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Sports betting: New markets, emerging trends and overhauls

One of the biggest news events of the year in the gaming world was undoubtedly the U.S. Supreme Court’s May decision to strike down the Professional and Amateur Sports Protection Act, paving the way for legal sports betting across the country.

Although the ruling dominated the headlines, there have also been other changes in sports betting legislation around the world, from Vietnam to New Zealand, which will also have a major impact in their respective jurisdictions.

Therefore our focus for this G2E edition of the Asia Gaming Briefings magazine is of course dedicated to sports betting.

We review the momentous changes likely to happen in the U.S. as a result of the PAPSA ruling and what opportunities may open up for global sports betting companies, many of which already have a significant head start on any U.S. competitors given their longer history in legal markets, such as Europe. We ask in particular, what kind of opportunities may emerge, either for Asian providers to offer their services, or for companies seeking to target the Asian market in the U.S.

We also take a broad brush look at some of the trends in the Asian market when it comes to sports betting, where local punters are driving a strong demand for a wider variety of content, especially when it comes to second-tier sports. According to experts, a conservative amount for the level of credit extended on a weekly basis in the Asian sports betting market is between US$10 billion and $50 billion. With such large amounts at stake, companies cannot afford to ignore the emerging trends.

Among individual jurisdictions, we study the recent amendments to Vietnam’s sports betting laws. The latest regulation, which comes into force next year, goes some way to providing clarity for the investors keen to enter the market, but industry experts argue there is still more to be done, in particular when it comes to betting options.

Still, firms from Singapore, Hong Kong, South Korea and Malaysia have already expressed an interest in entering the market, in particular in the field of horse racing.

Lastly, we go to New Zealand, where the country’s coveted racing industry has been shaken to the core by a proposed revamp of the sector in a report by an Australian expert.

The study recommends closing more than half of the country’s race courses and leasing out the Totalisator Agency Board to an Australian operator. The premise of the report is that the industry is in a state of serious malaise, putting at risk the many jobs dependent on the sector.

Given the relatively small size of both the New Zealand market and its population, economies of scale are difficult to achieve, but highly necessary.

Needless to say the proposed overhaul has raised more than a few hackles in the horse racing world.

Local gamers drive content demand

Asian sports books are adding more content in response to demand from local gamers, with betting on smaller, local sports, now growing at a faster pace than punting on the European big leagues, experts say.

Football is the predominant factor in Asia. I would say 95 percent, if not more is football alone and that is both for cash and credit,” says Jesper Jensen, director iGaming Asia, who says a conservative estimate for the amount of credit extended per week in Asia is US$10 billion to $50 billion.

However, the Asian punter is looking for more betting opportunities than just on the major soccer leagues. Thomas Klingebiel, commercial director, Asia Betgenius explains: “Most operators see 10 percent of betting from the top divisions in Italy, France, Spain, Germany, England. The other 90 percent of turnover is from other, less prominent football leagues. So while the top leagues and countries make up around 5,000 events annually, we are seeing strong appetite in the market for more content – with around an additional 75,000 events available annually.”

Some examples are the Chinese Super League and the Indonesian Leagues. “This is a trend that you find with other sports as well, and the appetite for other sports outside of football is definitely growing in Asia,” adds Klingebiel.

The number two sport in terms of turnover is basketball, which is dominated by the National Basketball Association. “There is huge demand for basketball in other countries around the world,” says Klingebiel. “NBA is the second most important league after the English Premier League when it comes to betting in Asia as it attracts more attention than Spanish La Liga and Italian Serie A football leagues. But while the NBA offers between 1000-2000 matches per year, it has a significant off season. This has seen a trend of growing desire for more basketball content – with operators wanting a 24-hour, 365-day proposition to offer to clients. To meet that need we are offering trading on an additional 25,000-30,000 basketball matches per year, with lots of exclusive content available to our partners.”

