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Sporting bets on Olympics, Japan and esports
With major sporting events set to resume their Autumn schedules and fresh off the back of the Tokyo 2020 Olympics, our focus section in this edition of Asia Gaming Briefing is on the sports betting world.
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The Japanese government pressed ahead with the games, which had already been delayed by a year, despite rising Covid cases in the country. Although a great sporting achievement, the decision drew criticism and the final bill looks set to be about $15.4 billion, making them the most expensive ever.
In our first article in this section, we examine how the heavy expense of the games, coupled with the ongoing Covid drag on the economy and the coffers of the country’s sports clubs may be the catalyst that pushes the government to expand legalized sports betting earlier than anticipated.
Some figures in the industry say there is a buzz that the market could be opened up by as early as 2024, with eye-popping projections for potential.
Our second piece looks at the Olympics-effect on sports betting. Without a doubt, Covid dampened enthusiasm towards the four-yearly event, with no cheering crowds permitted into the stadiums to spur on the athletes.
It was an extra element adding to why sports books fail to get as excited about the Olympics as other major sporting events, such as Premier League soccer tournaments. Despite the global audience figures, the games fail to generate anywhere near as much in betting volumes as some other major competitions. We look at why this is the case and what was new in Tokyo 2020.
The use of drones to live stream horse racing in the U.K. has become widespread and is being increasingly viewed as a problem for sports integrity and illegal gambling. Another of our articles in this section examines the impact and extent of this problem and why horse racing clubs in other jurisdictions should also take note.
Brant Dunshea, chief regulatory officer of the British Horseracing Authority, tells us that once an illegal practice takes hold in one market, it’s not long before it spreads to other parts of the globe.
Lastly, Purbrick & Associates puts esports under the spotlight. The article looks at the potential for future growth and what’s likely to drive expansion in the market, in particular in Asia. Mobile esports are gaining ground fast in the region, although so far betting revenue is not catching up, with the sector dominated by the younger, casual player.
Basketball scores in Olympics betting preferences
Basketball surged in popularity in terms of Olympics sports betting preferences at Tokyo 2020, though sports book operators said the games were not a major driver of volumes.
According to a pre-event survey from the American Gaming Association more than 20 million people said they planned to bet on the Olympics. This was the first such survey from the AGA and the first Olympics since sports betting was legalized outside of Nevada in 2018.
Despite the hugely expanded audience potential in the U.S., sports books say they have not seen a major boost from the Olympics, which have always failed to generate the same level of volume as some other sporting tournaments, such as major football leagues.
Television viewership for the games was also down significantly, with the Tokyo time zone proving challenging for major markets in the U.S. and Europe. In the U.K., the BBC reported a 39.4 percent decline in viewership for the opening ceremony compared with the Rio de Janeiro games.
U.S. network NBC reported its lowest audience figures for an opening ceremony in 33 years. Australia and Japan, reported higher numbers.
“If we compare individual sports against normal betting levels then we had many which had a significant boost during the Olympic weeks, so that was welcome - but if we compare the overall turnover against normal weekly betting levels then the Olympics hasn’t really created a boost on volumes – this is normal for the Olympics which are not a catalyst for betting in the same way as major football tournaments,” said Jay Dossetter, head of corporate communications for Entain, which owns brands such as Ladbrokes and Coral.
“It’s largely as we expected. This is mainly based on experience from previous Olympics, but also when factoring in the time-zone of this Olympics compared to our major European markets.”
Dave Povey, head of sports book at RPM Gaming explained that part of the problem in driving betting excitement for the Olympics is the four-year cycle.
While major sports such as basketball and tennis, will retain momentum, more niche sports will fade from view once the games are over.
“If you’re a lesser sport, even if you captured the public’s imagination in Tokyo, it’s very hard to take that spike in exposure and awareness and translate it into ongoing engagement with that sport. In short, viewers and bettors are very habitual,” he said.
“And habit-forming takes time. Unfortunately for those sports looking to make a mark longterm, or sportsbooks hoping to promote the likes of cycling, swimming, surfing or skateboarding beyond their Olympic campaigns, the interest simply won’t endure.”
“So, while you’ll always hear the regular tropes around 40 percent of the entire planet watching the Games, the harsh reality is that most of us will only revisit the lower-tier sports when the next Olympics returns. Sadly, it means these sports’ governing organisations will struggle to effectively capitalise on the growth potential of this quadrennial sporting shop window – and sportsbook operators have drawn a similar conclusion for their punters.”
