Hello everyone, and welcome to Aristocrat's Investment Management Roundtable speaker series. On behalf of Aristocrat, I'd like to welcome you to today's call. My name's Rohan Gallagher, and along with Linda Assatoury, we look after the Investor Relations Program here at Aristocrat. Unfortunately, we haven't been able to get out and about and visit many people at this particular point in time, given the broader market landscape, but we do recognize the market's interest and access and value of corporate access, in particular getting to catch up with our senior management team. Over the next 50 minutes or so, we're going to be featuring our CEO and Managing Director, Mr. Trevor Croker, and making his debut performance in our Management Roundtable series, Mr. Mike Lang from London.
For those not familiar with our Roundtable series, over the next 50 minutes or so, we're going to take your most popular questions, and we're going to put those questions to our leaders and give their, so that they can provide everybody with open and equal access. For us, we think it's important as we head into our 30 September period end, where we'll be going into blackout shortly thereafter. Now, this call, a copy of the recording will be posted onto our website, as well as a transcript for those people who'd like to follow up after this call. We're going to do our best to answer all of the calls that have been registered by you, our attendees, and if we cannot get to all of those questions, the Investor Relations team will double back and catch up so that you're fully complete and in control.
Thank you for your interest. Welcome to Trevor and Mike, and with that, I'll ask Mike to, I'll ask Trevor actually to unmute his line and ask him if he could extend his welcome to the Group and also to provide a quick update on the company strategy. Thank you, Trevor.
Yeah, thanks Rohan, and welcome everybody. Thank you for spending some time with us today, and we hope that you get some good value from this call. Aristocrat continues to remain focused on high-quality product-led growth. Our consistent approach, the way we do that, is through a couple of lenses. First of all, as we continue to take share in the markets in which we participate, and I'm confident we're continuing to do that again in 2021, that we look at new adjacencies that we can grow into, and there's a number of new adjacencies that we're able to grow into across our gaming and our digital business.
Those adjacencies are also good opportunities to expand on our capability, both in our content teams, our technology teams, our commercialization teams at the same time, and no doubt Mike will make a few comments on some of the new adjacencies that the digital business has entered into over the last period of time. If I then take you back to the gaming piece of the business, we have entered the Illinois VLT and Oregon VLT markets in the last 12 months. We will be entering the New York Lotteries in calendar 2022, and we will also be entering HHR in partnership with Churchill Downs in 2022 as well. These are new adjacencies that build on the existing adjacencies that we have been attacking over the last period of time, including Bartop, Stepper, Washington Ovation, and Class 3 Stepper as well.
At the same time, we have another number of good stories to talk about from a digital point of view, particularly around the recent acquisition of talent that Mike will talk about in new studios, to building up new talent in new locations, to address new genres and new capabilities at the same time. You know, if you go back to the fundamentals of who we are, you know, we are a strong company. We've got a strong balance sheet, we've got strong capacity, and we've got a strong desire for growth, and we continue to remain focused on that in our core business and can see strong growth there. More importantly, we have opportunity through M&A to accelerate growth in the future as well.
Thanks, thanks Trevor. If we turn our attention to the strategy itself, can you talk about whether the company's strategy has actually changed during COVID? If it has changed, you know, where do you see the focus has been on?
We took the opportunity to review and finesse our strategy during COVID. What it has highlighted is the strength and the diversity of our Aristocrat business. The strength of the digital business came to the fore during the COVID period, and that's given us an opportunity to then refresh our overall strategy. You know, we found that the compelling points of our strategy that we had 18 months ago are still compelling now. If anything, we've probably accelerated a few of those things around people, things around capability, ESG, making sure we've got a responsible position in ESG. Also around product, we're continuing to look at innovating and bringing forward new product.
If you come back to what do we focus on when we talk about our strategy at Aristocrat, management's priorities are still our people, our customers, and our resilience, and we continue to focus on that in everything we do, making sure that we focus on the development of our teams, focus on the D&D development team, which you will recall that we kept working or wanted to keep working right through the COVID period, and we're seeing the fruits of that coming through with a fantastic portfolio of games, which no doubt you've seen highlighted through the Eilers reports, but we're extremely proud of the current portfolio of games and the competitiveness of both the games and the cabinets.
If you then think about where we're getting our growth, as I said, I still feel very, very strongly about the way that this organization is set up to continue to have strong growth over a number of years. We've proven that by coming out of the blocks fast in 2021. In our half year, you would have seen the first half. We've been able to come out of the blocks fast, come out with good profit, and we're able to now continue to accelerate on that because of our continued investment for growth, investment in R&D, investment in UA, and investment in capital behind our gaming operations products as well.
As I said at the start, and that is then all back, gives us all the optionality we want to think about how do we then address M&A as another accelerator of the next wave of growth for Aristocrat.
Thanks, Trevor. Now, we've touched on growth and that Aristocrat would like sustained and profitable growth, and that's pretty challenging in a pretty competitive market landscape at the moment. If we can unpack that, is it possible just to go through what you see our growth options are in the short and medium term, please, across gaming, digital, and other facets of the business?
Yeah, so if I talk about gaming first, because you know, Mike's going to layer in a lot on digital, so I'm going to talk a little bit about gaming, and Mike can add more context and color in digital a little bit later on. If I talk about where we are with gaming, we are taking share and continue to take share in the core markets we participate in. You can see that in the reporting, you can see that in the performance stats. You know, a premium games portfolio over three times floor average, fantastic set of results, top five cabinets in the gaming space, indexing cabinets. So we continue to invest there. That's continuing to make sure we're taking share in the core businesses. At the same time, as I said earlier, we're entering more adjacencies.
Illinois and Oregon in 2021 calendar year, we're now queuing up with New York and HHR as well, which will drive through the second part of, sorry, the second part into calendar year 2022. Then you look at the portfolio of games, you know, Buffalo Link, you know, Choy's Kingdom, all these great games that are continuing to queue up and allow us to place cabinets and games into the marketplace as a whole. You know, there's no two ways to know. Everyone knows that Australia has been impacted this year. We had a very good first half in Australia where we saw good pent-up demand and opportunity because of great cabinets and games. As I said, Choy's Kingdom, Dollar Storm, great ways to enter North America marketplace, but most of the eastern states have been closed now since the late part of June.
