FEATURE

FEATURE

Replacing the action

With almost all land-based venues shuttered and sporting action suspended, Robin Harrison looks at the options available for US operators as they attempt to retain and monetize their sportsbook customers

The US sports betting industry has been stopped dead in its tracks by the novel coroavirus pandemic. While the National Football League (NFL) is in its off-season, all other major US leagues have been suspended as a result of Covid-19.

Early on in the outbreak, Rush Street Interactive tried to put a brave slant on proceedings, claiming a significant uptick in betting on sports such as table tennis, Australian rules football and Belarusian soccer.

“With major events being postponed, we can really showcase our broad offering of sports around the world,” Rush Street Interactive operations chief Mattias Stetz said. “We have rugby, soccer in Hong Kong and basketball in Turkey, along with others.

“For any sports going on anywhere in the world, we try our best to have it.”

Within days, all of Australia’s major sports leagues followed their European counterparts in suspending fixtures until further notice. Fixture information provided to iGB North America by sports data specialist Abelson Info reveals that beyond soccer in diverse countries such as Belarus, Burundi and Tajikistan, as well as some semi-professional basketball in Asia, betting is largely restricted to Australian racing. Not that there are many places to bet on these sports today.

With all commercial casinos shuttered, and only small tribal gaming venues still open, it is almost impossible to place an over-the-counter bet. For states with online wagering, the range of markets available aren’t the sort that can drive customer activity.

“It’s obviously a very difficult time for all businesses associated with the sports betting industry,” Keith O’Loughlin, senior vice president of sportsbook and platforms for Scientific Games’ SG Digital subsidiary, says. “There’s a very limited number of live events available for bettors to get involved with, which is having a significant impact on engagement.”

O’Loughlin says it’s “paramount” for the supplier to support its partners during the crisis.

“We’re sourcing and adding further content to our OpenSports offering during this time to provide operators with the relevant tools to keep engaging with their customer base.”

These measures appear to have had a limited impact on shoring up sports betting revenue. New Jersey saw sports revenue drop 58.4% in March, and Indiana’s monthly total declined 50.5%. While Pennsylvania benefitted from a high hold percentage to post a month-on-month revenue increase, handle was down 60.2%. Iowa also reported a month-on-month increase in revenue, though handle dropped 66.5%. The worst decline was seen in Mississippi, which saw sports betting revenue for March plummet 86.8% year-over-year.

West Virginia, which publishes weekly updates on its sports betting market’s performance, reported a slowdown across retail and mobile channels in the week ended 14 March. That week, the National Hockey League, National Basketball Association and Major League Soccer all postponed their seasons. Handle declined to $4.6m, down 45.4% compared to the prior week.

The following week to 21 March—with an executive order closing all casinos in the state on 18 March—it then fell to $877,303. This comprised a $852,845 contribution from mobile, before falling to $731,866 the following week, when mobile betting was the only available option.

There will obviously be aberrations and differences in other state markets, but the trends seen in West Virginia are likely to be replicated in others. With fewer sports to bet on, and none of the most popular leagues, there is a significant drop-off in customer activity.

To an extent, this could be offset by activity around other sports, as well as betting on future events. William Hill, for example, has been regularly pushing betting on the NFL—due to return in September—and the rescheduled 2020 Masters in November.

But this leaves a period in which customers have no impetus to bet, not to mention few in-play markets.

What, then, can they bet on?

 

VIRTUALLY APPEALING

O’Loughlin says SG has seen a “surge” of interest in virtual sports and esports.

“These two verticals remain largely unaffected in the current climate and are proving to be a viable option for operators looking to boost their offering amid a live sports shutdown,” he explains.

“Virtuals have always been a reliable solution and now more than ever they’re showing their worth. Improved graphics and a wider range of sports and markets ensure that these events are the next best thing to live matches.”

Virtuals, to some extent, may appear to offer a ready-made replacement for sports betting, in that these replicate the look and feel of a real sport, albeit underpinned by a random number generator (RNG). This effectively makes each game an extended slot spin, supported by graphics and a simulated match.

“The offer of 24-hour, uninterrupted play has proven to satisfy most punters on a daily basis and encouraged a strong shift from sports betting to the virtual proposition,” says Steven Spartinos, chief executive of virtual sports specialist Kiron Interactive.

