FOCUS

Asia’s sporting chances

When the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act in 2018, many surmised that the ruling would trigger a ripple effect, leading other jurisdictions to legalise sports betting.

That has not yet happened. However, the appetite in Asia continues to grow apace and operators appear undeterred by the “grey” status of many of the markets. In this edition’s Focus section we explore several sports betting-linked areas that are in the headlines, or gaining traction in the region.

The first is the rise of virtual sports, which is proving to be highly popular. The latest in 3D animation and motion capture technology are producing sports events that are becoming hard to differentiate from the real thing. Football is by far and away the most popular sport, though suppliers are developing basketball products to cater for the Philippine and Chinese markets, while in India cricket is the obvious choice.

Our second article focuses on expert opinion on the emerging markets with the most potential. India and Japan come out on top. In the former, skill-based games are legal and market experts are confident this will be extended to sports betting at some point in the next few years. The large and rising middle-class population, coupled with increasing internet connectivity make it a market that’s hard to ignore. Japan has no current plans to legalise online gaming, but is still seen as one of the easier grey markets in Asia.

No focus on sports betting could ignore Australia and we take a look at the “turf ” war for supremacy of the market being wagered by Victoria and New South Wales. The two states are taking different tacks when it comes to their approach to races and their relationships with bookmakers. We ask who is coming out on top?

Lastly, politicians and regulators in the U.K. are expressing increasing concern about the number of Asia-facing operators sponsoring U.K. sports teams. Most are attempting to cash in on the huge popularity of the Premier League across most of the Asian region. It’s a delicate question that could deprive clubs of a major revenue source and operators of a valuable marketing tool.

Virtual sports gather speed in Asia

Dismissed in the past by skeptics and naysayers as “animated roulette,” virtual sports have come a long way since their early days of crudely drawn graphics and limited betting options and are firmly taking hold in Asia.

With the deployment of motion capture technology and 3D animation, combined with the harvesting of real sports data to provide the full gamut of betting markets and odds – including in-play wagering – virtual sports have taken hold in a big way.

In fact, these simulated betting products are now firm fixtures at most online and land-based sportsbooks.

“Virtual sports have really taken off in the last 12-18 months, with our [Asian] customers quite overwhelmed by the turnover they have seen,” says Michael Maerz, managing director for Asia at sport data and virtual sports provider Sportradar. “They [virtuals] are hugely popular throughout Asia.”

Likewise, Yariv Lissauer, CEO at virtual sports supplier Leap Gaming, says he has noticed a pronounced increase in demand from Asian operators for virtual sports products.

Asia is a huge continent, of course, so tastes vary, though the most popular virtual sport by some margin is soccer, as is the case in much of Europe. Due in part to the popularity of the NBA in huge markets like China and Philippines, virtual basketball tends to be the second most popular product in the region.

While Sportradar is currently working on virtual baseball given its huge appeal in markets, such as Japan, Korea and Taiwan. Virtual cricket involving eight Indian teams competing in a T20 league, is also in the pipeline to cash in on the obsession with the sport on the Indian subcontinent.

One reason for virtual sports’ growth in Asia of late has been the evolution of the graphics and overall realism of the product. Indeed, gamblers are more likely to place wagers on an artificial sports betting product if it closely resembles the real thing. While Asian gamblers still tend to prefer live casino over RNG gaming, lifelike virtual sports products these days are almost indistinguishable from the real thing.

“The more polished and the better the product looks will increase its authenticity and how trustworthy it is in the eyes of the users,” says Lissauer.

Motion capture technology

To help with this authenticity the use of a professional studio’s motion capture technology, otherwise known simply as mocap, is now widespread in the industry. This involves kitting players out in skin suits with ‘markers’ attached so that dozens of HD cameras positioned around the field or court can record every precise movement. In fact, the positional accuracy of these mocap set-ups can get down to just 0.5mm. The technique is even used by certain suppliers to capture the movements of greyhounds and racehorses on the track.