We are still seeing good orders and good demand across the Australian marketplace, but naturally until those markets reopen, and we hope that's soon for everybody's sake. I think if you then think about where else we're going is building on our technical capability. One of the things we found through COVID was cleanliness and our customer experience or systems business, the features that could be built in, digital wallet, cleanliness, that were all features that were required now by our customers because they were looking for ways to give their customers a safe and easy way to engage with the product on the floor. We have been investing behind that, and we continue to see great opportunities to continue to expand our footprint there, particularly in North America, and also sharing some of those synergies across with the Australian business as well.
I won't get too deep into the digital. I'll get a little bit about digital, then I'll let Mike go deeper again, but you know, at the end of the day, the digital business is about an $80 billion business, so it's a sizable business. You know, it had a one-off spike with the COVID lockdown period globally, which I think has seen the market mature to a size probably something we wouldn't have seen for a couple of years, but we do believe that that market's going to continue to grow at above GDP rates and see it as a real opportunity to continue to invest. As you know, we've got a strong portfolio that we've built out from, from our social casino portfolio.
Number two slot, number two casino producer, number one slot producer in the social casino games, increasingly publishing eight to ten games per month across the app portfolio to increase customer engagement. If you then think about the new entrants, and you saw some of those great ads that we just opened up with RAID and Mech Arena, and RAID particularly continuing to scale, although not at the same rates that you experienced a year ago, but it's become a mature and strong game in its genre as market-leading game in that genre as well. EverMerge, which is Rohan's favorite game, as you can see, you know, we've seen good growth in that early days and still see that merge category as an attractive segment to move into longer term as well and continue to invest for innovation.
Like I said, Mech Arena, just out, scaling extremely well, looking forward to seeing how that game grows in a new genre, learning a lot about that type of genre and the economics behind it as well. Finally, that's all the organic stuff and what we can see in our pipeline, got good clear line of sight of that, very confident about that from 2021, carrying momentum into 2022, confident into 2023 with another pipeline of opportunities as well. You know, then we've got the opportunity, as I said earlier, about M&A to accelerate, and we continue to look at M&A, whether it's bolt-ons or tuck-ins in digital, whether it's more support in adjacencies in the gaming business.
There are obviously other adjacencies like RMG, et cetera, that are around the marketplace that we continue to monitor as those new markets start to emerge, particularly in North America.
Thanks, Trevor. With Aristocrat's growth ambitions, you know, the key core focus is really above category growth organically, and that's to really optimize the existing business. Then opportunistically, the company has a history of accelerating growth via M&A. Rohan Sundram from MST Marquee is actually quite keen to hear your latest thinking around that further M&A opportunities and importantly, how those recent digital acquisitions originated.
Yeah, thanks for the question, Rohan. Look, we've taken a pretty rigorous and methodical approach to M&A when you look at the acquisitions that we've done as an organization, and we focus very much around making sure that they're accretive from day one, and then also looking at how we leverage the learnings and capabilities from those acquisitions across the Group or how the Group can actually help scale those acquisitions. If I then talk about where we are at the moment, you know, we really focus on getting the fundamentals of the M&A right, so it's not just about do we have the capacity or do we like to target.
It's really things around the quality of the management team, the growth and the size of the addressable market, the differentiation of the product within the segment in which it competes, the culture of the organization, and also the capacity and capability of the key teams to help grow and add to our culture and also to our capabilities as an organization as well. You know, as far as it goes, we still have gaps in our portfolio, and it's good to know that we've always got gaps that we can fill, and you know, we continue to see opportunity, as I said earlier, to mock the data and a few bolt-ins to Mike's business and the digital business, which I've been very pleased about the way that we've addressed that.
They've been either into new genres, either into new capabilities or into new locations, which is building out the diversification of the digital business, at the same time helping to build the scale that we want to build the pipeline of product for the digital business longer term. As I said earlier, COVID has changed a few trends, and some of those trends have been around the interest in our traditional gaming customers to have both a retail and a digital footprint, and obviously working with partnering with our customers in how do we become a solution provider for them, not just in our CX solutions, but potentially in game content and also in other marketing and support areas as well. We've really continued to focus on that as opportunity to grow. As I said earlier, you know, RMG is another opportunity on the sides of that.
There are other adjacencies that we continue to monitor, but it's not just a case of we can, therefore we will, it is we take a very disciplined approach to what we want, how it fits into our portfolio, how it's accretive to what we're trying to achieve, and how do we make sure we're the rightful owners to actually own these businesses and grow these businesses, as you said, Rohan, because we look for M&A to accelerate growth or for strong organic growth profile already.
Trevor, there's, you know, if I look at our addressable markets, we've got land-based or our offline business at about $150 billion. We've got our mobile social free-to-play at about $80 billion, and by the time we get to Mike, it'll probably be even higher than that. We are already in large addressable markets now, but you did touch on the possible growth options being that entry into real money gaming. There have been some really thoughtful pieces of research recently on RMG and related to that, the payments industry. This appears to have led to a large number of questions from our registered attendees today. For many market participants, it appears a logical extension for Aristocrat based on our capabilities, particularly leveraging that world-class content.
Trevor, Joe McCarthy from Elston Asset Management is one of many who asked, you know, could you provide some more information on what the company's view is on the real money gaming market and the opportunities available and how you can leverage your existing business into that space, please?
Yeah, thanks, Joe. First of all, real money gaming, the way we look at it consists of, or the way we look at, the way the industry looks at it consists of three segments: iGaming, sports, and iLottery. If you think about it from that perspective, that's the three branches of what we call RMG. RMG currently sits at about $70 billion from a GGR point of view now. Mind you, that's probably going to expand when we talk about North America a little bit later in this conversation, no doubt.
