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IN-DEPTH 1 October 2018
The integrity fee debate
Now that the US Supreme Court has done away with the Professional and Amateur Sports Protection Act (PASPA), Jake Patel looks into whether the sports leagues should be taking a slice of the pie.
By Jake Patel

With the introduction of legalised sports betting across the US comes the issue of regulation and ensuring everything is above board and legal.

Enter the sports leagues.

In the build up to the Supreme Court’s ruling and striking down of the 1992 PASPA, the four major North American sports leagues and the National Collegiate Athletic Association actively fought against New Jersey’s efforts to legalise sports betting before it reached the Supreme Court.

Now the leagues have changed their tune… as they could stand to benefit from legal wagering on their sports. The leagues have recently pushed for tax revenue from all legalised sports betting activities on the basis that monitoring the integrity of the sports and ensuring there is no foul play will put a financial burden on them. This is being referred to as an integrity fee.

Jake Williams, Head of Legal for sports data services supplier Sportradar, told Gambling Insider: “They are going to need to watch what’s happening with their sporting events, whether it’s collecting information or monitoring that information so that they know exactly what is happening in a regulated market. Alternatively, they could be doing that on a global basis as well, considering that the betting markets are now truly global.

“They are going to have internal costs, including staffing up, having betting experts join the teams within league offices to understand what’s happening, and if they need to respond at all with regards to whether it’s suspicious betting activity. There is also the education part. They have to talk to their players and coaches, their team owners and all the staff around the leagues and tell them how this is a new area for them and educate them on what might happen.”

VIEW FROM THE LEGISLATOR

The first state to include the integrity fee in its sports betting legislation was Indiana. In January, a bill was put forward allocating a 1% integrity fee to sports leagues depending on the wagering handle. The bill would also impose a 9.25% tax rate on sports betting revenue. Another bill was introduced, which didn’t include integrity fees. Although neither bill was passed in the 2018 legislative session, a member of the Indiana House that supported the bill, Representative Alan Morrison, said there was some input in the initial bill from the NBA and MLB. Morrison told Gambling Insider: “We need to understand these major sports leagues will see an increase in wagering on their sports. If they think they should be compensated for it, that is up to them. I don’t agree or disagree, but I do see where they are coming from.

“We are pretty unique here in Indiana. We were the first state to be approached by any major sports leagues to be part of legislation at the state level. We’ve been able to open up an important dialogue. They requested to be included and it was not a bad way to start the conversation.”

But not all states are interested in including integrity fees in their sports betting legislation. New Jersey, the first state to implement legalised sports betting, has not included an integrity fee in its legislation, with one of the state’s top lawmakers urging other states to reject integrity fee payments to sports leagues.

Steve Sweeney, the Democratic State Senate President, even went as far as describing the integrity fee as “extortion” in a letter addressed to governors and legislative leaders back in May.

“Essentially, the leagues are askingto be paid to allow games to be played fairly,” Sweeney wrote.

“Ironically, they are calling this extortion attempt an `integrity fee,’ even while fully aware that providing participants a stake in the volume of betting would amount to what could more accurately be called an ‘anti-integrity fee.’

“Their demand begs the question of what they would now start doing to preserve the integrity of their games that they have not been doing for years.”

The American Gaming Association (AGA) has also voiced its concerns with the introduction of the integrity fee.

Sara Slane, Senior Vice President of Public Affairs at the AGA told Gambling Insider these fees will “essentially be taking money away from the tax payers and state. There will be less state revenue as the deductions are made before tax and revenue is paid to the state. The leagues appear to be more concerned with paying themselves.”

At the rate it’s going, it does not look like the debate around integrity fees will last much longer. The argument put forward by the leagues hasn’t had much traction at all. Slane went on to say that “it’s an uphill battle for the leagues that are pursuing integrity fees,” and that she’d be “surprised if any states entertain the notion of including integrity fees in the future.”

Adam Silver, the commissioner of the NBA, commented on integrity fees at a conference in July, saying: “Frankly, it’s not a place we’ve made a lot of progress. It’s one of the issues we’re talking to states about. We’re also very focused on how the data will be used and how we can protect the integrity of the league.