Still there were some noteworthy betting trends to have emerged from Tokyo 2020.
According to Entain, basketball was the most popular sport for the first time, helped by the introduction of 3x3 basketball.
In Rio, basketball accounted for about 17 percent of its business with that figure rising to 27 percent for Tokyo.
That trend corresponds with the AGA’s pre-games survey, with 45 percent of those questioned saying they would bet on basketball, far and away the highest percentage, topping soccer which came in second at 34 percent.
Entain said basketball, soccer, tennis and volleyball accounted for 76 percent of all bets placed. In terms of inplay and prematch split, 63 percent were live bets and 37 percent were pre-match.
There was also one interesting exception that seems to be bucking the trend and that’s table tennis. The sport gained in popularity during the Covid pandemic when the Russian and Ukraine leagues were the only live events still being held.
“Consequently, worldwide operators came to realise they’d missed an obvious trick in seldom promoting the sport, whose format is essentially “quick-fire tennis”, Povey said. “Luckily for them, the pandemic lasted long enough for habit-formation and lasting retention to kick in around the sport.”
Jade Gaming CEO Joe Pisano said the sport has benefited greatly from technological improvements in data capture and analysis.
“With accurate, up-to-the-second scores running directly – and progressively reliably – off in-venue feeds, there are many more opportunities to bet in-play than most other sports. In short, somewhere in the world, someone’s usually playing a competitive match that’s live and accessible.”
Covid/Olympic costs may speed Japan sports betting regulation
Japan’s government may move to expand legalized sports betting sooner than expected as it seeks to rebuild its Covid-ravaged economy and recoup costs from hosting the Olympic games, industry figures say.
Earlier this year, the Financial Times reported that the government had commissioned a report to look into legalizing betting on major sports such as football and baseball.
It said internal discussions have already begun.
At present, betting is only permitted on horse racing, cycling, boat racing and motorcycling, both through online and retail outlets. However, the illegal market is large and growing, with the government turning a largely blind eye to the practice.
The world’s third-largest economy grew an annualised 1.3 percent in April-June after a revised 3.7 percent slump in the first quarter, according to preliminary gross domestic product figures. Although the 2Q21 figure was better than analysts had anticipated, they say the outlook is still uncertain due to ongoing restrictions to fight Covid.
Add to that the costs of hosting the Covid-delayed Olympic Games, which have been put at $15.4 billion, making them the most expensive ever, the government has clear incentive to look for further revenue sources.
Kåre Hilt Ingvaldsen, the Tokyo-based Asia Pacific manager at odds data provider TXOdds, said there has not been much in the way of updates from officials, but “the vibe is that this will definitely happen eventually and maybe even sooner than expected.”
Jade Entertainment CEO Joe Pisano goes one step further, putting a potential date of 2024 for the opening of the market. He says Jade Sportsbet is seeing increasing interest from Japanese companies in anticipation of legalisation.
“Despite relatively limited offerings, the regulated gambling industry in Japan generated a reported $55 billion in “revenues” in 2019 for the four sports on which wagering is allowed. An expansion of those offerings is projected to more than double those numbers,” he said.
Although technically still illegal to bet on overseas websites offering sports betting, the market is expanding rapidly, with soccer and baseball dominating the field.
Hilt Ingvaldsen points to a survey from Asahi- SimilarWeb last year that found that Bet365, one of the biggest online sportsbooks worldwide, saw an increase in views from 860,000 in December 2018 to 13,2 million in July 2020 from Japanese users.
A key concern for the industry, however, is what the shape of any future regulation will look like. Initial euphoria from land-based operators about Japan’s potential has waned as the highly restrictive regulatory framework and high taxation base has become clearer.
With the much slimmer margins in the sports betting world and intense competition, regulation will need to satisfy demands to address potential problem gambling concerns without imposing restrictions that place too heavy a drag on investment.
“Clearly, the jury remains out on what future regulation will definitively look like and that’s the bellwether,” said Dave Povey, head of sports book at RPM Gaming.
“However, speaking more generally, applying Covid-related pressure to an economy, both through lost revenue directly from illegal forms of gambling, alongside loss of revenue for professional sports clubs, means the Japanese authorities will have to start thinking about opening up online sports betting more seriously.”
The central league in the Nippon Professional Baseball league saw attendance drop 78 percent in 2020. Given that sales from tickets and related food and beverage make up more than half of the team’s revenue, the impact on club coffers is clear.