If you think about what's happened to this industry over years, it's progressively been becoming more regulated, you know, starting off in Europe and progressively becoming more regulated, and certainly you're seeing quite sophisticated companies and organizations with good businesses operating out of Europe, and they're really starting to be the, like the entry points into the North American marketplace. To some extent, the same thing is happening across Asia. If you really think about what's froth and bubble around RMG at the moment, it's the legalization or the regulation of RMG in the North American marketplace. You will have known that there's over 20-odd states now with sports betting, and that legislation is rolling out quite quickly.
High gaming, there's about six, and it's moving at a slower pace, but there is a way to see high gaming get to the sorts of penetration that sports is getting to, possibly over a longer period of time, but there's definitely a market opportunity. That regulated North American market becomes quite an attractive opportunity for everybody. How do we see playing?
If I go back and talk to you just about how strong our content is at the moment, and that content is monetizing extremely well in the gaming world or the retail world, as it is in the micro social casino and digital world as well, we see that there's an opportunity to use our content, to use our strong customer relationships and our capability with regulators and operating in a regulated environment as a way to enter that segment with the right partner or at the right time in the future. We are continuing to look at it that way, Joe. We continue to stay focused on what we control. There is an opportunity, you know, build or buy. There's a lot going on in that space, and I think we're just continuing to monitor what's going on.
There has been questions in the past, is A, you're taking too long, you know, will you miss the boat? We know how the markets are opening. The markets are opening as per we expected, and we can see a logical way to enter at the right time with the right product solutions.
Fantastic. Thanks, Trevor. Now, Alex Gallard, our friend from First Sentier, he unpacks this a little bit and goes into a bit more detail, asking, are there any views on the best way to monetize our electronic gaming machine or our land-based content into the iGaming space?
Yeah, so there's three levels of monetization in iGaming. There is a pure content play where you literally just publish content into an aggregator or provide your own RGS directly to a customer. There is an aggregator who will then take a number of suppliers or maybe take Poker, Bingo, Keno, other suppliers, an aggregator, console, portfolio, and plug that into a platform. The third one is the platform, and that is we have a fully integrated platform that takes the aggregator plus many other different aggregators and puts that together as a pure solution for the land-based operator who then provides it through a solution to their customers. If we think about it from our perspective, we think that the best way in the U.S. to think about this is as a B2B business. We don't see this as a B2B opportunity.
A lot of these licenses and openings are occurring through our traditional customers, and we see it as a better way to partner with our customers, using our great content, working with our customers to put together a portfolio of games that ultimately will be available to players in the states in which they all get licensed in time. Alex, I do not know if that helped you, but if the top layer is where the thinnest piece of monetization is, at the bottom layer is where the most monetization is.
Fantastic. It seems as though we've got plenty of grass in gaming. We've got some grass in digital, and we'll be touching on that. There is obviously the extension opportunity. Obviously with the free cash and the balance sheet position that we're in, it's some great problems for us to have over the next few years or so. All right, let's move into digital. Mr. Lang, welcome, Mike. You're in safe hands, really. Mike joined us in 2019, and normally we would have got him out for a bit of a meet and greet with the financial markets, but unfortunately that hasn't been the case at the moment.
If the audience indulges me just a little bit, because we have had a number of these questions, not just for this call, but for the last 12 months about Mike and a bit of background. I am going to hand over to Mike. Mike, can you just give us a quick background on your career prior to joining Aristocrat, please?
Thank you, Rohan. Thank you, Trevor. It's great to be here. Cliff note version of my career, I have been in the media, digital, technology, and gaming space over my career, working at companies like the Walt Disney Company, Fox Entertainment, Universal Music Group, and most recently Discovery Communications. I have also been the CEO of a movie studio and have had extensive experience in both the traditional video gaming business as well as mobile gaming. You know, this opportunity to come to Aristocrat was really exciting to me for a couple of reasons. Number one was maintaining living here in London. I'm originally, as you can tell, American, and we moved out to London five years ago and really do love living here. Less travel than we used to have, but clearly do enjoy being here. The thing about Aristocrat really is very high level.
Number one, I'm always drawn to creative, talent-driven businesses. You know, that's what makes the media business, you know, exciting and fun. And clearly this, like any other media business, is driven by great creative, great talent, great product is the word that many people use. Second, I mean, and Trevor touched upon this, the mobile games business is incredible. Yes, it's already grown. You know, next year they're talking about it being $100 billion. One way to think about mobile games is that the mobile games business globally is bigger than the console and PC business combined. That just shows you the scale of this business and how exciting it is. It's global, our business. We have 2,500 plus employees that's all across, you know, the world in Israel, Ukraine, you know, United Kingdom, Poland, Finland recently, and the United States and India.
That's exciting for me as an opportunity to be part of something on a global basis. The economics, which we'll talk about later, the economics of the mobile business is incredibly attractive as a media segment and through my career, one of the most exciting economic models in terms of the way the business works. Finally, and not to pander here, but a big, big reason why I came was because of Trevor, the board, and Aristocrat, the kind of company it is, what they represent. I mean, the things he talked about, about people first, it's real and it's a real part of the company, which I very much respect.
Quite frankly, the power of the company, which Trevor talked about, the combination of this very, very strong gaming business run by Mitchell Bowen combined with digital, I think that gives us enormous competitive advantage, unlike a lot of our mobile games-only competitors where they're solely dependent just on mobile games. We have the diversity and the opportunity to leverage both businesses together and the synergies of those. Very high level, that's why I've joined the company and I'm really excited. Nothing has changed my mind over the last two years, including you. It's all very positive.
Fantastic. Thanks, Mike. Now, let's drill down into Aristocrat Digital and let's talk about the strategy. How would you describe the digital strategy?
I think it's based on four pillars. Number one is profitable growth, not just growing top line, which we've done very, very well, but in a very profitable way achieving that. If you look at our profitability and our margins, I think that's, you know, very strong compared to the competitors. At the same token, we are beating them in regards to industry growth at the same time. One thing to take into account too over the last two years is all of that growth has been organic, built within the organization itself. We've not, you know, achieved that growth through M&A, which we are starting to do, and we'll see more of that as it comes. That shows the power of really this, you know, focus on building our product, world-class product that drives that profitable growth.