“My view is we should be compensated for our intellectual property, but we can do that directly, again, with commercial relationships with gaming establishments.”

Slane went on to say integrity fees will have a negative impact on operators as they “need that flexibility to compete with each other and integrity fees will make that harder. It sets a terrible precedent.”

There is also the view that states could take lessons from Nevada, which has had legal sports betting for several decades.

Slane said: “Nevada has proven that it has a strong sports betting model and has taught us lots of good lessons that other states could learn a lot from.”

This thought was echoed by Representative Morrison, who said: “We don’t have to reinvent the wheel completely. We can take some parts of what Nevada does, or even what is done internationally, to put together something that works for Indiana.”

Williams said: “Given it’s on a state-by-state basis, I think having a mish-mash of different regulations and even legislations would cause its own problems, so I think preferably, you would have a uniform approach and just if it’s a good idea or not, and if so, at what level is it a good idea?

“I think a 1% tax on turnover or handle is probably a bad idea, because you’re going to have to have federal and state tax taken out of that too and operators won’t be able to operate it effectively. Having that implemented on a uniform basis across all states would make life easier for everyone, including the leagues, operators and the state regulatory and legislative bodies.

“This industry has done a pretty good job monitoring suspicious betting, the bookmakers don’t want match fixing going on, the leagues don’t want match fixing going on - no one really does. It’s an alignment of interest for all of the parties involved to make sure the games are protected, match fixing is not happening and that there is prevention in place.”

HOW UNIQUE IS THIS ISSUE?

There are lessons that the sporting leagues in North America can learn from other countries with legalised sports betting.

In the UK, sportsbooks don’t pay any integrity fees to the leagues, but instead pay data rights fees. The English Premier League has been receiving huge revenue boosts from sportsbooks for data rights agreements since 1992. These agreements essentially provide bookies with the sports data necessary to calculate and formulate odds. This also allows sportsbooks to enter into sponsorship agreements with individual football clubs.

In the past, the US leagues have sold access to their data to daily fantasy sports operators DraftKings and FanDuel, so it is possible that they may try to assert their ownership of the data to sell it on to sportsbooks. First, though, the leagues must be granted exclusive rights to the data by the courts.

Alternatively, in Australia, integrity fees are very much a thing.

The sports leagues enter into private agreements with sports betting operators, which are referred to as an integrity agreement or a product fee. These agreements require betting operators to pay fees of up to 4% of their betting turnover, and to meet integrity controls and regulations imposed by the sports body they are in agreement with. In some cases,the sportsbooks have to comply with specific legal guidelines. The main takeaway from Australia is that special consideration has to be given to how integrity measures are implemented and how integrity fees are calculated.

Representative Morrison said: “I don’t think the focus should be on an integrity fee, but rather an integrity component in the legislation I author again next session. There needs to be some kind of integrity component to sports wagering and there are multiple ways of doing that. It’s very likely that many states will not have an integrity fee.”

Implementation of integrity fees in the US, then, seems rather unlikely at this point. But that won’t stop the leagues from trying to get their cut from the legalisation of sports betting.
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IN-DEPTH 18 October 2019
Automating acquisition

Alex Czajkowski discusses the automation of acquisition within online gaming.

It’s almost every operator’s perennially hot topic - acquisition. While acquisition strategies can vary market-by-market, there is a case in every market for automating more of the process to improve conversion rates or significantly reduce acquisition costs. In any market, you can segment your prospects, regardless of your product, into two: inner-directed and outer-directed. Inner-directed prospects know what they want; your job is to get out of their way, but be there for any obstacles that occur in achieving their goal.

Typically, this is to join, deposit, get a bonus and play. For example, when I go into a store to buy a laptop and having to deal with some sales clerk who knows less about them than I do (and in fact may be financially incentivised to push me to the wrong selection), I know what I want; get out of my way. But the sales clerk may know something I don’t, like how last year’s model is now significantly reduced and the changes were largely cosmetic.