Artists take the captured wireframe data and overlay human features and detailed kits to bring the in-game athletes to life. Stadia complete with fans are also painstakingly recreated, while audio and commentary add the finishing touches. “With our football, basketball and tennis [products] we had semiprofessional footballers and basketball and tennis players in black suits wired up,” Maerz says. “It was a process of over a month to get the real movements and plays, which essentially looks like a PlayStation game. The quality of the video is definitely something that is very much appreciated in the Asian market.”

Sportradar’s access to a trove of real sports data assists with the realism and with calculating probabilities. “Data will tell you what happens and how often,” Frank Wenzig, managing director of gaming at Sportradar, tells AGB from the gaming division’s main office in the German city of Bremen. “You need to reflect this in the video and enrich it with the right probabilities. For example, in a correct score betting market we have to understand how likely it is there will be a 1-1. But we have to consider that one percent chance there will be an 8-0. If we do not consider this then they may look like real odds, but they do not feel like real odds. That is distracting for our audience.”

As well as driving interest in real sports competitions, like soccer’s Asian Cup or next summer’s Euro 2020, operators find virtual sports offer gamblers options during lulls between matches or during the off-season. Virtual sports also serve a thick-and-fast menu of betting – 24 hours a day, seven days a week. For instance, Sportradar’s basketball product offers some 3,300 fixtures per day with eight matches running in parallel. Users can bet on a new match every three and a half minutes.

And these days more and more virtual sports products offer in-play betting, which helps to drive engagement and increase revenues for operators. For instance, bettors can wager on every single point with many virtual tennis products, creating a new betting round every 10 to 25 seconds. “Live betting is a lot more attractive than the pre-match betting with real sports, so the logical trend is to follow this in the virtual sports world,” Wenzig says.

On-demand products also mean users can just bet and go rather than having to wait for scheduled events to start. These features offer that instant gratification that the younger generation of gambler craves.

Mobile technology

While Lissauer quite rightly points to advancements in mobile technologies, coupled with 4G and now 5G connectivity, as having helped with the appeal of virtual sports, the investment suppliers have poured into products has been decisive. Squint your eyes and you could be fooled into thinking you’re watching an actual televised sporting contest. This immersive experience can only help virtual sports to grow further in Asia and elsewhere.

Indeed, Wenzig insists the lines between computer-generated gameplay and real-world sport continue to blur. “Nowadays, virtual sports are a dedicated type of product. This will meld together with live betting and in the future people won’t even know if it is real or virtual.”

India, Japan eyed as key emerging markets

Uncertainty caused by political and regulatory instability in Cambodia and the Philippines has prompted operators to search for potential new markets, with India and Japan at the top of the list.

Such was the conclusion from panels dealing with Asian online gaming opportunities at the Betting on Sports conference in London in September.

Rune Loderup, chairman at Asia-facing and Manila-based Goldblue, said the online gaming sector in Asia was currently enduring a “rollercoaster” due to the upheavals involving the outright ban on online gaming in Cambodia and China’s pressure on the Duterte administration in the Philippines.

“We have a situation in Asia where it is illegal to live in the country where you offer into,” he pointed out.

One such example is India where – at least for most states within the country – sports-betting remains illegal. However, there is provision within the law for the operation of games of skill meaning that both poker and, increasingly rummy are proving popular with online audiences.

Speaking on a later panel, Navneet Makharia, the chief executive of Kolkata-based gaming supplier Ability Games, said that the “nascent” Indian online market was “yet to be explored.”

And now, due to increased penetration of highspeed internet, smartphone and the huge demographic potential, India is starting to arouse serious interest. “There are 800 million potential sports lovers; it’s right behind China so there is huge potential,” he told the audience.

“Fantasy sport users will cross 100 million in 2019. Think about this number when it is open to the betting side. This is the potential for the market today. Any operator offering this can cross sell any other product.”

Charlie Zhang, vice president AG Tech/Alibaba agreed about the potential for fantasy sports in India suggesting that the love of cricket combined with fantasy could be a huge growth area. “The core thing is there is a sports gene in the Indian fans. Cricket takes 90 percent of the share, and Kabaddi takes another 5 percent,” he said. “The companies that are looking at India start by adding cricket, with tips. It’s similar to China.”