The core for us is our pipeline, the new games that we're developing and where those games are at. As mentioned, you know, we have, you know, as many as 10 plus games in development at one time. We want it to be more. Not every game's going to work. It's a creative business, but we're able to really drive more and more. Pipeline is seen by, you know, recent releases like EverMerge and most recently Mech Arena. At the same time, not losing focus of the core franchises and library business that drives enormous growth and helps fuel the pipeline in many ways. I mean, one thing to keep in mind is that this business has evolved dramatically, where many of the products like RAID will have a long life cycle now because of the enormous amount of live ops, new features, new content that we're able to provide.
That's a relatively new dynamic, similar to say the movie or television business, and creates an enormous amount of ongoing cash flow as we reduce the amount of marketing we spend over time and continue to monetize those customers over that period. Our social casino business is another example where we're able to achieve that. I think the diversification of our business is critical. You know, yes, we have a very strong core social casino business that represents, you know, close to 50% of the total business, driven a lot by the amazing IP driven from our gaming partners that comes over, but also digital-first content that we're creating as well that now is actually going back to the gaming business, as Trevor's mentioned in the past. That's a core great business for us.
However, the courage of the company to invest and acquire into other genres has really paid off. We've now become a very dominant strategy role-playing game business through Plarium and the leadership of Aviram Steinhart and the team there. We have built a very good casual business that continues to show opportunity, in particular with EverMerge and our most recent acquisition of Futureplay. I think that diversification is going to continue. We've made our first step in action, which we'll talk about with Mech Arena, and we believe that's just going to continue.
Finally, I think that our strategy is around not just organic growth, but looking very in a disciplined way around inorganic growth through M&A, through recent deals we have done across a broad spectrum, everything from investments or talent deals, like a deal we did last year, Proteus, to full-on acquisitions like we have done with Futureplay and Playsoft, which I can talk about later. That really makes up the core strategy of our digital business as we go forward.
Thanks, Mike. You know, large addressable market, step one, grow above category growth. You've seen us do that in social casino with that eight to ten games a month going in to support those franchises. You've also seen, you know, category growth with RAID and the role-play games. Now the opportunity is to accelerate that growth through M&A, which is part of the broader Aristocrat strategy. Within digital, David Fabris and Gabrielle from Macquarie are asking, can you scale up with studio deals or do you need to acquire more businesses on a go-forward basis?
Right. Thank you for the question. I mean, I think the core rationale for us doing any M&A is based upon two major components. One, talent, great talent that we believe in, similar to what Trevor was talking about, that brings something to the table for us. Two is our ability to scale those studios. We're not doing M&A for the sake of M&A so we can make an announcement. We take a very disciplined approach. We look at it in that regard. Clearly, we all know the multiples in this market are pretty frothy. We need to have those two criteria in order for us to feel comfortable and justified to make those kinds of M&A transactions.
Yes, both on our Playsoft transaction and Futureplay, they are built upon the idea that we will bring leverage and capabilities to bear to help those businesses scale and become bigger than they otherwise would be on their own. In particular, with Playsoft, that's going to be a major first-party studio for our social casino business in terms of their capabilities in that area, both in regards to developing games as well as doing Unity-based digital slot production out of that facility in Poland. Number two, you know, again, as Trevor talked about, leveraging the capabilities of Futureplay of not only merge segment, which we're really excited about, but being in a very strong market for mobile game in Finland, which we've never been before.
I think another element of this whole strategy we shouldn't underestimate is the ability to go into very strategic locations that have high-quality, low-cost operations. I mean, so much of the business of mobile gaming is your ability, again, not to only develop the pipeline, but continue to provide the live ops and future content in order to achieve that. The strategy that we've done, for instance, Plarium, leveraging our strong capabilities in Ukraine and Russia, has enabled RAID to be a world-class business because of the capabilities of those studios. That's a strategy that we're going to continue to emulate and to identify opportunities there. To your broader question in terms of, you know, is that enough?
We are going to continue to look at every single deal and have a point of view on that for no other reason so that I can tell Trevor and the board why we have not done a particular deal or why we are not recommending to proceed with a particular deal. We have got a really strong team. We are out there across the world looking at things. We are looking at things in earlier stage to more established. We will be doing more, but it is going to be based on our terms, based on those two criteria and when it makes sense.
Mike, we're clearly in the flow of potential deals within the digital M&A space to add to an already strong business. You have seen greater business resilience with geographic diversification, with Futureplay in Finland, Playsoft in Poland. You have also got talent deals like Proteus last half and Northern Star this half. How did those acquisitions that you did in the last quarter, how did they come about?
We have a core competitive intelligence, market intelligence group that's working nonstop identifying what's happening in the marketplace. As many of you know, there's new games, new studios emerging, you know, monthly. We identified a lot of those companies way in advance and have been monitoring them and keeping on top of them and then, you know, starting to build a relationship. We also believe, you know, there's certain deals where you make the decision to go buy something. There's others where you may start with an investment or a relationship that ultimately leads to something bigger as well. We are very flexible in that regard. We have, you know, both, you know, a core group as well as people on the ground, and that's where we've identified these various talent opportunities that, and that's going to continue.
Mike, for the moment, you know, we've done a few talent deals. We've done a few studio deals. Does that mean that there's limited quality options out there for leveraging that strong balance sheet that we talked about earlier?
No, I would not say that. I think it is more around our disciplined approach, again, as our ability to find the right thing for us. I mean, our competitors clearly are going out and doing deals, and we, you know, we wish them well. You know, we have looked at those same deals and we have decided we did not want to do them. There is no deal that we have missed here or that I feel like we have not had the commitment from Trevor and the board around that. You know, it is actually the opposite. You know, in many ways, you know, continually asking me, "Hey, you know, what can we be doing more?" And I, you know, and our team want to make sure, again, talent and ability to scale and, quite frankly, our capacity then to manage that appropriately are all the issues that we are going to look at.