In The Philippines, basketball is the number one sport, while in China it is on a par with football, attracting a lot of interest in local matches.

“Across Asia, tennis is something that has been holding a pretty good position for the last three years,” continues Klingebiel. “Tennis is popular as it has huge in-game betting opportunities. It is also played around the world in different time zones. There is not the same focus on the top tier of competitions, with a great deal of interest in challenger events which take place all year round. Some golf betting propositions are beginning to develop but the level of interest is below that of badminton and volleyball. Badminton is quite popular in Asia and operators offer a significant range of games while volleyball is particularly popular when there are local teams playing.”

Another area to watch is the eSports industry, which some say may end up giving some traditional sports a run for their money when it comes to viewership and player numbers. “ESports is moving real fast and will overtake the NBA in terms of viewership and worldwide players, tournaments, branding, and offerings,” says John English, partner at Global Market Advisors and managing director of Sports Betting & Technology. “There are so many games but the popular ones we play here in the US: League of Legends, Dota 2, Fortnite, Call of Duty, Players Unknown Battleground, and even sporting titles like Madden Football, are growing at breakneck speed in popularity in Japan, China and throughout Asia.”

The entire eSports industry is expected to grow over the coming years with worldwide revenues projected to reach $1.07 billion in 2019. In 2017, the eSport market revenue in Asia was estimated at $406 million, compared with $392 million in North America, $298 million in Europe and $29 million for the rest of the world, according to figures from Statista, The Statistics Portal.

“The eSports phenomenon has gained in popularity in the Asian market for sure,” continues English. “It is a given just as it is in the U.S and around the world. It is catching the attention of all the bookmakers. The social sports and skill games games do very well online on game streaming sites like twitch, gaming consoles, as well as television and mobile phones. Of course, at the moment Soccer and the NBA is where the audience currently resides but that is rapidly changing,” he adds.

ESports is also no longer just a form of entertainment, it is becoming a profession for many players. Gamers around the world are enticed to compete in numerous tournaments with the promise of a sizeable profit. In 2015, the combined annual eSports prize pools worldwide amounted to $74.8 million, the Statista figures show. However, the data shows that ticket sales and prize pools account for only a fraction of the eSports market revenue. The majority of the global revenue the industry generates comes from sponsorships and advertising. It is estimated that in 2020, brands will spend approximately $1.2 billion on eSports sponsorships and advertising, up from the $517 million that was projected for 2017.

“From the in-game perspective, those that book eSports have a large opportunity to capitalise on the plethora of game outcomes during a single match. There are some concerns that still need to be ironed out, mostly regulatory issues of match fixing, doping and how to unify and control the massive amount of games and teams being created. Traditional sports have enjoyed a long and storied history and they are not going anywhere anytime soon, however, innovations in game development, mobile technology and speed, virtual reality, augmented reality and blockchain technology are changing the course of the games we play, what we view and what we wager on.”

Will Asia join the U.S. sports betting gold rush?

John English*

Four months after the U.S. Supreme Court repealed a federal law limiting sports betting to just four states, there has been a mad dash by bookmakers and system providers from all over the world to descend on U.S. soil and plant their flag.

This change in regulation can truly be likened to the California Gold Rush of 1849, when thousands of 49’rs raced to California to mine the tons of plentiful gold and create immense wealth for their families.

Behemoths like William Hill and others have positioned themselves early on. Paddy Power after merging with Betfair has a strong U.S. presence with their TVG horse racing network and with the recently acquired FanDuel, a dominant fantasy sports provider; MGM has partnered with Boyd Gaming and with the NBA, WNBA, and European gaming giant GVC. That’s just to get started.

There is still plenty of room, as only a small handful of states have gone live so far and approximately seventeen have legislation in the works. States like New Jersey, which deserves a huge amount of credit for challenging PASPA to begin with, has been very progressive in moving forward with casino and mobile offerings to accompany their sports betting and are also allowing licensees to have multiple skins for sports betting.