Our inner-directed online gaming prospects benefit from a bit of guidance in their rush to register. No, they don’t need to know of password format requirements; they’re using a sufficiently robust password to begin with and they’re experienced players. But by reminding them that with every play they are accumulating loyalty points they can redeem for cash, this could be welcome news at a new site. So while we don’t want to interfere with the inner-directed prospects hurling themselves through our conversion funnel, we do need to be there to inform and support. This also helps ensure a higher conversion rate, not to mention an opportunity to really introduce the brand voice.

Sure, you could use distracting pop-ups, or unmemorable banners alongside the necessary forms. But those are all one-way communications. You’re talking at the prospect rather than with the prospect. Sinitic.ai, a leading AI-enabled, gaming-focused chatbot provider, or more specifically, an automated intelligent customer experience (AICX), enables operators to engage in “asynchronous conversations” through this process. It uses proactive yet passive messaging through an open, automated chat window. In this window, the chatbot prompts as the player moves through the forms, offering to help but also reminding the player of site benefits and interesting news (e.g. there’s a new game to try or a big match tonight).

Should our inner-directed prospective be intrigued by any of the prompts, they merely have to chat back to the bot. With language-specific NLP (natural language processing) behind the bot, the prospect and the site can have a natural conversation about that topic. They could even discuss any relevant topic the prospect may choose to ask about, such as: What are the odds on Liverpool vs. Arsenal tonight? An integrated chatbot can answer these questions, in real time, as straightforward or cheekily/sassily as you want your brand voice to be.

The outer-directed prospect is just the opposite; they need assistance. They are like the new dad standing in front of 300 choices for car seats for their first baby, with prices ranging from $50 to $500. Only one word comes to mind – help. Here, an intelligent chatbot can walk this prospect through the registration, deposit and bonus processes, field by field if necessary; just as if there was a customer service agent holding their hand through the process, but with no delay, as a human agent would be handling multiple chats and not be truly one-on-one. An integrated chatbot should know where the prospect is in the journey, right down to the field in focus on the form, and prompt appropriately.

Again, the chatbot can also insert “marketing messages,” new promotions that may be of interest, game suggestions for the newbie to try and matches they want to bet on. These all help in the conversion process, not to mention churn; one key reason online casino operators so quickly lose their first players is the players play the wrong game and have a fast bust out, leaving disappointed. This can be prevented through chat-supported onboarding with proactive chat for churn prevention.

In some markets and cultures, prospects skew more to this outer-directed side. For example, in Japan, prospects want to know everything going into a site, while in Vietnam, they do want their hand held. In more mature western markets, inner-directed players may be more prevalent, but the key is automated intelligent chat support for both segments. Speaking of Asian markets, one clear difference between the west and specifically China, is the necessity to leverage one-to-one direct sales communications to bring players onto the site. For China, operators have rooms full of imported Chinese speakers, at no small cost, chatting with prospective and existing players over WeChat and other social platforms. These one-to-one chats for acquisition can also be automated, right down to including the 20% or so of messaging we classify as flirty.

Sinitic.ai's AICX solutions can push messaging through virtually any channel, be it the ubiquitous (and popular) web chat, SMS, WeChat, Line, Facebook Messenger, WhatsApp etc. So wherever your preferred hunting ground for players is, you can set loose an AI-based chatbot to harvest players with the same methodology you use in the call centre. But of course chatbots don’t take breaks, get ill, ask for raises or housing or travel expenses - all real call centre issues. “Chatbots are the new email,” some say. But they are actually better; they are as synchronous or asynchronous as the player wants. They can be chatty and real time (synchronous) or stand-by ready, simply announcing a relevant message that may or may not initiate a reply from the player (asynchronous).

Chatbots are increasingly the preferred way for players to interact with a site; why dig through the FAQ when you can just ask the chatbot? Why not even navigate using the chatbot? “Take me to the game with the biggest jackpot.” Using AI and NLP, Sinitic.ai’s AICX solution can add an entire new level of interactivity to your site, delivering automated acquisitions, improved conversions, reduced churn and better player lifetime values.

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