You know, to all of our investors, I'd say don't view what we've done over the last year as either a lack of ambition or a lack of opportunity, which is only going to continue as I think this market continues to grow, not just grow in terms of top line, but grow in terms of diversification and geography as well.
Mike, we believe Aristocrat, through its scale, has now moved to around top five tier one Western markets there, thereabouts. The market last year, I think our reference point was $78 billion from New Zealand. I think next year, calendar year 2022, we're looking at close to 100. How do you get focused? You know, with such a big market, you can get distracted. Why are we picking the particular segments that we're in, the particular genres that we're in? With reference to those recent studios, what particular genres will those studios be targeting?
I think one of the key elements is the way that we operate the business, right? Yes, we have a central group, you know, with me in London that's looking at a lot of things as well as another core group. A lot of the ideas and development that comes are coming from our individual businesses. You know, taking the strategy that Trevor and the operating organization started, which now we're just extending out, is we're really empowering world-class, tremendous executives and teams to develop and drive the ideas and opportunities that then we look at from a resource allocation standpoint and decide, okay, where do we want to invest and where do we want to go? I think that bottoms-up, top-down approach is what makes us different than others, you know, and that we're allowing that to happen.
Again, the ideas and driving for Futureplay was driven by the Plarium team and their belief, not only from what they saw in EverMerge, but long-term that they believed, A, that the merge segment is a really interesting segment that we want to be into. B, we probably don't have the capabilities internally to build that ourselves. Our background is more in the strategy role-playing game areas, and we needed to acquire that. And three, hey, this Finland market is really an interesting market. You know, you've got Rovio, Supercell, all these other great businesses that are there and a lot of talent in that market. Let's go acquire that. That came from a combination of both information in the market and then Plarium driving that. In particular, on Playsoft, you know, we've worked with them in the past in terms of helping us on various projects.
We were very impressed with their capabilities, especially in the social casino ability, which is a different kind of capability needed in order to build that product. Product Madness, who's had, you know, with the leadership of Yoav Ecker that we were able to bring to us over a year ago and has done an amazing job in a short period of time, Yoav very quickly said, "Hey, listen, I need to have a first-party studio. I need to have, like Plarium, my Ukraine and Russia organization that can help not only scale our existing franchises, but work on other products." I mean, to be very clear, we're really excited. We're the number one slot player in the world. We want to be the number one social casino company in the world. We are not stopping.
We want to diversify and grow within the genres of social casino, which is merging as, you know, in various segments as well. With Yoav 's leadership and now with the capabilities of Playsoft, we have that. Finally, we also said, "Hey, wait a second." We found this great talent relationships that we've been nurturing and creating in Finland. We found these two executives that we really liked who had a belief in a mashup strategy, RPG kind of game. They came to us and said, "Hey, listen, we'd like to build a studio." We did an organic kind of development studio from the ground up there that we're going to be building. Again, very diverse in our approach, bottoms-up, but really, again, focused on various genres that we want to continue to grow.
Fantastic. Mike, we did get a lot of questions around Finland, obviously as a talent hub. I do suspect that there's probably an Investor Roadshow sort of pondering in some people's ideas and heads.
I hope they don't want to, you know, it depends on the time of the year you want to go to Finland too.
It's a thinking person's game, of course. But, you know, obviously the heart and soul is D&D and our creative teams and our talent. You know, obviously Finland is a great hub for digital talent as are other markets that we're continuing to move into. Within Finland Futureplay, it's got a game called Merge Gardens. With this acquisition, it appears Aristocrat's doubling down on the merge genre on the back of EverMerge. How do you see that playing out with the merge market seemingly plateauing, particularly with, you know, greater IDFA changes seemingly coming across certain segments like casual?
Good question. Number one, we still believe in the merge segment broadly. We believe in the casual segment that will continue to grow. In particular, the EverMerge, excuse me, the Merge Gardens and Futureplay product, what's really interesting about that is their ability to think about a match-three component in addition to merge. They're looking at differentiation relative to the actual game itself, which we think that unique differentiation and spin versus just a me-too approach as to what's in the market is really ultimately that's going to create the kind of breakthrough products that are successful, right? That's another element there. On your broader question around casual and IDFA, you know, I'll cover that really briefly. Clearly, IDFA is a new issue for the entire industry that we have to face.
As we look at our portfolio, and I think this is similar to the industry itself, the casual segment has been the most impacted by some of the IDFA changes implemented by Apple. Again, we're a highly diversified portfolio. While, yes, we have seen short-term issues in our ability to scale marketing at the levels we'd otherwise like to, that's a small component of our total portfolio. We've not seen that same impact in social casino. We've not seen that in strategy role-playing games. Number one, I just want to assess the overall diversification that we have and our ability to manage that. Number two is we're not standing still. We believe that IDFA privacy changes are a long-term trend. They're not going to go away.
As a result, we need to diversify our marketing mix and do other things in order to build out those capabilities to continue to effectively market with a reasonable return as a result. Some examples of that, in particular for EverMerge, is some of you may know that we've been testing television in the United Kingdom, and it's actually been pretty effective. We are going to continue to look at television advertising on top of performance digital marketing as a way to potentially grow the business. In other areas, you might be aware of our strong use of YouTube influencers within our strategy role-playing game area. Most recently, a very well-known influencer, Ninja, had a work with RAID. That's exactly the kind of things that we need to do and embrace and continue to try, as well as other platforms like TikTok and so forth.
All of those things are areas where I think ultimately, from my perspective, someone who's been in the media business, that the mobile games business has had an incredible efficient digital performance marketing world that now is having to shift and become more media-like, which means creativity, the actual marketing content, the marketing creative. You guys saw the ad on RAID. That's a world-class ad. I mean, I put that up against any movie advertising, right? That's the kind of advertising that we're going to need. Two is diversity of marketing channels and ability to do that. Three is a disciplined and highly analytical approach that decides when and how to do that. I'm still very bullish on the merge segment. I'm bullish on EverMerge and Merge Gardens and casual, but I think it's evolving and in many ways evolving because of what's going on. With our scale, I feel very confident that we'll be able to achieve that and succeed.
