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IN-DEPTH 14 August 2018
Is an integrity fee the answer to a legitimate sports betting market
Do we really think that introducing legalised sports betting will mean more teams, players and coaches will be looking to ‘cheat’ in order to make material profit? And is an integrity fee the answer? Gambling Insider delves deeper
By Gambling Insider

The recent, ground-breaking repeal of the federal ban on sport wagering by the US Supreme Court has opened potential floodgates for individual states to legalise sports betting.

Those moves have already started, with Delaware becoming the first state to make the move on 5 June, just weeks after the SCOTUS verdict brought about by a lengthy legal battle instigated by New Jersey lawmakers.

However, simmering away in the background have been calls from the major US leagues (NFL, NBA, MLB, MLH) for an ‘integrity fee’. In a classic piece of marketing spin, the leagues are calling for a significant slice of any potential sports betting windfall, and dressing that up as ‘integrity’ when in fact it’s all about their branding.

MLB and NBA have been most vocal, calling for a 1% cut of the handle – the total value of all wagers placed on their sports. This notion reared its head when added to legislation in Indiana by Representative Alan Morrison, who admitted to ESPN that he had ‘received input’ from sports leagues including the NBA and MLB.

There is a lesson in numbers here from Nevada, one of the few states where sports betting was already legal prior to the SCOTUS ruling. In a ten-year period, Nevada sportsbooks took $22.5bn in bets but posted revenue of ‘just’ $938m, which equates to a little over 4%. Suddenly, a straight 1% off the top of that figure is looking like a 25% hit for sportsbooks.

NBA spokesman Mike Bass said: “Sports leagues provide the foundation for sports betting while bearing the risks it imposes, even when regulated. If sports betting is legalised federally or state-by-state, we will need to invest more in compliance and enforcement, and believe it is reasonable for operators to pay each league 1% of the total amount bet on its games to help compensate for the risk and expense created and the commercial value our product provides them.”

That looks like a one-sided view from Bass and the NBA. Yes, the leagues do provide something for punters to bet on, but that also generates more interest in those leagues for spectators. And let’s face it, money is already changing hands illegally on sports betting, so regulation at least creates a degree of transparency and ability to properly monitor for any illegal activity.

Those US sports leagues are quick to point out that many other countries have such legislation in place – citing France and Australia, although details on those seem sketchy at best.

The fact is, if you take 20-30% of the total revenue away from sportsbooks operators then they simply won’t be able to compete with the illegal bookmakers. The illegal betting market in the US is worth a cool $150bn each year, and a legalised market is expected to attract at least similar sums. As they say in the US, “you do the math”. States are surely going to think twice about introducing an integrity fee that means they are going to receive less tax dollars as a result, especially when that integrity fee is most likely to be lining the already overflowing pockets of the leagues and billionaire team owners.

Let’s look at another global sport for a second, and one which is no stranger to integrity issue – tennis.

The TIU is entirely funded by the governing bodies of professional tennis. The ATP and WTA each contribute 25%of the total budget, with the ITF and four Grand Slams each responsible for a 10% share. For 2017, the annual budget was set at $3.23m ($2.4m in 2016).The TIU budget for 2018 is $3.71m. The TIU receives no finance from betting levies or integrity fees. Since it was set up in September 2008, the TIU has grown organically from a three-person unit into one that now employs 17 members of staff. Its core business is dealing with betting-related corruption in international professional tennis. Players, coaches and anyone involved in the game abides by its terms and conditions.

According to the TIU, tennis is now one of the most popular sports to bet on. For millions of people around the world this is a legal leisure pastime, but for a minority it is a criminal activity that taints the sport. In combatting corruption the TIU has forged close and constructive working relationships with many of the most prominent global gambling regulators and licensed betting operators. This allows operators to report, in confidence, any concerns from unusual or suspicious betting on more than100,000 professional matches that are played each year.

All match alerts are acknowledged, recorded and assessed by the TIU’s Intelligence division and followed up by investigators where cases suggest the possibility of corrupt activity. In 2015, 246 match alerts were received. This figure rose to a high point of 292 in 2016. In 2017, there was a substantial overall reduction in alerts, with a total of 241.

So you see, here is an example of a global sport working with betting operators and gambling regulators for mutual benefit – helping to keep players honest and the sport clean. Surely that is what the NBA and other governing bodies should be striving for, and appreciating the assistance that the gambling industry can provide?

