Earnings to take a hit as bwin moves into social gaming

Online casino games specialist bwin.party digital entertainment is to muscle in on the vibrant online social gaming scene.

The company intends to establish a new social games studio called "Win" - suggesting that the company has found the caps-lock button on its keyboard at last - with its own dedicated development teams.

While that team finds its feet, the group has secured significant development resources by contracting with software developers and engineers experienced in delivering social gaming solutions across all key technologies including HTML5, iOS (the Apple operating system) and Android. The company expects to launch its first applications in the summer of 2012.

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To give itself a springboard into the market of games played on social networking sites it has coughed up $23m in cash for a number of assets owned by Velasco Services and Orneon.

In all, the company expects to invest up to $50m over the next two years on its foray into the world of social gaming. The commitment to secure meaningful market position is expected to result in additional costs of €5-€10m in 2012 and 2013, the company said.

"We have chosen a 'build and partner' strategy, one that provides us with both the resources and additional management expertise to execute our planned extension into social gaming - an exciting and fast growing area of digital entertainment that is the latest addition to our business strategy," said Jim Ryan and Norbert Teufelberger, the co-Chief Executive Officers of bwin.party in a joint statement.

"We are excited by the potential of this new market and believe we can deliver attractive returns in the medium term through relatively modest investment, funded from operating cash flow over the next 18 months," they added.

JH