Fantastic. Thanks, Mike. Now, we're going to move on to Apple App Store in just one second. Just to close out the M&A side, we've got a live question from my good friend Simon Thackray from Jefferies. Thackray's asked, you know, of the deals that you said no to, you know, and others have pursued, are there any deals that you feel you've missed out on because of any internal capacity constraints?
No.
Yeah.
No.
All right. All right, Thackray, none. There's your answer. Very good. Let's keep moving on now. Just before we touch on Apple App Store, because I know that's the most topical issue this week anyway, Matt Ryan from Barrenj oey, welcome back, Matt. He asked, how do customer retention and paid conversion rates look like in the U.S. now that things are getting back to normal? Do you think that, you know, we now grow off a higher base, or do you see further moderation back to pre-COVID levels from a digital perspective?
Thanks for the question, Matt. Before answering that, if I could just take one step back and just remember the world right after COVID, maybe a year ago when we talked, no one really knew what was going to happen. You know, we all saw a major increase in the business and so forth, and no one really knew what the world would look like going forward, especially with, again, a large percentage of our employees working remotely from home. What I think is the biggest takeaway is, yes, there's been moderation over this last year, but not even close to what potentially we could have seen or going anywhere close to pre-COVID levels. That's an amazing accomplishment. What's been driving that is, again, the content and the live ops and the feature sets that are part of the everyday part of our business.
As Trevor mentioned, the 8 to 10 new slot games we deliver every month, the new battle pass, the new tower features, the new things like that, is what's retaining those customers. Yes, there was an enormous amount of demand, but they're not going back even with the openings, for instance, in the U.S., you know, in some markets that is fairly back to normal. That says more about the sustainability of our business and the product capabilities of our people and what we've been able to achieve. I think it's really important that we don't lose sight of that. We've not seen dramatic moderation. Yes, moderation, but not even close to what we thought or could be.
You know, in particular, one of the things that I think is interesting is that if you look at the overall marketplace, not only if there, you know, the business that actually benefited the most from COVID closures was clearly our social casino business because of the closures of those casinos. That business in particular is not seeing moderation that we thought. Our other businesses that have continued to grow because of EverMerge, because of RAID, because of Mech Arena, they're kind of working off of that higher base and just building off of that. That combination, again, of the diversification across that portfolio, even if we do see some increased moderation in the future in social casino, I think really sets us apart and puts us in a very good position going forward.
Thank you. Platform providers are an integral part of the digital ecosystem, Mike. The timing of this roundtable could not be any better. Just last week, last Friday, you know, we had to put our legal hats on with Apple and Epic, but just prior to that, there was Apple apparently been putting out some potential concessions for, you know, in-app payments and opening up their ecosystem. We have got Matt Williams from Airlie. We have got Dion Hershan in live question, interested in Apple's most recent changes. Can you talk about what are the potential outcomes for Aristocrat recognizing it is all unfolding right before our lives in real time at the moment?
Yep. First of all, I want to just say that we have a great relationship with Apple, we have a great relationship with Google, and that this business wouldn't be what it is today without their leadership and development. We shouldn't underestimate the fact that this would not be a $100 billion business if it wasn't for the investment and support that those two companies have provided. That being said, we as a company believe in consumer choice. We believe in more access to our content. Every content provider wants that, right? You know, we are very supportive of that long term and think that's a long-term trend in the industry broadly. Whatever, you know, how that develops over the next not few months, but years, we think that's going to continue.
We just don't see, you know, the status quo continuing and that there's going to be opportunities and that we as an organization will take advantage of that when that happens in whatever ways we can. Number two is I really want to say that I think one of the misnomers of this whole conversation is people think about the Apple situation and immediately glom onto the platform fees, which clearly are a big part of our business. We've already started diversifying out of those platform fees through areas like Plarium and Futureplay, which we've talked about before, where we bypass that, as well as ad sales where we don't pay platform fees.
Irrespective of what's happening on the broader level, not just with this court case, but in markets like the EU, United States, and clearly most recently in South Korea, there are fundamentals happening within the industry that is also shifting and diversifying our cost of goods sold more, so to speak, and improving in regards to that. In terms of how we then react to what happens, I mean, I think an example of it again is Plarium and Playsoft. You know, we talked about before today, Plarium and Playsoft is on an annualized basis, you know, 20%-25% of Plarium's business. You know, we had announced $75 million at the half point of the year. You know, that business, just to give you a context, does about 10,000 transactions a day. We accept 100 payment methods, including PayPal and credit cards.
We have an enormous amount of capacity just within that organization as well that if and when there was a change in the payment structures and we were able to do things on our own, we have the capability to leverage that, not just within Plarium, but across our entire portfolio. That is just one example of where things can evolve. I would hesitate at this point to make any judgments as to when, how, or if this is all going to execute. We are just going to stay very close to it and monitor it and be ready to take advantage of it.
Again, with the core thesis of, you know, supporting our partners at Apple and Google, but also believing that more choice for consumers and more ability to distribute our content not only will help the business, but will help us with higher retention, more ability to get to our customers and succeed with our pipeline and a new product.
At this early stage, we could probably just see it as an opportunity that we could potentially explore, which would offset or more than offset potential business risks that we can identify at the moment, like IDFA on the casual genre. Is that a fair sort of summary at this particular point in time?
Yeah, I think that's right. I think another way to think about it is this, they're somewhat, these issues are somewhat merged, right? In that you've got the broader issue of how do you market in the future of mobile gaming as it becomes more traditional-like media, less 100% driven by this ability to target, uber, Uber target. At the same token, opening up potentially the ability for, you know, companies, publishers to go direct, to have other kinds of retailers to sell their product and to, quite frankly, lower the dynamics of distribution. Marketing and distribution combined evolve net-net. We feel it will be a positive given who we are, our scale, our diversification. As an example, Plarium and Playsoft, our ability to plug and play things like that in when the opportunities do emerge.
