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Australia’s Aristocrat Leisure has reported a 22.7% year-on-year increase in revenue for the 12 months to 30 September, to AUD$4.40bn (£2.32bn/€2.71bn/US$3.00bn) on a statutory basis.

The supplier saw growth in its land-based gaming supply business and an M&A-driven boost to its digital division push it to a new full-year revenue record, which was up 14.8% on a constant currency basis.

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The Americas division was the largest single source of revenue, accounting for $1.95bn of the total, a 23.3% improvement on the prior year. This was aided by growth in the installed base of Aristocrat’s Class II and III gaming machines, with Class II up 3.9% year-on-year to 25,220 units, and Class III installs up 14.3% to 22,998. Average fee per terminal per day rose 1.3% to USD$50.46.

The launch of new hardware, such as the MarsX, EdgeX, Winners World cabinets also led to an increase in outright sales for the year, with the total number of platforms installed rising 29.6%, at an average price per unit of USD$18,097. This offset a slight decline in revenue from Latin America, which Aristocrat blamed on challenging conditions in the Mexican and Argentinean markets.

The strong performance of the Americas business offset weaker performance in the Australia and New Zealand and International segments. Revenue from Class III supply operations in Australia and New Zealand casinos rose 0.4% year-on-year to $456.2m, while International revenue fell 2.9% to $204.5m.

Digital, meanwhile, saw revenue climb 33.6% to $1.79bn, with the division benefitting from full-year contributions from Plarium and Big Fish Games, acquired in October 2017 and January 2018 respectively.

Bookings (the total amount of revenue generated in a period) climbed 21.1% to USD$1.23bn of which 52.0% came from social casino games, while casual games accounted for the remaining 48.0%.

Heart of Vegas, the social slot app developed by Product Madness, accounted for 15% of this total, followed by Big Fish Casino on 14%, then Cashman Casino on 11%.

“We also made significant strides in bedding down recent Digital acquisitions, leveraging critical skillsets and establishing a diversified portfolio approach, analogous to our proven land-based growth strategy,” Aristocrat chief executive Trevor Croker explained.

Looking ahead, Croker said that the Digital division would focus on growing its presence in the casual gaming segment.

“The successful global launch and scaling of RAID: Shadow Legends, our first entry into the CRPG genre, contributed to our performance and generated valuable insights we will apply to future game launches and genre entry strategies.”

For the year, revenue-related costs rose to $1.97bn, leaving a gross profit of $2.43bn, up 23.0% year-on-year.

Aristocrat then reported $11.1m in other income, down from $13.5m in the prior year, while design and development costs growing to $500.4m. Sales and marketing expenses grew 19.7% to $217.1m, with administrative costs rising to $611.6m, and finance costs to $135.1m.

This left a pre-tax profit of $973.5m, up 27.6% from FY2018, and a full-year profit of $698.8m after $274.7m of income tax was paid.

“Aristocrat delivered another year of high-quality profit growth in fiscal 2019, further extending our track record of share taking and organic momentum, driven by strong investment in talent, product portfolios and marketing across our Land-based and Digital businesses,” Croker commented.

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“Sustained operating performance drove strong free cash flow generation, which was in turn invested to fund further growth, pay progressive dividend increases and provide significant balance sheet optionality for the future.”

For the current fiscal year, which began 1 October, the supplier said it expects to see continued growth in outright sales in the North American market, with its installed base to expand further.

Digital, meanwhile, will be driven by newly launched titles being scaled, with user acquisition spend to be kept to a rate of between 25% and 28% of the division’s revenue.

As of 19 November, the business also made structural changes to reflect the fact that the majority of its profits are generated from the US market, which currently represents more than 60% of the group total. While it will continue to pay taxes in Australia, it will recognise a one-off deferred tax asset of approximately $1bn in the first half of the year, to 31 March.

As a result, its effective tax rate, when factoring in the deferred asset, will be approximately 23.5% to 24.5% of profit.