So, although the rush is underway there is room for much more, particularly with the expansion of mobile betting technology and content such as eSports, which has global appeal and reach especially in Asia.

It is important to note that historically sports betting is a high-volume, low margin business and after 50 years of operation all the sportsbooks in Nevada generate approximately $5 billion in bets annually, with an average 5-6 percent win rate.

New bettors will need to be developed through innovation and creativity, and illegal or offshore punters will need to be wooed back home to create a truly explosive marketplace.

Many sports enthusiasts are Asian and it would make sense to have either wagering operations or branding that relates to the culture and appeals to the betting style they are accustomed to. Asian handicapping methods are also very popular in various parts of the world and have taken hold with some U.S. operators.

Although there is strong argument for those to enter the U.S., the market needs time to find its own footing. Regulations, compacts, lobbying and lawmaking need to come first. Unlike the California Gold Rush, the State of California has yet to agree on an online poker bill that has been in the works for a decade. We’ll see soon how they do with sports.

For the most part, to operate a sportsbook or to supply systems in the U.S requires extensive licensing, laboratory approved technology, and a very strong marketing effort. It’s going to get very complex and competitive, especially with state by state laws to follow and no federal all for one rule.

Some jurisdictions will only allow for casinos, race tracks or current licensed gaming establishments to offer sports wagering, some may not allow mobile or online wagering, some have onerous tax rates and buy in fees, and some will just get it right from the get go.

The largest issue that all comers need to understand is that realistically this market is only a very small percentage of what is bet on sports offshore. Just being legal may not be enough to break a long-term bond with their current bookmaker. After all, they’ve been in business for years, they can offer competitive pricing, a wide variety of wagering options, credit, and cash back. Often they have no licensing fees and don’t pay state taxes.

Customer acquisition, or transition will be a battle for the ages, so bring on the massive marketing efforts!

Europe, India, Israel, LATAM, and Asia are all are cutting edge in gaming technology and content development. The United States is new outside of Nevada to legal sports betting, so it’s an open market for all comers who are willing to face state by state licensing scrutiny and feel that they have a competitive product.

At the time of going to press, each state and most tribal nations are developing their own set of regulations or standards, so for any outside jurisdiction, including Asia, it would be wise to prepare for intense examination and suitability requirements. For the product requirements, it would be highly recommended to seek counsel familiar with the landscape and perform focus studies to determine if your offering has competitive potential in the marketplace.

Specifically, with Asian-facing companies, few have made a U.S.-facing branding effort with their casinos or suppliers and could look to start there. Partnering with well-known, large-scale brands, such as Wynn Resorts, Las Vegas Sands, Genting, or a strong tavern, or restaurant brand such as Buffalo Wild Wings or Hard Rock Cafe, which many operators are doing now, could possibly be a solid option for those Asian companies looking for a familiar connection with the American public.

For Asian companies that already have strong global branding, simply licensing their brand to a regulated risk management group would allow their presence to grow in the U.S. sports betting market in a shortened time frame. Asian companies have had their own limitations, in Mainland China, sports betting is limited to the sports lottery, which is state owned. In Macau, there is only one operator, while in Singapore, Singapore Pools has a monopoly. There is a limited, but growing offering in the Philippines.

Without doubt, just like there is in America, a massive black market utilizing large networks of agents or proxies to assist in their betting activity exists.

I see that the Asian market, much like the Europeans, will find their fit in either the technology side, or with seasoned operating partnerships and will have the ability to access the public and to prosper.

After 25 years of waiting for this to happen, it sure is happening fast and furious and the media and public excitement is completely focused on sports betting. With good intent, strong relationships, and reasonable expectations the U.S. will be a viable market for Asia and those around the world looking to get in the game.