Fantastic. Now, just conscious of time, I'll just leave one more question with you, Mike, on digital. That is a number of people have been asking about the game pipeline, Sathish from UBS and Matt from Barrenj oey of all people, who would have thought. Also, could I get you to touch on Mech Arena? It launched just last month. People have just saw the ads on the trailer at the start of this session. Can you just talk about Mech Arena and in particular the action genre and how that may be similar or different to RPG strategy that they're familiar with, please?
Right. One thing on the pipeline broadly is, as we mentioned, we've got about 10 games in development at one time. We want that to be more. We need to build that up in order to be successful and to continue that. You know, we will kill games, games that don't work. You know, I think it was a year ago we were talking about 8 Ball Smash. We've killed that game. We tried, we put a lot of effort into it, it didn't work. I think one of the beauties of this industry I want to evolve is that the cost of that is significantly less than other media businesses because A, you know, we don't spend 100% of the cost of that throughout. We're testing and learning. When we see something's not working, we stop.
Number two is we spent very little, if no marketing dollars to market that product. Unlike traditional media where you spend hundreds of millions of dollars marketing a product and hoping somebody shows up, right? There is none of that in this business. That ability to take our pipeline and manage that effectively and be willing to be almost ruthless. You know, we learned a lot. I think Trevor would say this from our friends at Plarium, be ruthless. When things do not work, we move on, I think is a critical element to our success and why we have had this success in organic because we have not overspent into things that did not work, but we have gone with the things that are working, for instance, like EverMerge and RAID and have gone hard on those and been successful from marketing and then ongoing live ops capabilities.
We've got a pretty exciting year ahead. I'd like it to be more, but I feel encouraged by what we have. You know, we've got a game, Magic Wars, which is in soft launch. We've got high hopes for that. Merge Gardens is still effectively in soft launch. If you look at the numbers, don't overestimate yet. It's still pretty early days. Our hope is to really scale that with the Plarium, world-class Plarium publishing team. We have a new slot product coming in at the later half of this calendar, of next calendar year that we're pretty excited about as well, coming from our friends at Big Fish. The portfolio is looking good for next year. I'd like it to be better, but feel good about where we're at.
Touching now on Mech Arena, what's really exciting about that game for me is the fact that it's a completely new genre that we've never been in, in the action segment. The Plarium team with their creativity has not only been successful in launching that product, but launching it to an enormous amount of DAU users successfully, right? That business is highly dependent on the ability of you being able to play other robots and not just playing a bot, but playing actual individuals. The ability to pull that off from that team at that scale and have the high quality results that we've seen is a really tremendous technology product accomplishment that I give Avir am and the team at Plarium a lot of credit for. Again, completely new. We've never done that before. We did that organically. We didn't go buy some company to do that.
We did it ourselves. It's an amazing accomplishment. Number two, that business is different than RAID. One of the things we have to understand is that kind of product is different. Number one, it's going to have an enormous amount of DAU and users because of the scale and scope of that demographic that's interested in that product. That's one of the exciting parts of it. Two, that industry and that business of action has typically been companies that have taken console products, most famous being Call of Duty, and then applying it into mobile games. There's an existing brand and franchise that they're bringing into mobile games and extending it. The Plarium team is starting from ground zero in building that brand. Number two is I think we have to be much more patient on that product.
We shouldn't be looking at it in a few months and, you know, either say high success or not because we need time to build that brand and capabilities, which I have a lot of confidence in the marketing and publishing team at Plarium to do that. Number three, the economics of the users are much different than the RAID users. While the cost of marketing and installs is much, much lower in that genre, the LTVs in general, long-term value created for those customers is going to be less than in RAID, where we've seen a much higher ARPDAU spend. These are all areas that we're learning and figuring out. It's still early days. You know, 9 million downloads, again, very strong success and monthly strong success on the product tech side.
Again, as Trevor will tell you, still very strong belief within the Plarium team always tells us a lot. If they believe in it and believe there's an opportunity and they want to grow, that gives me tremendous confidence in Trevor that there's something there because they're so ruthless and so strong in their business that if they didn't believe it, they'd be the first to tell us. As a result, I feel very confident that this game, you know, again, could maybe as a comp, if we want to throw it out, something like a War Robots could be something of that magnitude, which would be a great successful game for us. We'd be really excited and a great first step in a new genre.
Fantastic. Thanks, Mike. Thanks for that detail around digital and those new games. Of course, Apple. We will keep the market duly informed in terms of progress in relation to those developments. There were a few questions around the gaming side, but conscious of the availability of senior management today was more about digital. There will be one question I will ask for Trevor. Obviously, we have seen some very strong state gaming data out there in the United States as markets reopen. We are starting to see that normalize and that will probably normalize through to Thanksgiving. That benefits our gaming ops, particularly our rev share, which is, you know, essentially Class II and a little less than half of Class III .
Most people have seen, Trevor, the second quarter results where our competitors had better than expected results driven by gaming ops fee per day due to that coin in. The fact that people can refer to that information, Eilers survey, would suggest that very positive momentum in the industry at the moment. If we turn our attention to game sales, Matt from Barrenj oey and Don from JP Morgan's South Coast office, aka Don Carducci , both are asking, what challenges do you still face during this sort of COVID environment, in particular the supply chain, staff being disrupted, and how are the customers responding to that supply chain challenge that it appears the whole industry is experiencing?
Yeah, thanks. Thanks, Matt and Don. I'll start with the staff. We've been very fortunate in being able to keep our teams engaged through this whole period of time. Obviously, lockdown in New South Wales, excuse me, lockdown in New South Wales and Victoria is difficult, but certainly we've been bringing people back up quickly. We've been increasing our onboarding. We've been onboarding a lot of talent as we start to build the momentum, particularly into 2022. From a team point of view, we created an online learning portal. Just last month, there were over 1,200 online courses completed by our employees. That's going up every month. We have a lot of wellness training and wellness support. As everyone knows, R U OK? Day last week was a very important day across our Group where management and teams spent time talking with everybody, understanding their issues and staying connected.
