Tim Johnson, CEO of Carmen Media Group, talks exclusively to eGaming Review about money, marketing and Microgaming
"Carmen Media is not run by Microgaming, and please put that in big letters"
Online casino owners are a notoriously publicity-shy bunch. So, as the sole owner of the worlds second-largest online casino group, Tim Johnson could be forgiven for wanting to keep a low profile. But Johnson is not your average online casino chief executive. And the firm he owns, Carmen Media Group, is not your typical online casino operator.
A fourth-generation bookmaker, he launched his first online sportsbook in 1998 after selling the chain of Demmy betting shops he ran with his father and bookmaker Selwyn Demmy. What followed was what Johnson describes as two years of sheer pain with technology that wasnt really ready.
Johnson sank some of the US$80m he raised from the sale of the Demmy chain into buying the River Belle and Gaming Club casino sites, and has not looked back; just six years later, the company he presides over represents potentially the most powerful online gambling enterprise in the world.
An easy-going family man with a pathological fear of flying and a childhood spent in betting shops, Johnson is endearingly eccentric, but you would be a fool to underestimate him or Carmen Media. While at times it has felt as if the internet was sponsored by 888.com, until last year Carmen Media kept a much lower profile and many were surprised to see them at the dizzy heights of number nine in our Power 25. But make no mistake this firm is a match for anyone.
Talking to us from his office in the same Gibraltar building where 888.com and iGlobalMedia are based, Johnson is happy to reveal why he made the switch from sports betting, exactly what the firms relationship is with Microgaming and why everyone in Gibraltar goes out for dinner in Spain.
Why with all this sports betting heritage did you opt for online casinos?
Because our players were leaving us for the casinos. It really is as simple as that. It was clear to us that the internet casinos were not going to go away, so we applied for a casino licence in Gibraltar and launched our first Microgaming casino.
Was it a relatively smooth transition from sportsbook operator to casino owner?
Its a steep learning curve for people who have been in the bookmaking industry. Bookmaking isnt an easy game by a long shot, but operating an online casino makes it seem simple. The perception is that its a black box that sits somewhere and runs itself, which is the biggest myth in the gaming industry. We have more than 1,000 people scattered all around the world who are running the casinos for us.
How do you orchestrate such a huge number of people?
We have a staff of 70 people here in Gibraltar, which is where the back end sits, and we run the business from here. But we have several outsourced partners on different continents that handle various aspects of the business. For example, we use a company in Cape Town called Forwardslash, which provides some marketing services and a call centre to the US.
How close is your relationship with your service providers? What do you say to rumours that the Carmen Media Group is run by Microgaming?
It would make my life a lot easier if it was laughs. But to answer your question Carmen Media is not run by Microgaming and please put that in big letters. We are proud of our relationship with Microgaming as it produces great stuff, but we are absolutely and categorically not run by them. It is simply the software provider for the casinos and we pay for our software at the rate most people would pay if they took a casino from Microgaming.
So why do you think the rumours persist?
I think a lot of it is put out by the competition. I own this business. Its clear for everyone to see and you can go to Companies House and check. We are transparent because we have always operated that way. If you were operating in the UK with a chain of betting shops you wouldnt possibly think about not telling anybody who owns it.
But that is something of an anomaly in this industry. Why are operators so secretive about ownership?
Its simply the way the casino industry grew up. For some reason the identity of the owners was kept away from the players. If you pick any number of casinos and try and find out who owns them it is almost impossible. Hopefully the industry will change, and hopefully the legislation change in the UK will go some way towards making sure companies operate in a more transparent way.
How much is the persistent opacity of some large operators ultimately harming this industry?
I think its disgraceful. The player deserves more. But while I do think its disgraceful, its not a terrible thing for our business because we are credible. If other companies arent prepared to give the player that element of trust then they will make their own choice, so if the player wants to bet with a credible company they can bet with us.
Do you think people think that carefully about where they play?
I have found few players blas enough to say they dont care. And as the choice becomes greater and the player becomes more educated I think they will look for a bit more from the companies. When we talk to players the overriding factor that influences their decision is trust, and the fact they know where their money is going.
How important is that trust to making sure the industry continues to grow?
If you want to work with any of the big blue-chip brands you need to be credible and to have the corporate history behind you. We have several deals lined up in Europe, and it gives us the feeling we are getting this right when we can sit with large blue-chip companies and work together. Five or six years ago if you had walked in as an online casino they would have called the police.
Is this a favourable environment for online gambling firms looking for investment?
It is hugely favourable. And whether this is due to the increasing credibility of the industry or the attention poker has brought in you simply cant answer. But the money for investment is there from big blue-chip companies, should anybody require it. Its a hugely exciting time. You could very easily raise US$300m overnight even as a private company. The desire for co-owned joint ventures from blue-chip companies at the moment is that strong.
Are we going to see a lot of large-scale acquisitions in 2005 and is that something you have plans for?
I would agree with that, and yes we are looking for some. The industry has grown up to the point now where consolidation is just natural. Its been coming for a long time and its been happening in small bits and pieces, but I think it will speed up in the next two years and it will be survival of the fittest.
Where do you think most of this acquisition activity will occur?
I think the movement will come from the poker sector in the next 12 months. There are companies out there going balls to the wall, and there will be some that succeed and some that simply run out of cash. To compete with the likes of Party Poker is not a cheap game, and the amalgamations will come from companies such as ours swallowing up the smaller fish in the industry.
So is that where you are looking acquisitively?
How do you feel the Gaming Club poker is performing?
It is performing well at the moment, but we think we could and should be far more successful. We have recently restructured the poker division, and brought in some marketing guys from outside the industry to look at how we can raise the game on this. In two years poker should be bigger than casinos and we are trying to get to the top of that pile.
Presumably the Gaming Club Sports book is an important part of your future plans, but why did it take so long to come about?
The software had to reach a point where it was acceptable to be a part of the Belle Rock group. Our casino software is the best in the industry, and if we were to inject a sportsbook product that wasnt good enough, it would be hugely detrimental. We wouldnt inflict it on our players.
The Gaming Club sportsbook has quite a soft gaming feel to it. Is that intentional?
Its not a hardcore sports betting site. The players are entitled to have an entertaining experience when they spend their money, and that is where we are trying to go with the sportsbook. Its not a site we want people having US$50,000 bets on.
So is the sportsbook still something of a sideline project?
Its absolutely not a sideline, and there is a multi-million dollar investment behind it. We have around 16 traders on the floor, but we are fortunate that we dont have to go out there and blast the industry with inflated prices just to try and get the revenue in. The sportsbook is making a profit already, but it is doing that because the target market we are attracting is the fun player.
What are your long-term plans for Carmen Media?
We have no plans to exit, we have no plans to IPO and we have no plans to sell the business. We are building a great business with great people and we will continue to do that.
Are you happy to remain in Gibraltar?
Gibraltar is a great place from which to operate. Its not too big; it has a village mentality and everybody knows everybody. We all live close to each other, and I can walk down the road to where John Anderson chief executive of 888.com lives.
Do you all live in each others pockets?
To a certain extent. The saying is you can go out for dinner on your own, but you will end up eating with someone you know. Thats why we all go out for dinner in Spain.
How much friendly rivalry is there between you and Cassava?
There is healthy competition, but its not something that is watched on a daily basis. Our marketing strategy is devised 12 months in advance, and Im quite sure Cassava and John Anderson do the same thing. You simply cant run a business of this size deciding on a Monday what is going to happen on a Wednesday anymore.
Article posted on www.egrmagazine.com on 23rd Dec 04