Back in February LeapRate broke the news of a major restructuring at the Markets.com unit of Teddy Sagi’s online gaming giant Playtech PLC (LON:PTEC), which included mass layoffs in a restructuring of sales, retention and customer service operations at the retail forex broker.
So it should come as not too much of a surprise that Israel business newspaper Globes is now reporting that Playtech is looking to cancel a fairly large part of a new lease commitment for office space in the heart of Tel Aviv.
According to Globes (original article in Hebrew, here), Playtech recently notified Azrieli Group Ltd., Israel’s largest commercial office space manager and developer, that it would like to significantly reduce the amount of space it had planned to rent in a new business tower under construction in Tel Aviv’s iconic Sarona Market.
Under the original plan, Playtech was to occupy four and a half floors of Azrieli’s new Sarona Tower. Now it seems that Playtech will take only two floors, less than half of the contracted-for space.
Much of the reduction in office space seems related to layoffs and personnel reductions at Playtech’s financial division – namely Markets.com.
According to Globes, Playtech’s Markets Limited subsidiary (formerly TradeFX Ltd.) which operates Markets.com and a few other online trading brands has fired 80 of its approximately 180 employees in Israel, as the Markets.com business has shrunk and performed poorly.
We believe (as we wrote back in February) that the layoffs and personnel movement at Markets.com are largely a concerted effort by Playtech management (now calling the shots at Markets.com) to automate Markets.com operations and emulate firms such as Plus500 Ltd (LON:PLUS) – which Playtech tried unsuccessfully to buy last year for $700 million.
Sources close to the company have informed LeapRate that Playtech has also restructured the way in which Markets.com compensates its sales and retention staff – removing incentive compensation (i.e. commissions) and instead paying fixed salaries. Not surprisingly, under the new remuneration regime a large number of employees also left voluntarily, especially the higher-performing sales people who could no longer earn large commissions.
Other than the obvious benefits of automation (less people to manage, lower costs), a major driver of the changes was avoiding future potential regulatory problems. Apparently the new bosses at Playtech were concerned with all the telephone contact commission-hungry sales and retention people were having with clients, and made a strategic decision to automate (virtually) all sales and retention operations, and eliminate commissions.
Internally, the company has been referring to operating ‘more like a bank’, meaning a more conservative approach to the business.
Playtech is scheduled to release First Half 2016 financial results in about two weeks, at which time we should learn more about actual figures from Markets Limited / Markets.com.