We are very conscious of this disconnected world, but we remain connected to our teams and keep them updated and engaged. If it comes down to where you, sorry, the other thing I'd say is when you're winning, it's more fun. That's the part that I'd probably say is service techs out there that are busy installing machines are pretty happy at the moment, and they're enjoying that. That's a good thing to be doing. Same with production lines, et cetera. When it comes to supply chain, there's no two ways. Everyone's been affected by supply chain over the last period of time. Everyone is feeling it in different ways. It's probably moved more from supply to freight and getting freight out of countries and getting freight to destinations.
Over the year, as you'll recall, we took a long position on inventory going into COVID, and we maintained that. We maintained strong working relationships with all of our suppliers. In some cases, or in many cases now, we've actually ended up with alternative suppliers for a lot of components, which has allowed us extra flexibility. We're continuing to take a long position on inventory and making sure that those key components that are required for our games to be made and supported are there. We continue to work with our customers. There has been some benefits, obviously, with a slowdown in Australia in the short term, but we expect that to change when supply or when these markets open back up because we're not losing orders. We're just seeing them push out until there's more certainty about opening and the ability there. It is really around prioritizing.
G2E is on in a couple of weeks' time, and we'll have a number of machines or lots of machines there to show our customers and then prioritizing what games, what markets are the priority going forward. Our supply is in good shape, in my opinion, considering where the industry is. Companies that are able to manage their supply chain over the next 18 months will be the ones that will be able to be successful and satisfy their customer demand longer term.
Fantastic. We are just drawing to a close for the session today. Thank you for people who are still on the call and indulge me. A question from Raaz Bhuyan and Anthony Tan, the dynamic duo from WaveStone. It is a bit more of a personal question. Their question is, running a global business, Trevor, how are you managing the team in lockdown, and how are you prioritizing your time at the moment?
Yeah, thanks, Raaz and Anthony. I don't know if I've got enough time to answer all those questions. My wife might be better to answer them, actually. I guess the way I'm thinking about it is, first of all, we've got a great team of people. Through COVID, we've seen so many gems emerge in our organization, people that were in the, you know, sometimes lower down the organization have really stepped up to be great leaders. We've uncovered more talent than I thought we ever had. It's really empowering and exciting time to see so many people that want to step up and are willing to step up and have the capacity to step up. If I think about what I do, first of all, is purpose is we've got a clear purpose. What's our strategy? What's our purpose? Is everyone aligned with that purpose?
We communicate and keep all of our teams aligned with those visions. You can see that Mike and I talk. He's a lot smarter than I am, but we talk in threes, basically twos and threes, and keep it simple. We keep our teams focused on those purposes. It goes right back to our strategy conversation at the start. The second thing is about our people and staying connected with our people, you know, whether it's our people being our team or whether it's with our customers, you know, spending time. I talk to customers around the globe every week, finding out what their business is doing, how they're thinking about it. Talk to our people, town halls, coffee chats, Zoom chats, studio trivia games.
Playing trivia with some of the studios can be a little bit difficult for me, but it's always fun to engage with them and hear what they're doing. Game reviews over Zoom are not as much fun as they used to be, but it's good to stay connected. Thirdly, it's around processes. We've really focused on what's important and making sure that we focus on getting things done that are important. It's easy when you're big to create bureaucracy and to create busyness. Focusing on what's really important to the organization, staying tight to what we're doing, and staying focused on delivering the things that make a difference. That means cutting out unwanted clutter, obviously keeping governance in place, but keeping focused. Me personally, we bought a badminton net and put it in the backyard.
I play badminton with my wife and kids every time I get off the Zoom call. It is not for very long, but I have pulled a hammy a couple of times. We do those sorts of things just for a little bit of outdoor entertainment in this lockdown period.
Fantastic. Fantastic. To end the call, Trevor, have you got any closing remarks that you'd like to share with people?
Yeah, look, thank you for your time. I guess the final thing just on that last question is, you know, through the luxury of having a great team that's focused on what's important today, I've got a great line of sight into 2022. I'm very confident about where 2022 is going. Great line of sight of opportunities into 2023 that we're now already starting to prioritize and work on. My energies are really in that three to seven-year strategy for the organization and making sure we're continuing to create options for sustained growth. As we've said, we're going to take share where we exist. We're going to enter adjacencies, sorry, not existing markets, and continue to grow. Finally, using M&A to be that big accelerator for Aristocrat's next wave of growth. I'm still extremely excited.
You've heard me say this before, but I reckon the next 10 years at Aristocrat was better than the last 10 years. We're probably one and a half years into that comment, but I can see line of sight to what we need to be and what we can do. I see the people. I see the willingness to invest. I see the performance when you look at our game performance and portfolios, whether it's in our digital portfolio and new games or our gaming portfolio with new games and cabinets. Where I sit from this whole perspective at the moment is COVID has been a great opportunity for us to really refocus our strategy, refocus our people, really refocus our investment.
We came into that with a strong position to refocus that investment, continuing to invest in things that make a difference, which is R&D, UA, and CapEx for our gaming ops business, create capacity for more M&A to accelerate our growth, and stay focused on looking after our people and our customers. You know, we said at the start, we look after our people, we look after our customers, and we look at our business resilience. That is what we continue to focus on. All I would leave you with is we are taking share. We are doing what we said we're going to do. I've got line of sight of all of that. We're carrying great momentum into 2022 and great opportunities into 2022 into 2023. We are really focused on our accelerated growth in those eight years.
Fantastic. Thank you, Trevor. Conscious of time, thank you for the extra few minutes you've indulged us today. I'll draw the Zoom meeting or the webinar to a close and thank more than the 100 registered attendees for today's call. I'd also like to thank my colleague, Linda Assatoury, and the corporate affairs team for bringing this all together. Apologies for any questions that we couldn't cover due to time constraints, but we will come back to you. As I said from the outset, a copy of this call is going to be available on our website, and a transcript will be made available as soon as practically possible. We look forward to presenting our full year 2021 results on November 18. In the meantime, please take care, stay safe, and have a great day. Thank you.
Thank you.