On the previous panel, Zhang’s colleague Gilbert Wong, vice president AGTech/ Alibaba, said the company has been investing in India including forming a joint venture with local payments giant PayTM. “Fantasy is huge, there is unlimited potential,” he added. “We love India.”

Big in Japan

India wasn’t the only country given a mention with Loderup pointing out that Japan was also a “special market” which was “similar to European markets” partly because many of the larger affiliate organisations are already up-and-running with Japanesefacing offerings.

“The Japanese are quite shy to gamble online; they like it but don’t talk about it,” he added. “But when they open land-based, it will open the market further and make it even bigger.”

Japan is currently drawing up regulations to cover land-based gaming, but online gambling does not form part of the legislation.

Marcos Oliveira, chief affiliate officer at Clever Advertising, chipped in that grey online growth had, as yet, to provoke any “huge kickback” from the government. “So there aren’t big issues and we are taking advantage,” he said. “Japan is easier than Thailand and Vietnam, for instance. I can easily see Japan becoming one of the biggest online markets.”

The key to gaining an audience in Japan is distinct localisation. “You can’t look like a European gambling site,” said Loderup. “It must have instructions, (and be) very detailed. People must speak the language fluently.”

“Only bet365 works there,” added Oliveira. “If you don’t have a super-detailed Asian facing operation you will certainly fail. It’s the same with Africa. People like what they like and you need to adapt.”

Talking broadly, Oliveira said that patience was needed to make an Asianfacing operation work. “Asia is a persistence market,” he said. “You have to wait, wait, wait for the opportunity. For it is the most difficult market to establish. If you find yourself with enough patience, you will make amazing games. Once you are established. Don’t just expect to succeed.”

The difficulty in reaching the audience in any Asian jurisdiction was addressed by Loderup. “Most Asian countries have agents but not affiliates,” he said. “And they are afraid of putting their head above the parapet. That is why affiliates don’t work in China. But the affiliation business is slowly growing.”

The first problem was the marketing, then there was the issue of payments. “Even if you advertise a brand, you get blocked,” says Oliveira. But he added that affiliation was growing and that the various messaging services such as WeChat and Telegram “are creating massive groups of punters.” “That can drive traffic to your website,” he said.

Victoria, NSW stage Aussie turf war

Australian racing is in the midst of one of the biggest changes in its long history as the nation’s two biggest states – New South Wales and Victoria – wage what the media have dubbed a “turf war” and behind which lies two different approaches to the business of betting.

In one corner is Racing NSW, led by its singleminded chief executive Peter V’Landys, riding high on advantageous funding and determined to steer the country’s best horses to Sydney and away from Melbourne with a series of brand new, big-money races.

In the other corner, Victoria, boasting history and the spring carnival, an enormous money-spinner where the attention of the country’s betting public turns to Melbourne.

Most mainstream media attention has been on V’Landys’ new race creations like the A$14 million Everest and A$7.5 million Golden Eagle – among a raft of new events worth more than A$45 million that stretch across six weeks, all launched with the express purpose of attracting attention and horses to Sydney in the spring.

Overall prize money in both states has spiralled – Racing NSW and Racing Victoria will have paid out more than A$500 million combined in the season which ended on July 31 – but driving it all is betting revenue, and that is where the race is on for the biggest slice of the pie.

Perhaps the key difference between the states is their relationship with Australia’s biggest wagering operator Tabcorp, whose primary racing product is pari-mutuel betting, but which also offers fixed-odds products.

“New South Wales have basically gone all in on Tabcorp and Victoria is in a joint venture with Tabcorp and they allow corporate bookmaker sponsorship, the bookmakers can promote their product on television and sponsor racetracks and races in Victoria,” said Jason Cornell, an ex-Hong Kong Jockey Club and now Australian-based racing administration expert.

“New South Wales were behind, but they have had some big increases in funding and improvements and they have put Victoria on the back foot. The relationship with tote and bookmakers is definitely one of the main factors that differentiates the two jurisdictions.”