So far, it doesn’t look like the sports leagues are going to have much joy with an integrity fee, unless individual states decide to impose it as a makeweight in any agreement to offset any negative attitudes towards legalised betting. Only time will tell who the winners and losers will be in the integrity fee debate.
IN-DEPTH 4 September 2019
Virtual reality: Creating next-gen experiences for players

Singular CEO George Shamugia discusses a new revenue stream for casino operators

The competition in online gaming is intensifying, with players becoming more and more demanding. In some markets, single-customer acquisition costs can reach up to €400 ($440) alongside growing churn rates. Furthermore, the online gaming sector struggles to attract one of the most lucrative groups of players – millennials. The experience provided by casinos no longer appeals to the younger generation.

On  the other hand, the video gaming industry perfectly understands the needs of millennials and by introducing elements of luck in their games offers the best of both worlds. With the launch of loot box systems and Grand Theft Auto’s in-game casino, we have seen their first successful steps in targeting the online gaming sector. GTA V online, with 33 million active players, recently opened an in-game casino, where players gamble real money on games such as poker, roulette, slots, etc. As a result, churn users returned and GTA Online reached the highest number of active players since its launch in 2013.

The online gaming industry has almost fully utilised the potential of the mobile medium. The time has come to look for new, innovative ways of delivering a next-gen experience to customers.

The potential of VR

Could the next big thing for online gaming be a fully fledged virtual reality (VR) casino delivering an immersive experience and limitless new opportunities?

Although not widely adopted yet, VR has a sizable number of customers. Analysts predict it’s poised for explosive growth to become mainstream in about five years. According to market intelligence firms, the VR market will be worth $117bn by 2022, and according to Juniper Research bets made through VR will reach $520 billion by 2021. Upcoming 5G mobile network technology will propel VR’s mass adoption by allowing the development of fully portable untethered and affordable VR headsets.

Different level of social interaction

The captivating nature of gambling comes from its social aspect. Unfortunately, personal interaction is widely missing from online gambling sites. VR technology creates multiple opportunities to bring back and even enhance that social moment. The ability to connect with other players is one of the main reasons behind Fortnite’s popularity. This form of co-experience is the next generation of entertainment. Research conducted by Facebook has found participants spend more time on VR compared to any other medium. This directly translates into increased profits for casinos.

Pokerstars has made efforts in this direction by implementing Voice UI. Instead of using hand controllers to make a call, pass, or raise, players give voice commands.

Another opportunity for bringing in the social element are the players’ avatars. They enable players to build their identity reflected in the avatars’ appearance, but also the avatar's social, competitive and community status. For instance, players are willing to pay real money for virtual drinks at the bar. Operators can offer these social touchpoints for free to VIP customers as an act of appreciation.

VR also brings a new dimension to customer support. Customer support can also be represented with avatars to assist the player in person. The social moment increases the LTV of players and contributes towards lower churn rates.

Rethinking game design

VR is a way more capable medium than a 2D mobile or desktop screen. Instead of copying the existing online experience, games must be redesigned from the ground up for a competitive advantage with VR. For example, a VR slot game can become fully immersive by teleporting the user into the slots’ world of Ancient Egypt. Next, enrich the experience with high-fidelity graphics, realistic spatial sounds and animations. When betting on virtual race cars, the user can be teleported inside the car he/she made a bet on and experience the race firsthand.

New revenue streams

VR casino lobbies create new revenue stream opportunities: ad placement of brands on the venue walls, company logos decorating the bar etc. This kind of branding is not intrusive in the VR space and feels natural from the user's perspective. VR also gives users the ability to change venues from a Las Vegas casino today, to Macau or even Mars casino, the very next day. The dynamic and diverse experience increases retention rates.

The majority of profits for online gaming operators come from their high-roller players. Although they represent a small subset of active players, an operator can launch a separate VR casino brand for them. Providing exclusive VR gaming experiences to high rollers/VIPs, the operator can minimise churn and maximise VR efforts for these player demographics.

The catch with VR is to focus on quality, rather than scale. The target audience might be limited yet, once these players experience it, they will become ambassadors for your offering.

Surely, the opportunities and possibilities offered by the VR medium truly exceed anything offered by mobile and desktop. VR is a new frontier not just for gaming but for every industry, and it’s exciting to see where it takes the industry and what kind of innovation it brings upon us.