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Q2 REVIEW

July-Sept 2017

• JULY-SEPT 2017 • ISSUE 30

G A M I N G

I N T E L L I G E N C E

Q U A R T E R L Y

A GAMING INTELLIGENCE PUBLICATION

DRIVING CHANGE IN SPORTS BETTING Innovations helping the vertical evolve and the platforms powering industry growth

Exclusive interviews with DoubleU Games, Amelco, Playtech, OpenBet, SBTech and more


CONTACT US AT SALES@NETENT.COM


CONTENTS

LEADER Q2 REVIEW

ANALYSIS & OPINION 4 Snapshot Top stories, top quotes, top deals and deal of the quarter 6 Thought leadership Scientific Games, SBTech and NetRefer 12 People Sportradar’s new MD of betting and gaming Warren Murphy on his new role 14 Social gaming intelligence DoubleDown’s new owner reveals growth plans 18 Lottery Lottovate goes international; Camelot launches strategic review, 500.com acquisition spree and more 22 Technology & new products GVC relaunches Party Casino; Betgenius snaps up Codere contract and more 24 Legal & regulatory Australia’s TV ad ban; A new twist in the German regulatory saga; World regulatory briefing 28 Marketing The boom in betting sponsorship of sport 30 Games The quarter’s new games releases

FEATURES 32 Innovation in sports betting The innovative new products and services that are driving change across the sports betting sector 44 Sportsbook platform focus A look at the industry’s leading sports betting platform providers, featuring OpenBet, SBTech, Playtech BGT Sports and Amelco

FINANCE – Q1 2017 59 The GIQ 20 Nordic operators continue to lead the way with another strong performance in the first quarter of the year

AND ANOTHER THING… 70 Steve Donoghue discusses the future of the UK’s retail betting sector

Robin Harrison

E D I TO R

CHANGE IS POSSIBLE N THE SURFACE it appears as though sports betting has changed little over the years. Look closely, however, and it becomes clear that there is a flurry of activity that is slowly but surely helping the vertical evolve. Established and emerging operators and suppliers are developing new ways for customers to place bets, and new sports to bet on. In recent years new features such as Cash Out and Goals Galore coupons have shown that there is room for growth and innovation in sports betting, and it is clear that these are not isolated instances. As we show on page 32, there is a wave of incremental innovation going on, with companies looking to add value to what is already available to customers, rather than totally overhauling sportsbook offerings. Over these pages we provide a run-down of what we believe will have the biggest impact on the sector in the coming years. What becomes apparent is that the old guard still has a role to play. It’s not a case of new companies pushing the established operators aside to take charge of the industry. This is no more apparent in

O

EDITOR IN CHIEF Bobby Mamudi bmm@gamingintelligence.com

DEPUTY EDITOR Kio Dawson k.dawson@gamingintelligence.com

ADVERTISING & SUBSCRIPTIONS Omer Uziely omer@gamingintelligence.com

EDITOR Robin Harrison rhm@gamingintelligence.com

FEATURES WRITER Steve Hoare sah@gamingintelligence.com

www.GamingIntelligence.com

SUB-EDITOR Camilla Cary-Elwes info@thecopyeditor.co.uk

CONTRIBUTORS Steve Donoughue, Caroline Parry

ART EDITOR Alan Bingle alan@forty6design.com

GIQ Q2 REVIEW

Published by Gaming Intelligence Services Ltd Studio 15, Riverside Building 55 Trinity Buoy Wharf London E14 0FP support@gamingintelligence.com T. +44 (0)845 052 3816

our examination of the leading sportsbook platform providers on page 44. OpenBet remains at the pinnacle of the industry, but there are now a number of clear challengers emerging. What is interesting is where the competition is coming from. Playtech, having made numerous attempts to make a splash in sports betting, now finally believes that Playtech BGT Sports will be its golden ticket. SBTech has used emerging markets to prove out its technology and is starting to reap the rewards.