It isn’t the only difference though, but the biggest change in the two-state dynamic was in 2010 and the landmark “racefields legislation” court case.

When V’Landys squared off with corporate bookmaking giant Sportsbet and Betfair in 2010, the ruling over how racing could charge for its product went all the way to the High Court.

When V’Landys scored what many felt was going to be an unlikely victory it opened up more than A$80million that had been paid in lieu of the ruling and gave New South Wales a funding head start on its southern rival.

Although the high court ruling was overarching, arrangements on how the sport charges operators is made on a state-by-state basis and Victoria was essentially hamstrung, having already made far less lucrative deals with bookmakers.

Since then New South Wales have continued to go “all-in” with Tabcorp – continuing to hit bookmakers hard with charges based on turnover – and Victoria has essentially doubled down, preferring the joint venture arrangement with Tabcorp and negotiating a deal based on revenue with bookmakers.

Another key difference is television and streaming rights, with Racing NSW selling the rights to the Tabcorp-owned SKY Television and Victoria creating its own broadcasting arm called Racing.com. Racing.com was dealt a blow when Tabcorp merged with Tatts Group in 2017.

While New South Wales race clubs are little more than two decades into a 99-year pari-mutuel wagering license with Tabcorp, the Victorian wagering licenses are up for grabs in 2024 – the trouble is, there might be only one realistic bidder.

“It isn’t as competitive a landscape anymore,” Cornell said.

V’Landys success in brokering advantageous deals for his state has given him even more leverage with government and in 2016 he negotiated for what he called a “tax parity”, a system where Racing NSW was ensured a better tax break on betting than Victoria.

This “tax parity” will be rolled out progressively, with the biggest returns yet to come – meaning the two-state competition, which has also included big investments in training centers and infrastructure, is far from over.

“The tax parity delivered its returns in stages – first in 2016 and then more in 2017 and a big hit in 2018, and an even bigger chunk in 2020. So V’Landys has even more ammunition in the future,” Cornell said.

The two big states negotiated a lower tax rate, but the smaller states, with less leverage, were whacked with the full 15 percent

Another game changer for racing in Australia was the implementation of the controversial Point Of Consumption Tax (POCT) at the start of 2019, which allows state governments to charge bookmakers on revenue on top of what they already pay to the sport via racefields legislation.

It is up to state governments to decide how much is charged and how much of the POCT collected is given back to racing and in some cases, most notably South Australia, none was given back at all.

That meant disaster for South Australian racing and in some ways Racing.com, which paid for non-exclusive rights to broadcast racing from its neighbouring state in 2017.

South Australia is a product that has lost its lustre after POCT created a funding shortfall, with drops in prize money and many of the state’s top trainers and jockeys flocking to where the strength is.

That strength is in New South Wales and Victoria.

“The two big states negotiated a lower tax rate, but the smaller states, with less leverage, were whacked with the full 15 percent,” Cornell said.

The battle for racing supremacy is far from over but in the meantime the biggest player remains V’Landys, who has helped create a “vertically integrated” jurisdiction, where individual race clubs – including the once-powerful Australian Turf Club in Sydney – are essentially under his control.

That means that new ideas – something that V’Landys has had a lot of over the last decade – come to fruition quickly, in Victoria new initiatives can become mired in a disaggregated system involving three metropolitan raceclubs, Country Racing Victoria and the overarching “governing body” Racing Victoria.

The criticism leveled at both states, but mostly Racing NSW, has been that the funding battle has come at a cost, with fixed-odds betting markets becoming less appealing.

Professional punter and industry expert Richard Irvine says the POCT tax has created a situation where it is hard for bettors both big and small.

Irvine believes treating exchange Betfair less harshly with charges based on revenue, not turnover, would be a great start.

“Peter V’Landys and Racing NSW talk proudly about how they have captured and engaged the next generation of racegoers via the introduction of The Everest,” Irvine said in a statement on his Fair Wagering Australia website. “It was a contrarian move by Peter and it has paid off well. But he needs to realize that others in the industry, like Betfair can be contrarian as well. Betfair is here to stay – it’s a great driver of turnover, is hugely popular with younger punters who RNSW so desperately want. The rest of the country’s PRA’s have embraced it – made it pay its fair share but also allowed it to prosper. It’s time for RNSW to do the same and charge Betfair on revenue.”