“There are betting opportunities every 60 to 90 seconds and customers can choose to place single and multiple bets on a vast portfolio of popular sports and bet markets, both online and in-shop,” he continues. “The advantages will only grow as the vertical develops, but perhaps most important in this current climate is that virtuals are safe and secure products that allow for good margins.”

In recent weeks, the Nevada Gaming Control Board has permitted wagering on virtual Nascar racing as it looks to mitigate the sporting suspensions. However, in European markets, suppliers have noted an initial drop in activity, with the core virtuals customer being existing sports bettors that simply stopped betting after their usual gambling activity shut down. Activity, it should be noted, has since began to grow once again, and rapidly.

In Spartinos’ view it’s not a case of replacing sports betting in any way, but instead tapping into a new revenue stream for operators. After all, this is how virtuals in their current form came into existence. An outbreak of foot-and-mouth disease in the UK in 2001 led to the cancellation of that year’s edition of the Cheltenham Festival horse racing event and prompted Inspired Entertainment to launch virtual racing to fill the gap in the sporting calendar.

Yet since then, virtuals have remained an ancillary, rather than core, product in an operator’s portfolio. And Spartinos admits that it remains uncertain whether this (hopefully) short-term Covid-19 enforced change in customer behavior will have a long-term impact in betting activity once sporting fixtures resume and betting activity reopens.

“Alternative content will by no means completely balance out the declining revenues from sports betting, but it does provide a tool by which to limit the forecasted damage,” he says. “For many operators, virtual content is now front and center of their offering, encouraging a sharp uptake of the mainstay games of horse racing, greyhounds and football.

“The increased emphasis is expected to spark greater growth of the vertical to encompass a more diversified offering that has wider appeal. At this time, some will ask if operators have the infrastructure to cope with increasing volumes, and it is important to work with partners to expand capacity.”

 

ESPORTS EMERGES

As part of this more diversified offering, it appears that esports has an opportunity to emerge and establish itself as a core product. While a big part of its appeal has been LAN-based events, competitors can still do battle online, meaning its schedule of matches and tournaments has not ground to a halt in the same way as traditional sports.

It already attracts huge audiences—of up to 60 million people according to Ultraplay chief executive Mario Ovcharov—and is increasingly featured alongside traditional sports in operators’ portfolios.

O’Loughlin notes that esports betting has grown “exponentially” in recent weeks.

“It’s a fascinating development given how the vertical’s potential has been talked about for years,” he says. “It appears now is the time that players are familiarizing themselves with the concept of betting on competitions between gamers.

Mark Balch, head of product and partnerships for Bayes Esports Solutions, a joint venture between Sportradar and esports solutions provider Bayes Holding, says the business is looking to ramp up coverage to fill the void left by traditional sports.

“With more people at home, there has been a noticeable increase in day-to-day esports events overall,” Balch says. “There are more unplanned tournaments and opportunities for us to provide the corresponding data to our customers.”

Traditional sports clubs have been quick to jump on esports, with competitions between players on console titles such as FIFA in Europe, and NBA2K in the US. An NBA2K tournament, in which players from a number of National Basketball Association franchises will compete against one another, is even airing on ESPN.

Free-to-play (F2P) sports contest provider SportCaller has already looked to tap into this event with a bracket predictor game, launched for the GVC-MGM Resorts joint venture Roar Digital’s BetMGM brand. A proposition betting game has also been rolled out with FanDuel.

This continues a range of F2P contests run for partners such as Kindred Group and FanDuel over the past year.

“Primarily, those experiences came via first-person shooters such as Quake and CS:GO, but no doubt the use of esport events for our prediction games is driving a significant surge,” SportCaller managing director Cillian Barry says. “In fact, with many of our clients now using our question-based templates to create and run such games, esports evangelists are being fashioned from some once-cagey audiences!

“It’s an emerging trend on which we plan to capitalize.”

But to add the betting element means an additional layer of complication, Balch warns. First, there is the issue of legality in the US. New Jersey currently only allows operators to accept bets on esports competitions with approval from the Division of Gaming Enforcement on a case-by-case basis.

A bill to add esports to the approved sportsbook markets was filed by Representative Ralph Caputo in January but only passed the Assembly Tourism, Gaming and the Arts Committee on 5 March. In Nevada, the Gaming Control Board is steadily approving betting on more competitions, but again on a case-by-case basis.