Povey suggests there are existing models that could be adopted, such as the Hong Kong Jockey Club with its strong focus on returning to the local community through its philanthropic projects.
“As for a perceived loss of integrity in sports through betting, that would be a majorly misguided concern, especially with a huge illegal market already evident,” Povey said. “After all, rather than outlaw betting and gaming amongst consumers primed to engage, governments should realise that the opportunity to regulate any existing market, benefiting from the ensuing taxation, is a chance not to be dismissed.”
The pluses will always outweigh the negatives if you get a responsible system in place, rather than risk a market turning or reverting to black,” he said.
U.K.’s drone dilemma poses global threat
The use of drones to facilitate inplay betting on the U.K.’s horseracing courses has become a scourge for the industry that could easily spread to other global jurisdictions, regulators warn.
The British Horseracing Authority (BHA) says that the problem is now so widespread in the U.K. that there isn’t a fixture when the drones aren’t present.
The Covid pandemic, which saw spectators banned from the stands, has exacerbated the problem.
“I receive my race day summaries and every single fixture our team are noting one, two, three drone operators operating beyond the boundary of our racecourse trying to gain in-running pictures,” said Brant Dunshea, chief regulatory officer of the BHA.
“The UK is a really unique market,” he said. “I’ve not been made directly aware of it having been made a problem elsewhere, but inevitably in my 30 years in racing administration, where we’ve seen an integrity related threat pop up in one jurisdiction it pretty quickly pops up elsewhere.”
There’s a lot at stake, both for the race courses and for the drone operators. Dunshea said in some cases the drones can provide live footage as much as five to 10 seconds ahead of the terrestrial broadcasts, giving punters a significant edge.
“There was one company that advertised on social media the opportunity to pay a subscription to gain access to the feeds,” he said. “It was at an address in London.”
As well as selling to individual punters, local U.K. media have reported that the drone operators are also selling the feeds to major online betting platforms.
For the race courses, the practice jeopardizes their lucrative broadcast rights, a key source of income.
“The racecourses own the rights to the footage and it’s a serious issue for them. It’s a classic case of how regulations are racing to keep up with technology,” Dunshea said.
Still, it’s a tricky legal question. Drones have been in use legally in British racing since 2015, when they streamed pictures from Royal Ascot. Operators need permission from the BHA and be operating in accordance with Civil Aviation Guidelines. The horse racing body has a set of stringent guidelines that must be adhered to and a formal agreement must be in place.
However, those drone operators streaming from land adjacent to the tracks and not impinging on the territory are not technically illegal as long as they comply with CAA guidelines.
“We don’t have regulatory oversight of those operators,” Dunshea said. “We can work with the Racecourse Association, the course and law enforcement to try to best manage the situation.”
At the Grand National this year, one of the most popular dates in the U.K. horse racing calendar, authorities did have some success. The BHA’s integrity staff worked with local police to arrest three individuals operating a drone offsite.
An employee of drone operator FoxFly was also arrested in Ireland earlier this year, when police judged he had breached lockdown regulations.
The company told Ireland’s Sunday World that it planned to fight the case on the grounds that the employee was providing digital content for public use, which fell under the Covid lockdown exemptions.
The company owner, named as Mick McCool, told the newspaper that Foxfly’s drone operators are fully licensed, that they comply with all relevant regulations covering the use of drones by observing the races in non-built up areas located up to a mile away.
For horseracing authorities, the proliferation of unregulated activity is a key integrity issue.
“The risk is obviously beyond just our shores,” says Dunshea. “We know that people wishing to wager on our product can do so through grey market operators, or those who are operating outside of the regulatory framework. As an integrity threat it’s a broad one and has no boundaries.”
Dave Povey, head of sportsbook for RPM Gaming, agrees that there are no upsides from the use of drones.
“I can only see negatives here – there’s very little upside to the regular viewer / punter in terms of bird’s eye view on events, so it’s more a fad that could fade really. However, there are significant integrity issues around sporting organisations and syndicates using drones for their own benefit and stealing a march on operators.”
Esports continue to race ahead, with Asia a key focus
Esports continue to record strong growth and while the mobile sector is gaining momentum in terms of number of viewers, it’s still the more traditional forms that dominate when it comes to betting revenue.
By Harold Purbrick*
Once a relatively niche part of the video gaming industry, professional esports has grown significantly in recent years. With a total audience number of over 500 million, esports has moved beyond its humble beginnings and is now mainstream entertainment.