Australia-based Aristocrat Leisure has been on the casino technology market since 1953. Over this 50+-year history, they became one of the largest corporations in the industry, focusing on innovation and player experience. ‘Australian Math’ made Aristocrat pokies famous in land-based casinos, while a move into digital gaming during the early 2000s solidified their financial growth.

There is a method Aristocrat’s creation of new products. It consists of working with creative developers, iterating on older solutions, and focusing on immersive experiences. Because of a unique position on the market, the company can bring about innovation on a large scale, creating new trends on the market as a whole.

Let’s explore the Aristocrat Leisure approach to product development in more detail.

How Aristocrat release more innovative products

Aristocrat is headquartered in Sydney and operates in over 80 countries. As a publicly-traded company, they regularly release financial figures and reports on results. A recent 2019 investor presentation accompanied by an Annual Report reveals record performance on the market, with revenue up 23% to $4.4 billion, operating cash flow up 16%, and income before taxes up 20%. Revenue figures and general company information illustrated below:

Raider

Source: 2019 Annual Report

A large part of Aristocrat’s revenue still comes from physical table games, gaming operations, and pokie machines – they’re among the biggest suppliers in Las Vegas. As a traditional casino game developer, they continue introducing new exclusive products such as cabinet designs, bar top screens, and machine prototypes.

Some notable physical innovations throughout 2019 and 2020 include:

  • MarsX and EdgeX – are cabinets focused on immersive player experiences, complete with new sound systems and uniquely curved LCD screen placement.
  • Arc Canopy – is a prototype machine installed on casino floors in the form of an archway. It hosts up to 4 players in a small arena-like environment.
  • Winners World – are bar-top cabinets and screens that add popular pokies as well as in-demand digital features to Vegas bars.
  • Linked Progressives – pokie links synchronized across many casino sites that allow players to get higher jackpot chances with an increased payout.

As CEO Trevor Croker summarized the year in a recent statement: “Throughout the year, Aristocrat strived to meet the evolving needs of customers and players by investing in our product portfolios and expanding into attractive new segments and genres.”

It shows a dedication to continuing moving in this direction – introducing new products and iterating on successful project launches. At this growth stage, expanding their portfolio seems to be the highest priority of Aristocrat Leisure. 2019 also marked high market performance for digital products.

Digital performance

Aristocrat operates 10 Digital studios, employing over 2,400 professionals in the sector. During 2019 they made a record of $1,23 billion in profits, also increasing marketing spending for new products by a large margin. Overall, digital now represents 41% of all company revenues, showing a significant shift into this industry with announcements of 12 new mobile titles and social casino games.

The current Aristocrat digital portfolio has 9 games, with another 4 in a soft launch mode, which can mean various stages of beta testing pre-release sales, or first stages of player acquisition. 52% of revenue comes from social casino games, with the other 48% from casual mobile games.

Aristocrat Strategic Cycle is designed to ensure successful launches of new digital projects and their ongoing financial stability:

Aristocrat Digital Strategic Context 2019

Going over cycle parts in additional detail:

  1. Game Design – prototyping and quality assurance, creating titles that are both technologically secure and optimized for user experience.
  2. Evergreen Brands – recognizable titles and settings. It can mean purchasing well-known licenses such as Toy Story or using iconic historical time periods.
  3. Digital skills – player marketplaces, premium features, cosmetic options, and other ways to monetize social and mobile free-to-play games.
  4. Marketing – use of all advertising verticals, including viral YouTube campaigns, player referral rewards, and other means of enlisting new users.
  5. Market Intel & Portfolio Planning – using all the acquired data from previous game launches to plan out new titles as well as updates to existing games.
  6. Operational Rigour – optimization of games for return on investment. Events at various lifecycle stages, management, planned sequels, etc.

Some of Aristocrat’s most profitable games have been alive for over five years. Their entry into the market was made possible by some key studio acquisitions made in the 2010s:

Plarium

Plarium Global is an Israel-based studio founded in 2009. They were acquired by Aristocrat in 2017 for $635 million after their hit mobile game Vikings: War of Clans has made the top 10 highest-grossing strategy game lists. Since then, Plarium grew to over 1200 employees with 8 offices and development studios in Europe and the United States.