It’s not a case of new companies pushing established operators aside to take charge of the industry Finally we have Amelco. Speaking exclusively to Gaming Intelligence, the supplier’s CEO Damian Walton and CTO Kilian Heneghan explain why a trading specialist has quietly set itself up as one of the most well-regarded suppliers in the space. This has been a fun issue to put together, and one that we hope will provide a valuable resource for companies keen to find out what lies ahead in sports betting. rhm@gamingintelligence.com

GamingIntelligence, Gaming Intelligence Quarterly and GIQ are trademarks of Gaming Intelligence Services Limited. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, or stored in a retrieval system of any nature without prior written permission. Application for permission must be made in writing to the publisher. Copyright © 2017 Gaming Intelligence. All rights reserved.

3


GIQ Q2 2017

Snapshot most popular news stories on GamingIntelligence.com Aspire Global eyes accelerated growth with Stockholm IPO Lottoland acquires 7% stake in Jumbo Interactive AGTech enters lottery scratchcard market with Chinese logistics group SF Express Paddy Power first to launch Onionsack’s Facebook betting chatbot Paddy Power Betfair moves into DFS market with Draft acquisition Financial difficulties behind PKR shut-down Betsafe partners inaugural Star Sixes football tournament William Hill restructures senior team in line with new objectives Amaya makes final $47.5m payment to former PokerStars owners Kenya’s Sportpesa enters Tanzania betting market

Quote of the Quarter

The amended State Treaty is dead Lawyer Wulf Hambach on the latest twist in Germany’s regulatory saga (see page 25)

4

Brand new Stars AMAYA CHIEF EXECUTIVE officer Rafi Ashkenazi has been busy overhauling the company since taking the reins from David Baazov a year ago. He has put the finishing touches to a new management team, with the recruitment of Robin Chhabra from William Hill as chief business development officer and former Scientific Games executive Jerry Bowskill as chief technology officer. In addition to the recruitment of a crack team of executives, Ashkenazi will rebrand Amaya as The Stars Group as it enters a new era without the stigma of Baazov, who became embroiled in an insider trading scandal. “I felt that we had to reinvent ourselves, to a certain extent,” Ashkenazi told Gaming Intelligence in his first major interview since becoming chief executive. Amaya was an organisation driven by M&A. Pre-Amaya, the Scheinbergs’ Rational Group was an organisation driven by its love of poker. Ashkenazi wants The Stars Group to become “The world’s favourite iGaming destination”. He wants to marry the M&A nous with the product passion exhibited by the Scheinbergs. Last year, a merger attempt with William Hill was shot down. Ashkenazi was a big cheerleader for the transaction: “There was a lot of noise, and primarily negative noise. If we restarted the process now, we have a far better reputation and a far better understanding and appreciation from the financial community.” Together with Chhabra, he will now look at strategic transactions such as the Wil-

liam Hill deal or smaller tactical acquisitions. “It would primarily be a vehicle for increasing sportsbook revenue and acquisition generally through sportsbook.” Ashkenazi sees the sportsbook as a huge opportunity for The Stars Group. Compared to the astounding growth of the Stars casino, BetStars has been a slow-burner thus far. “We have made several mistakes,” admits Ashkenazi.“We need to get the product right. We are Stars. We should always have the best products out there. Everything we release we should be proud of.” “We did not have any type of mission,” he says of the Amaya period. The company was very focussed on opening in more and more regulated markets and cross selling from poker to sportsbook. But, as Ashkenazi says: “You cannot cross sell a sub-optimal product.” There is a buzz around PokerStars again. The wheeler-dealer, bleed the cash cow dry years of Amaya are over. “One of the key mantras I am driving is: one company, one team, one goal,” states Ashkenazi. When he transferred from Rational Group to Amaya Group HQ in Montreal, he realised that there was a ‘virtual wall’ blocking communication between Canada and the Isle of Man. “One of my goals was to take these walls down and create one team out of the two entities, which is operating in a cohesive manner.” Amaya is dead. Long live The Stars Group. *This is an edited version of an interview that first appeared online. For the full story, go to GamingIntelligence.com