Unsurprisingly, betting on esports has also grown in parallel with viewers, and is an increasingly important product in the gambling business. Most estimates place total esports betting revenue in 2020 at around $10-15 billion, which is set to continue to grow in the future as esports fans in Asia participate in betting.
The growth of esports betting shows no sign of slowing down, boosted during the COVID-19 pandemic as betting on traditional sports was impacted and consumers switched to the less interrupted esports. A 2CV survey suggests that the pandemic has shifted some gamblers away from traditional sports, noting that nearly a third of those who had bet on esports only started doing so recently and a significant number of regular gamblers who had never bet on esports before said that they would consider doing so in future.
The UK Gambling Commission published a survey in 2020 suggesting that esports betting is growing quickly, especially among young men. The survey showed that nearly 10 percent of all adults in the UK have bet on esports, and that more than a third of men aged 18 to 24 had done so.
A 2017 report from the UK Gambling Commission estimated that 58 percent of esports bettors were men, while 42 percent were women. The same report also noted that women were more likely to bet using ‘in-game items’ rather than money, suggesting that they are active gamers as they utilise virtual skins for betting. This may indicate that in Asia, where the gender gap in gambling is noticeably wider, more women may bet on esports in the future.
The most popular esports titles today (and by extension the most bet on), are Counterstrike: Global Offensive (CS:GO), League of Legends, Dota 2, and Valorant. These games are competitive and team-based, typically revolving around strategy in addition to individual skill. Competitive games tend to attract a large player-base, a requirement for any successful esport game, as viewership is strongly tied to player participation. For example, Dota 2’s tournament prize pools are comparatively high, reaching upwards of $40 million for their largest events, and are funded primarily through the purchase of in-game items by players.
The same is true for esports betting, especially given the prevalence of using virtual skins as wagers, suggesting that esports betting is especially popular among those who play the games themselves. Bettors who don’t play esports games are unlikely to have access to the virtual items. This is especially true for CS:GO, as the game has similar betting revenues to League of Legends despite having a smaller player-base, likely due to the success of its virtual economy.
Esports viewership depends on the game, but major tournaments regularly attract viewers in the millions. League of Legends, with a player-base of around 115 million monthly active users, had an estimated 100 million total viewers during 2019 World Championships, demonstrating that player engagement in esports is extremely high. The same tournament also reached a peak of 44 million concurrent viewers, according to figures released by the game developers. Previous estimates of peak viewership for the tournament were just 4 million, but did not include Chinese viewers, suggesting that China could make up as much as 90 percent of League of Legends viewership. League of Legends is particularly popular in Asia – three of the last four world championships have been held in Asian countries, and the 2021 championship is set to be held in multiple cities across China.
Though the games mentioned above have dominated the esports scene, a new area of the market is emerging in the form of mobile esports. A number of mobile esports held events with prize pools comparable to most major esports tournaments, such as the Peacekeeper Elite 2021 Season 1 Playoffs’ $2 million prize pool. Mobile esports also have high viewership figures, among the largest in the entire industry. The 2021 Free Fire World Series reached a peak of 5.4 million concurrent viewers, making it one of the most highly-viewed esports events ever.
Unlike traditional esports titles, mobile esports are also largely Asia-centric. The Free Fire mobile game World Series was hosted in Singapore. The Peacekeeper Elite mobile game events are held exclusively in China. At one point, Indian players may have made up as much as half of the Player Unknown’s Battlegrounds mobile game’s 60 million daily active users.
Mobile esports betting may grow to match that of the currently dominant esports within the next few years. However, impressive viewership figures and prize pools of mobile esports does not necessarily translate to betting revenue. A significant portion of the viewers are likely to be under-18 as mobile games are oriented more towards younger audiences.
Even with its relatively rapid growth, esports betting remains illegal in many countries. Esports betting is explicitly allowed by regulators in a limited number of countries, including the UK, Australia, and some parts of the EU (Spain, Malta). Certain states in the US have also regulated esports betting, especially Nevada. However, esports betting remains illegal in much of Asia, despite the region being a major part of the esports playing scene.
There is commercial interest in expanding the esports industry in countries such as Singapore and Japan, but little indication has been given that esports betting will be regulated in these areas in the near future. Despite this, it is evident that esports’ popularity is growing in Asia, and the already substantial illegal betting market in Asia is likely to grow even larger.
* Harold Purbrick of Purbrick & Associates, a risk management consulting firm that specializes in geopolitical risk as well as sports integrity.