*John J. English is a Partner, Managing Director of Sports Betting & Technology Global Market Advisors

Investors at starting gates

Vietnam has embarked on major reforms toward opening the country to sports betting, with major Asian-based foreign investors joining the queue to capture part of a potentially lucrative market.

The moves, launched in the past two years by way of an initial decree, and set out in a parliamentary bill this year, hope to capture a portion of the multi-million-dollar underground sports betting market and lure back overseas spending estimated at around US$800 million a year.

Analysts welcome the moves, but say there is still some way to go for investors, including a lack of infrastructure and high charter capital requirements that are likely to mean that interest will be focused only on major cities.

Maxfield Brown, manager business intelligence with Ho Chi Minh-based consultancy, Dezan, Shira and Associates, says the moves mark an “important step towards opening the industry to foreign investment and increasing state revenues.”

“Legislation surrounding gambling in Vietnam is still in the early stages of the legislative process,” Brown told AGB in an email. “Vietnam has provided clarification to date on horse racing, greyhound racing, international football, and physical casinos,” he said.

So far, urban centres, such as Ho Chi Minh City, Hanoi, Da Nang and the surrounding provinces are targets for investment. “Investors in these locations benefit from higher levels of income among residents and also attract higher net worth tourists,” he said.

“Investors will benefit from rising wages and steady increases in gambling spending that is estimated to be growing by around 12 percent annually.

“The underground gambling market in big cities and tourist destinations will take a big hit as large investors displace smallerscale underground operations,” he said.

The sports betting bill is set to come into effect from the start of 2019, although some football game bets were cleared from April 2018 to coincide with the FIFA World Cup.

The bill, passed by Vietnam’s National Assembly in June this year, followed that of a 2017 decree, which introduced a five-year pilot program setting out “strict conditions for firms involved in betting activities.”

According to Dezan Shira these include charter capital of $44.2 million for horse racing and football and $13.2 million for greyhound racing.

But the consultants noted there remains a lack of clarity in several areas, including categories of sports being included, and how the government will implement the bill’s guidelines.

The imposition of high capital requirements was seen as a deterrent to invest elsewhere in the country. “Rural locations with established underground gambling organizations and relatively low investment are not expected to see significant [activity],’ Brown said.

For football, the government will allow betting only on international games recognized by FIFA, the global governing body, which includes the World Cup, the Confederations Cup, Copa America, the Champions League and the Europa League.

This means, popular football competitions from the English Premier League, Spain’s La Liga, and Italy’s Serie A are excluded.

Dezan Shira and Associates say this has created a dilemma. Vietnamese citizens are not allowed to legally bet on these league matches, while betting operators are reluctant to get involved for events held only once a year, or every four years.

Other guidelines include the fact that all players must be at least 21 years of age, while the maximum bet amount is set at one million VND ($44) per day with a minimum of VND 1,000 (4.42 cents)

Foreign investors leading the charge to invest in the new betting climate include companies from Hong Kong, Singapore, South Korea and Malaysia.

In early April, SGX Catalist-listed Amplefield Ltd. signed a memorandum of understanding with horse breeders Equine Sanctuary (Sdn Bhd) (Malaysia) to enter a joint venture to provide design and consultancy services and to oversee construction of a racecourse and racetrack in Ho Chi Minh City.

The proposed development covers 300 hectares of land in Le Minh Xuan Ward in Ho Chi Minh City for the racecourse and race track and form part of the Sing Viet City development.

The development includes 16,000 residential units, along with a resort covering horse racing, gaming and golf facilities.

Amplefield executive director, Yap Weng Yau, in media comments, called the MOU “a first step towards the development of “racino’ facilities,” with “tremendous potential” that would be a huge draw for both tourists and locals and stimulate further development.

Other investors include gambling operator Golden Horse from South Korea, with announced plans to set up a subsidiary company in Vietnam backed by an investment of $500 million, with proposals set to be submitted to the Vietnamese Authorities by October.