Furthermore, Balch adds, Bayes must make sure the competitions it covers are legitimate, and don’t pose integrity threats to its operator clients.

“So, in a situation like this, where you have a lot of newcomers involved, it’s paramount for us to conduct in-depth research constantly to ensure the data we’re providing is impeccable,” he says.

Furthermore, while at least a percentage of the (up to 60 million-strong) esports audience placing a bet may boost revenue, it is unclear how neatly this audience converts to real-money wagering.

“There are a number of factors that have contributed to the spike of esports betting and it is hard to know which is having greater effect, and which will last,” Balch says. “The huge interest for FIFA and other sport simulations are likely not to continue after the Covid-19 crisis, but we will not know the full impact for some time.

“However, what is clear, is that the majority of traditional sports betting activity has not suddenly shifted to esports games like CS:GO or League of Legends,” he adds. “Most are simply abstaining.”

 

SOCIALLY VIABLE

If, as Balch says, players are simply not betting on new sports such as esports, the challenge shifts to one of finding ways to engage and retain these customers. This is at the core of what SportCaller does, as digital performance director Paddy McDermott says later on in this issue. This of course becomes a lot more difficult without any live sports to drive customer activity around.

“With more people at home, there has been a noticeable increase in day-to-day esports events overall”

Mark Balch, Bayes Esports Solutions

Barry says that as a result of the sporting suspensions, the supplier has been transitioning clients to a new wave of free-to-play games and quizzes that do not rely on live sports.

“Instead of users making predictions on, say, Saturday’s football, they are instead testing their knowledge on seasons past—challenging friends, battling for bragging rights and winning prizes along the way,” he explains. “These products are helping our clients to engage, retain and even add to their base during an otherwise unsettling and unpredictable period.”

This is supported by an existing range of question-based games, which can be tailored to any sport. This could be on the history of the English Premier League, or past editions of the National Collegiate Athletics Association (NCAA) March Madness tournament.

“Interestingly, some operators are tactically matching their quiz games to the seasonal cycle of now-postponed sporting tentpoles (for example, April’s Masters golf). This strategy makes for astute fill-the-void substitution.”

This has a secondary role, as a socially responsible way to engage and retain players without demanding additional spend. These games, he continues “provide a welcome break from the current stresses of modern life with a fun and compelling challenge that never asks players to fund their accounts.”

“Instead, operators can elevate engagement and brand loyalty even when their customers are disconnected from sports betting, so that when the sporting calendar does recommence, their users will follow,” Barry says.

“Now more than ever, it’s crucial to employ a lighter marketing touch which promotes fun and online hangtime, retaining players without cross-selling them into other casino products in which they had traditionally demonstrated little interest.”

“Esports evangelists are being fashioned from some once-cagey audiences. It’s an emerging trend on which we plan to capitalize”

Cillian Barry, Sportcaller

Barry’s final point does raise the question: how much is online casino benefiting from the sporting shutdown? As O’Loughlin points out, players that traditionally bet on sports will still be looking for some form of real-money entertainment, and online casino could become an attractive proposition to these players.

Of course, actually ascertaining whether or not casino has benefitted during the suspension of sports is difficult with the few states that offer igaming having yet to publish their results. One operator, speaking off the record, suggested that there had certainly been a significant positive impact.

Customer acquisition had soared, they said, with customer deposits up by a fifth, and revenue by around 30%. While affiliates, with businesses covering a broad array of markets around the world, are not necessarily indicative of US trends, they have largely avoided too significant an impact, with the bulk of revenue coming from online casino.

Last year New Jersey’s online casino and poker revenue reached $482.7m, a 61.6% improvement on 2018. With these games the only products unaffected by the pandemic, this could conceivably jump significantly in 2020 as customers shift to the new verticals. New Jersey’s online casino market saw revenue grow 64.8% year-on-year in March, to $64.8m, while Pennsylvania reported slower growth, with revenue up 24.5% to $24.3m.

Yet it’s worth noting that currently only New Jersey, Pennsylvania and Delaware offer online casino. West Virginia passed legislation, but progress towards opening the market appears to have ground to a halt. Michigan will join the fray, and is currently targeting a launch early next year.