GIQ Q2 2017

Get the latest news from our website

GamingIntelligence.com

GVC strikes deal to take bwin brand into Russia GVC HOLDINGS HAS struck what could prove to be a groundbreaking deal with Russian online media giant Rambler Media Group. The new partnership will see the companies collaborate on the launch of a locally licensed, bwinbranded sportsbook in the country. This will see bwin become one of the first international gaming brands to launch in the regulated Russian market. The deal has been struck between Digital Betting, a sports betting business owned by Rambler chairman Alexander Mamut, a billionaire lawyer, banker and investor. Rambler is one of the country’s biggest web portals. GVC will supply its technology platform, support services and sports betting product to Digital Betting, which will operate the service via its online gaming licence in the country. The new bwin.ru site is expected to launch for desktop and mobile devices later this year. With Rambler’s assets, including web search,

email, news aggregation and eCommerce services as well as media sites, GVC believes it will establish itself as the market leader when live. “We are delighted to be partnering with one of Russia’s leading online media organisations,” GVC chief operating officer Shay Segev said. “We believe the combination of the bwin brand, GVC’s cutting edge technology and Rambler’s marketing expertise will provide a compelling offering for Russian punters.” “We are pleased to be offering the internationally admired bwin OF THE sports betting brand QUARTER and product in Russia,” Digital Betting CEO Dmitry Sergeev (pictured) added. “We believe this partnership has great potential to capture significant market share in Russia when it launches later this year.”

DEAL

THE QUARTER’S DEALS IN 60 SECONDS Catena Media has continued its M&A drive with deals for sportsbook affiliate Online Media (UK) and casino-focused Newcasinos.com. The UK-focused Online Media was snapped up in a deal worth up to £17.4m, and Catena may pay out up to €11.9m for Newcasinos.com. Lottery reseller Jumbo Interactive welcomed two new stakeholders in Q2, with Lottoland acquiring a seven per cent stake in the company, and Australia’s Tatts Group snapping up a 15 per cent holding. Lottoland paid AUD$7.6m for its stake, while Tatts paid $15.7m. Paddy Power Betfair has acquired earlystage mobile daily fantasy operator Draft for an initial consideration of USD$19m. It may pay out an additional $29m, depending on the business’ performance over the next four years. GVC Holdings has completed the sale of its payment processing subsidiary Kalixa Group for a €29m cash consideration. Singapore-based financial technology investor Senjõ Group has GIQ Q2 REVIEW

snapped up the business, though its fee may rise to €35.5m depending on accounts adjustment. Tabcorp has confirmed that the Australian Competition Tribunal has granted authorisation for its proposed merger with rival Tatts Group. The authorisation is conditional on Tabcorp divesting Odyssey Gaming Services, its Queensland-based electronic gaming machine monitoring business, which the company has agreed to sell to Australian National Hotels, a subsidiary of hospitality giant Federal Group. Cherry has bought a 25 per cent stake in virtual sports developer Highlight Games. The deal gives Cherry the option to increase its stake to 51 per cent. The operator has also increased its stake in Germany’s Almor Holdings to 82.5 per cent. Finally, Sportech looks set to finalise the sale of its Football Pools business after the private equity buyer OpCapita was awarded a UK Gambling Commission operating licence.

