a material effect on our business.
In fact, to a certain degree, the fluid situation is helpful because the leagues have suspended play, affecting competitors that operate primarily in North America, which has not been hit as hard yet. This gives Newgioco more time to develop and perfect our extra-Italy plans in Africa, South America and the US.
This interview contains certain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are identified by the use of the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project” and similar expressions that are intended to identify forward-looking statements. These forward-looking statements are based on management’s expectations and assumptions as of the date of the interview and are subject to a number of risks and uncertainties, many of which are difficult to predict that could cause actual results to differ materially from current expectations and assumptions from those set forth or implied by any forward-looking statements. Important factors that could cause actual results to differ materially from current expectations include the effect of the novel coronavirus pandemic on Newgioco’s operations in Italy and around the world and the risk factors described in Newgioco’s Annual Report on Form 10-K for the year ended December 31, 2018 and its subsequent filings with the U.S. Securities and Exchange Commission, including subsequent periodic reports on Forms 10-Q and 8-K.