Amaya Gaming has been active in both the online and land-based casino supplier space, buying up small to mid-sized companies over the past couple of years. But nothing compares with its bold move to buy PokerStars announced two weeks ago.

Little Amaya Gaming (AYA) has shaken up the gaming world.

A company that IPO’d less than four years ago in Toronto, with an initial market capitalization of just over $30 million, now has a market value nearing $2 billion and paid $4.9 billion to buy Rational Group, the world’s largest online poker company.

The Rational purchase was a stunner, but not the first for AYA, which added online software company Cryptologic, Class II slot manufacturer Cadillac Jack and online poker network OnGame in earlier purchases.

What is new, of course, is the size of its acquisition. A company with revenues under $200 million acquired a company with more than five times that amount.

A remarkable feat.

So where does AYA go now?

A lot of attention has been focused by the American press on expansion of online gaming in the United States and whether, if California legalizes i-poker, it will allow PokerStars to enter the market given its past transgressions in taking bets from Americans after that practice became illegal in 2006.

But with ownership of PokerStars and Full Tilt Poker, AYA has a lot more than prospective or nascent U.S. online poker jurisdictions to worry about. It is the world’s dominant poker company with 85 million registered users and global market share estimated as high as 70 percent.

The belief is that if PokerStars can be licensed in U.S. states, and if California and other major states legalize online poker, AYA will dominate.

We would caution against such a facile view.

Barring the unlikely chance of a national poker law, the US is legalizing poker state by state. And of the states to legalize so far, none is big enough to offer the kind of market that takes advantage of PokerStars’ huge advantage—player pools so big it guarantees any game at any price point at any time.

When Nevada and Delaware pool their players sometime this fall, they will be combining populations of just 3.6 million people, less than a tenth that of California, and not enough to offer really viable poker operations.

PokerStars and Full Tilt also have old databases. Their U.S. database of players is now seven years old. That’s a lot of age.

The U.S. also offers strong brand names such as Borgata in New Jersey and WSOP. Just because PokerStars is a commonly known brand overseas doesn’t mean it will be immediately well known in the US.

Further, there is no guarantee that PokerStars will be licensed in California, or that other American states will legalize online poker quickly.

So, combine a balkanized industry, aged database, fierce competition and political uncertainty, and the US might not be the pot of gold at the end of the rainbow.

That doesn’t mean that Amaya won’t make a lot of money out of PokerStars and Full Tilt. Rational still is the world’s dominant online poker company, and there are complementary lines of business that AYA brings to online gaming operators.

But even there, no guarantees exist. As IGT demonstrates, 70 percent market share can be difficult to sustain.

Articles by Author: Frank Fantini

Frank Fantini is principal at Fantini Advisors, investors and consultants with a focus on gaming.