Choi Hak Soo, president of Golden Horse met in July with local leaders of Bac Ninh province and said that the investment plans for the 400-hectare entertainment complex included a horse racing course, a resort, and residential area, with the creation of up to 10,000 jobs.

But there remain calls for the government “to do more” to spark further interest from operators and investors.

The Government has already taken the necessary steps to legalize betting, but it needs to provide further clarity in the bidding process and increased options for betting operators, the consultants added.

New Zealand Racing overhaul stirs controversy

Opponents of the sweeping changes proposed for the racing industry in New Zealand are questioning whether the reforms are legally and practically possible.

The changes proposed in a government commissioned review of the industry by Australian racing identity Joe Massara cover the structure, finance and legislation governing the industry, the system of betting and the industry-owned monopoly operator, the Totalisator Agency Board (TAB), as well as the racing clubs, race courses and prize money.

He recommends a sweeping series of changes including stripping the New Zealand Racing Board of most of its powers, leasing out the TAB to an Australian operator, closing 28 of the country’s 48 race courses, turning the NZ Racing Board into a Wagering Board responsible only for broadcasting and betting, and devolving power to run thoroughbred harness racing and greyhounds to the respective codes.

He is also seeking changes to the taxation regime to cancel the gambling levy (worth NZ$13 million a year ($9 million) and using this to boost stake money.

Messara finds that “on any test, the thoroughbred racing industry in New Zealand today is in a state of serious malaise.”

Thoroughbred racing accounts for two thirds of the jobs, turnover, and economic benefits generated by the racing industry.

A study by an economic consultancy carried out as part of the Messara review says the racing industry contributed $1.63 billion to the economy, with over 14 000 direct and indirect full-time equivalent positions with an average of eighteen race meetings a week (across all three codes).

However, Messara says that overall the industry lost money and had done so for many years. The foal crop was falling, and wagering was static. There were too many race tracks, many needing substantial upgrades.

Owners’ costs in 2016/17 are calculated at $199.3 million and prize money (after payments to trainers and jockeys) at $45.6 million “leaving a collective deficit met by owners of $153.7 million.”

“This is a return of 22.9 percent, which compares poorly with the 48.1 percent (return achieved) in New South Wales.”

His core recommendation is a pool of prize money of at least $100 million which would improve the return to owners to 42.6 percent. He recommends increasing minimum stakes across all classes of races by between 67 percent and 150 percent, which would, for example, double the minimum stakes for Group One races to $400,000.

However, his plans for achieving this pool of prize money are contentious, and the details are sometimes sketchy.

For instance, neither the Racing Board nor the government has the power to compel racing clubs to close. Moreover, the idea that the government can somehow command the handover of racing club assets has left many in the industry scratching their heads about how this might be done should clubs dig their toes in and decline to co-operate.

Hence Messara’s recommendation that the government pass legislation to transfer the assets from the clubs and their mixture of owners to thoroughbred racing has created considerable concern and controversy.

Under the Messara plan this body (with strong owner and breeder representation) could, and likely would, dispose of the land and use the capital to invest in upgrading courses and to provide increased stakes. He is very firm that the prize pool must go up and should reach $100 million over five years.

His other core recommendation involves the leasing of the TAB to an Australia operator. This is justified mainly on grounds of scale.

“Under the current structure, the NZRB will be unable to deliver the sustainable level of funding required to revitalise the New Zealand Racing Industry and lift TAB operations to a basis of efficiency required to be competitive against international wagering operators of scale.

Messara goes on to recommend “a full operational outsourcing of all domestic wagering, broadcast and gaming operations, to a single third-party wagering and media operator of international scale, under a long term contract, with the NZRB holding the licence.”

He regards the issue of scale as “insurmountable” and points out the average Australian aged over 18 wagers 2.5 times as much as the New Zealand equivalent, which combined with a population only a fifth of that of Australia means “the NZRB can never realistically meet or maintain market and customer expectations.”