At a time when all the major software providers in the Internet gaming business are poised to roll out their new and improved products, it's not hard to see that the industry is ready to take the next big step forward. Based on numbers published in the Bear-Stearns E-Gaming Report* there are four major league companies that hold over 70% of the market between them: Starnet, MicroGaming, Boss Media and Cryptologic. In this series we'll look at those hard-ball players, examine who they are and see what they've got planned for our gambling future, beginning with Starnet.
Starnet Systems International licenses turn-key Internet gaming packages to independent Casino operators. Through a number of wholly owned subsidiaries Starnet specializes in the development, licensing, and e-commerce functions required to provide a complete Internet sportsbook and casino. With over 20 games in their casino download package including card and table games, slots and video poker, and a full sportsbook service, Starnet has charted an impressive course since they formed in 1997.
Starnet is nothing if not serious about their gambling business. And so they should be. Revenue for the current fiscal year jumped to $17.9 million, up 186% from $6.3 million in 1999, driven by a 198% increase in revenue from royalties and fees. Licensing revenue has increased by 150% in the same period with over 40 primary licensees now running the Starnet products.
Sexy numbers aside, Starnet has had a rocky ride in the past 12 months. Trading under the NASD symbol SNMM, Starnet shares climbed steadily from a November '98 low of US$0.37 to a high of almost US$30 by early July '99. When a law suit was announced on July 27th against Starnet by licensee Las Vegas Casino, the stocks plummeted to US$15, but leveled out when it became clear that the suit would never be filed. Then, after a week or so of relatively stable trading, senior Starnet executives began executing their stock options and selling. 75,000 insider shares hit the market between August 12 and 19th for an estimated yield of US$496,000. Finally, on the 20th of August, police raided Starnet's corporate offices in Vancouver, B.C. seizing company records and property while the Canadian government froze Starnet bank accounts. Police officials cited Starnet's gambling and pornography activities as the cause of their investigation, referring in part to Starnet's live web transmission of performances at No. 5 Orange, a local strip club.
When the dust had settled, Starnet shares had lost 70% of their value in less than two weeks and the company was getting a lot of unwanted attention. Thus began a long process which has seen the company divest themselves of their porno interests and restructure their corporate offices. If the numbers are any indication, the market has responded with tepid confidence. Shares have fluctuated around the US$2.50 mark for the last six months while Starnet itself has weathered the storm and forged ahead with new initiatives. But the storm has taken its toll: largely due to legal costs incurred fighting their case Starnet recently reported a loss of US$3.3 million for the 1999 fiscal year versus the $2 million in earnings posted the previous year.
It's clear that Starnet's plan has been to press forward and leave the past behind. A number of announcements, including everything from partnership initiatives to forthcoming software roll-outs, have kept Starnet on the business news wires. Officially announced this past July -- but rumored for months -- Beyond2000 is Starnet's next big thing. Also known as SS2000 or Starnet2000, this software initiative is the result of two years development effort and includes something for everyone. A totally redesigned download package will include all the traditional Starnet games in single-player and multi-player format, add several new ones to the mix including multi-player Bingo and Keno, and introduce a complete set of no-download Java games. (see the preview)
Starnet games have always been worthy of a player's time. After the inevitable stabilization process of any software product, Starnet's games emerged as a solid product with many gaming options. In the forthcoming releases new features for players will include a modularized approach to the games software allowing smoother updates, more multi-player chat-enabled games, VIP bonuses, and tournaments available in any game the casino operator wishes to provide it.
And for Starnet's growing list of licensees, it's clear that the casino managers will benefit hugely from the new software's features. The re-tooled sportsbook with its Odds Management System, will allow an operator to create betting events, set the wagering parameters, manage price/odds in real time, validate wagers, control and monitor event liability and profile customer play. Ed Starrs, President of Starnet Systems International, told us that their new Bingo "allows for very high house take" and the new Keno offerings, Keno Live! and Video Keno, will be especially attractive in that the "hold percentage on both is approximately 20%". Finally an extensive paramutual betting system will be available that will be low maintenance, yield a predetermined commission "between 10% and 20%", and enjoy a clear legal status in 43 of the United States and all of the Canadian Provinces.
Starnet's focus has always been on the casino operators. This is no slight against the company for they've tied their own future to the success of their operators through the structure of their licensing agreements and the ongoing nature of the relationship between licensee and licensor. It would certainly appear that the forthcoming releases will provide both parties with the basis for a mutually beneficial and lasting relationship. And the players? There's every reason to believe that the new software will continue the tradition of satisfying play in a stable software environment.
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