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IN-DEPTH 22 October 2018
US Sports Betting: States and storylines to watch
Chris Grove, Managing Director of Sports and Emerging Verticals at research firm Eilers & Krejcik Gaming, explores the key states and storylines within US gaming.
By Chris Grove

A referendum heading for the November ballot could dramatically restrict the ability of lawmakers to authorise expanded gambling - including sports betting. Should the referendum fail, Florida will be back to struggling with the same fractured stakeholder landscape that stymied progress in 2018. If the referendum is passed, Florida’s gaming tribes could end up with a solo shot at sports betting. That sort of control over one of the largest sports betting markets in the country could have significant ramifications for the legislative and competitive landscape in other states.

While New York may move forward with some type of limited sports betting in the near-term, all eyes are on the 2019 session. After a near-miss in 2018, the consensus is that New York is well-positioned to get sports betting across the finish line next year, perhaps as part of the budget process. But it’s hard not to wonder if the same dynamics that scuttled sports betting this session - a complex stakeholder picture, political inertia, and tensions between gambling stakeholders and pro sports leagues - won’t similarly cloud sports betting’s prospects in the session to come. The size and significance of the market make it even more likely that high-stakes brinkmanship could derail the process of bringing legal sports betting to the Empire State.

Illinois will be a good test of the ability of sports betting legislation to withstand pressure from macro-gaming issues and politics. The backdrop in Illinois is a convoluted one, and any sports betting bill with a serious shot will no doubt see a litany of attempted amendments. Should a clean bill pass quickly, advocates will have reason for optimism in other complex states. If a bill gets mired in the legislative muck, a key market will be off the board, potentially draining momentum from other states.

The industry will be watching closely as much of the ambiguity around Pennsylvania’s regulated sports betting industry resolves during the market’s march to launch. Should Pennsylvania maintain the high cost of entry, we’ll get some insight into how much value major players really place on the sports betting opportunity, and the lobbying prowess of international sports betting giants will be tested should Pennsylvania persist with the approach of blocking out-of-state brands.

While it is smaller than the states above, Oklahoma is interesting thanks to the size and breadth of the tribal gambling operators located within the state’s borders. A push to pass sports betting came up short in 2018, but is certain to be revived when lawmakers return to work in 2019. A serious bill in Oklahoma will provide us with an opportunity to see some of the unique dynamics among tribal gaming stakeholders, the leagues and state government on the sports betting question in action. This is an opportunity that could provide useful insight into other states with a similar stakeholder makeup.#

How successful are the lottery-run states?
With states like Delaware and Rhode Island launching sports betting under the state lottery umbrella, lottery officials in other states will watch closely while weighing up whether or not to push for a piece of the sports betting pie.

Obviously, Delaware and Rhode Island are somewhat unique in that they’re the hub for the most commercial gambling activity in the state, but a strong bottom-line performance from one, or both, could embolden lotteries in other states to stake a stronger claim on legal sports betting. The upshot: A more complicated stakeholder picture that could delay the legislative progress for sports betting in a number of states.

Can the leagues make a deal and involve themselves in the regulation process?
So far, a group of professional sports bodies (MLB, NBA, PGA) haven’t managed to work their key sports betting demands into any piece of passed legislation. That won’t deter the group, even as it emboldens gambling stakeholders. They have, for instance, pledged their support to a federal sports betting framework proposed by Senator Chuck Schumer.

Both sides likely realise that some sort of compromise is necessary for sports betting to advance at a rapid clip. But both sides remain far apart on core issues. Complicating the picture is the fact that the league group needs to negotiate in multiple, independent markets that often have little gambling operator crossover. New York is the closest we’ve seen to a workable deal between the league group and gambling stakeholders, suggesting that there’s still a troubling amount of distance between where we are today and a world where leagues and gambling stakeholders are pulling in the same direction.

What share does mobile grab?

We already know mobile is important in Nevada’s market, where online bets account for an estimated third or more of total handle. Mobile wagering is expected to make an even more meaningful contribution to handle and revenue in markets that lack the sign-up friction associated with Nevada’s mobile product.

A strong showing for mobile sports betting revenue in states like New Jersey and West Virginia could help sway states that haven’t adopted mobile yet and could weigh on the decision-making scale for states thinking about authorising sports betting in 2019. If mobile crosses the magic threshold of 50% of total activity or revenue in either state, the argument for including mobile will become significantly stronger in states that are on the fence. Barring issues with rollout or seriously defective technology, it shouldn’t take long for either state to approach and surpass that threshold.

Where will state costs converge?
We’ve seen a broad array of approaches to the questions of taxes and licence fees in the first wave of states that have passed sports betting bills. Tax rates range from the single digits to above 50%. Licence fees swing from a few hundred grand to $10m.

No one expects the next wave to reach a true consensus on these questions, but we should get a stronger sense of the centre ground when it comes to the price of participation. Increased certainty there will help companies better measure and plan their commitment to regulated sports betting, which should help drive the broader momentum for the legalisation of sports betting.

Should these states be permeable or protectionist when it comes to out-of-state brands?

Similarly, there’s still no clear consensus among authorising states regarding how open or closed regulated sports betting should be to out-of-state brands. New Jersey and West Virginia both left the door fairly wide open, allowing three unique online sports betting brands to run under each sports betting licence. Pennsylvania took the opposite approach, issuing guidance that suggests sports betting licence holders are limited to using their primary brand when offering online sports betting.

Where other states land will have a defining impact on the ability of a number of brands - both international and domestic - to derive significant revenue and benefits from regulated sports betting. Several major gaming companies appear to be leaning in the direction of a protectionist approach; a trend that could limit competition and innovation in the US.
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.