The company focuses on casual mobile and social media games, specializing in strategy and roleplaying niches. Their portfolio counts 15 games, and over 290 million users playing across all titles, regularly making top played ranks in Google Play and App Store.

The most successful titles of this studio are:

  • Vikings: War of Clans – released in 2015 and available for mobile and as a browser game. Despite being over four years old, this strategy game still has a large player base, with regular updates keeping it afloat on the market.
  • Lost Island: Blast Adventure – released in 2018 for Android and iOS, this is a puzzler that’s telling a story about an expedition in search of ancient secrets. It’s a casual game with simple Match Blast gameplay and island customization mechanics.
  • Raid: Shadow Legends – released in early 2019, this is the most recent Plarium mobile game. It mixes fantasy roleplaying with collection mechanics, allowing players to create a party of champions and compete against others in raids.

Big Fish Games

Big Fish Games is a Seattle-based studio established in 2002. Aristocrat Leisure acquired them in 2017 for $990 million. In addition to mobile and social games, this studio also develops PC and Mac titles. Big Fish has a portfolio with over 50 games, specializing in casual experiences such as puzzles, hidden object games, match 3, etc.

This particular acquisition firmly placed Aristocrat into a leading role in the social casino games market. It allowed them to acquire main licenses such as Toy Story for new puzzle games aimed at the casual market. Additionally, Big Fish studio could now take popular Aristocrat slots and digitize them for mobile/browser games.

Big Fish Casino became the main hit of this partnership as a result. It’s one of the largest social casino games in the world, available on mobile and as a standalone app. The casino offers players over 35,000 jackpots daily, rotating popular slots and classic table games such as roulette and blackjack. The game also has tournament and leaderboard features, allowing for versus matches and player-created lobbies.

To date, Big Fish Casino remains social, allowing players only to use virtual currency with no real money gambling options.

Product Madness

Product Madness was one of the first Aristocrat digital studio acquisitions, made in November 2012 for an estimated $40 million. They started in 2007, developing social casino games, having reached 500,000 registered users for their titles on Facebook alone. Since the acquisition, the studio grew almost three times the size, with new offices in London, Seattle, Vegas, Austin, Minsk, and Lviv.

Game Hunters Hearts Of Vegas

Heart of Vegas is the most successful Product Madness title to date, having reached #1 most downloaded app in Australia for both Google Play Store and App Store shortly after its 2013 launch. The game was the first in a series of social casino games to come, boasting dozens of popular Aristocrat slots available for play both online and offline. In 2019 Heart of Vegas accounted for 15% of all Aristocrat digital market revenue flow.

Further social casinos called Cashman, Lightning Link, and FaFaFa Gold were released between 2015 and 2019. They have different slots and jackpot opportunities, with each offering its theme and user experience. As with Big Fish, none of the virtual casino games offer real-world gambling – they incorporate social features such as leaderboards to create a Vegas casino simulation without actual money wagers involved.

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Queen of the Nile

Queen of the Nile is one of the most popular slot machines ever to grace the floors of land-casinos, which is why it’s been promptly digitized and is now available on almost every social casino app discussed in this article. This poker machine was mostly played in Australia before getting a full online release.

In-browser and with no app download, people can also play free pokies Queen of the Nile on this page, looking for virtual big wins. The game is a good representation of Aristocrat free play pokies since it has all the mechanics they use elsewhere in almost every game. It includes Free Spin scatter symbols, progressive Jackpots, and Wild symbols which, like in most Cleopatra slots, are represented by the Empress herself.

Creating digital releases of pokies like this is only a part of Aristocrat Leisure’s new digital strategy. This strategy includes mobile RPGs, strategy games, puzzles, and other casual titles. Those investments have been paying off with record financial figures in 2019 – the new decade will mark even more online experiments from the Australian gambling giant.

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