U.K. sponsorships by Asiafacing firms face scrutiny

The future of high-profile sponsorships of British football teams by largely Asianfacing sports-betting and online casino brands could be in doubt if proposals put forward by the UK’s main opposition party come into force.

The UK Labour Party’s deputy leader and spokesperson for gambling-related policy Tom Watson has said he is “concerned about the relationship between overseas gambling operators and British football teams.”

In calling for a “full review” of all remote licences issued since 2014, he suggested that the reputation of the UK licensing regime was on the line.

“I believe that a UK gambling licence should be a hallmark of credibility and trust,” he said in an article on the PoliticsHome website.

“It should not be seen as a platform for overseas operators to use the reputation of British sport as a marketing tool for their own domestic audience, whereby the benefits of the UK market are enjoyed, but nothing is given back to address the harm that is caused.”

Asian-facing betting and gaming brands have been a feature of UK football for some years, both in terms of shirt (and now shirt-sleeve) sponsorship and on the perimeter hoardings.

Among the Premier League sides that featured Asian-facing brands in the season just gone, Newcastle United had Fun88, Fulham featured Dafabet (which also features on the shirt of Celtic on the Scottish Premiership), Crystal Palace had ManBetX emblazoned on their shirts, Bournemouth was sponsored by M88, Burnley had LaBa360 (deal now lapsed), Huddersfield wore OPE and lastly Wolves had W88 on its shirts.

Non-Asian-specific betting brands included SportPesa on Everton’s shirts and Betway at West Ham United.

In the close season, meanwhile, LoveBet has signed up to take over the shirt sponsorship at Burnley and Sportsbet.io, a bitcoin-based sportsbook, is now the main sponsor at Watford.

David Clifton, a partner at legal consultancy Clifton Davies, said Watson appeared to be blaming the regulator for “allowing overseas gambling operators to advertise their wares by way of shirt sponsorship” when that was the very working of the legislation. Such marketing is allowed “as long as effective steps are taken to prevent British consumers from using the gambling facilities in question,” he added.

Another legal source who preferred not to be named suggested, however, that the UK Gambling Commission has already privately indicated to operators that it will be applying more stringent investigations into the ownership of any operators from overseas applying for a UK licence.

“The Commission is asking more questions about where else in the world they derive their revenue, “ the source added.

Watson’s call for a licensing overhaul was cautiously welcomed by leading UK operator GVC, the company behind the Ladbrokes, Coral and Sportingbet brands.

“GVC strongly supports a robust regulatory framework to ensure that all operators provide players with a fun, safe and fair environment in which to gamble while protecting potentially vulnerable individuals from harm,” a spokesperson said.

“As part of that regulatory oversight we would be fully supportive of a full review of current UK licence holders to ensure that all operators are upholding the standards that the British public expect and deserve.”

The trend towards ever more Asian-facing brands using English and Scottish football as a platform for marketing their offerings to their audience in Southeast Asia and further afield is now well-established.

“Foreign bookmakers, especially Asian handicap books have famously used Premiership and Championship shirts to raise brand awareness amongst the tens of millions of hard to reach bettors in their home states for years,” says Harry Lang, a marketing consultant with Brand Architects.

“The global popularity of our home leagues have been like catnip for these operators vying to capture eyeballs in markets where TV and digital media are banned for betting firms.”

The silence from football with regard to its relationship with gambling operators is notable and its significant role in the mushrooming of the visibility of gambling in the UK was not touched upon by Watson.

Nevertheless, the English game does come in for some criticism from Lang. “As a business it’s been laissez faire about where the money comes from so if they won’t recognise that their international fan base is being targeted through back door UK licenses then the government will inevitably act the policeman and do the job for them.”

“I think the concept of the FA and clubs turning down sponsorship handouts from international bookies out of the goodness of their heart is naïve,” he added.