The quarter in numbers FINANCE

US$317.3m

Amaya revenue in first quarter

40%

Ladbrokes online sportsbook growth in Q1

€203m

Sportradar revenue in 2016 M&A

US$825m

DoubleU Games deal to buy IGT’s DoubleDown

2

Acquisitions by 500.com during Q2

€50m

Raised by Catena Media to fund further affiliate acquisitions LEGAL

35%

Tax rate approved by Kenyan government on all gambling

543

Total licences issued to date by Malta Gaming Authority

£300,000

BGO fined for misleading advertising by UKGC LOTTERY

-9%

Decline in UK National Lottery sales in 2016/17 5


S P O N S O RE D E D I TO RI A L ONE VOICE

Getting real: revolutionising player insight Scientific Games aims to revolutionise the way operators gather player intelligence with its new community-based market research solution, ONE Voice IMAGINE HAVING UNLIMITED, real-time access to players and non-players. Now, envision the benefits of 360-degree communication between these consumers and your marketing and product innovation teams. And finally, think about the countless, actionable insights you can glean from their conversations in order to develop better, more engaging games for lotteries and casinos. Welcome to ONE Voice, a new market research online community (MROC) created by Scientific Games, offering a community of engaged consumers who are ready and willing to share their feedback. This online platform was developed to gather input and feedback from participants on a wide range of gaming topics and behaviours. It’s key to the company’s innovation when it comes to market research, and here’s why: l Researchers can engage with consumers l Consumers can engage with researchers l Consumers can engage with other consumers “ONE Voice is an advanced way of conducting research because it offers us three ways to learn from engaged consumers. With traditional research, it’s usually just one way, with researchers engaging with panelists,” explains Ambika Jack, director of Consumer Insights and Global Research for Scientific Games.

360-degree dialogues “These 360-degree, one-on-one interactions are very meaningful. Of course we are naturally interested in getting feedback from those who currently play lottery, casino and/or mobile games, but we are also hoping to get a better 6

understanding of non-players,” says Jack. “By interacting directly with non-players, we can learn what new products might be developed to appeal to their interests and it helps us grow playership for our customers.” Jack points out that the gaming industry has a long history of knowing who their players are, and having a deep understanding of their

“ONE Voice is an advanced way of conducting research because it offers us three ways to learn from engaged consumers. These 360-degree, oneon-one interactions are very meaningful” Ambika Jack, Scientific Games.

gaming preferences. The Consumer Insights team at Scientific Games wanted to leverage the experience of their gaming colleagues when they created ONE Voice. “We use these learnings on a continuous basis to improve and refine first drafts of our games,” says Jack.

More on MROCs Companies from a broad range of industries, including consumer packaged goods, fast food restaurants, beauty care, automotive and eCommerce have embraced MROCs to gather insights and co-create with their customers. These online communities continually help organisations address problems and provide solutions to their consumer base. For example, luxury online shopping company Gilt Groupe engaged with their MROC to address a common challenge facing eCommerce solutions – shipping costs. Kraft Foods turned to one of their MROCs, The Consumer Channel, to gain consumer insight on health and wellness. Through meaningful dialogues, Kraft learned their consumers preferred to think in terms of portion control and snacks, rather than diet foods. Kraft then successfully launched its 100-calorie packs, and credits MROC members for the feedback that led to this new packaging. The 2016 Greenbook Research Industry Trends report revealed that mobile surveys and MROCs are quickly becoming one of the most used forms of market research among companies. The interest and adaptation of MROCs to facilitate two-way customer discussions has increased by more than 40 percent since 2011. MROCs enable companies to deepen their customer insights and their customer relations. For the lottery and gaming industry, this type of interactive platform helps answer the


S P O N S O RE D E D I TO RI A L ONE VOICE

An engaged community

age-old question, “How do we develop games that attract new players; specifically younger generations of players?” It helps to accelerate and innovate games and technology that align with consumer preferences, aiding in customers’ sales performance. “With MROCs like ONE Voice, consumer feedback is sought and given in real time, just like the digital, on-demand world we live in today,” explains Jack. Players can access and provide feedback to the ONE Voice community using any type of device, such as a computer, tablet or smartphone via a password-protected responsive site. Players can also share video content as well as provide their feedback as picture messages.

Segmenting players by motivation ONE Voice was created to execute on ONE, the industry’s first cross-jurisdictional, motivationbased player segmentation study of lottery and gaming players. Scientific Games conducted the study in 2014, segmenting lottery and gaming consumers by motivation – what drives them to play – rather than demographics. Segmentation research is used to define meaningful customer differences that affect how they buy, what they buy and how much they spend. “When we segmented our players by motivation, we discovered that each segment included players of both genders, all ages and ethnicities. From this, we learned that success more GIQ Q2 REVIEW

often comes from products developed based on consumers’ motivations and needs, regardless of their age,” shares Jack. From the company’s research, Scientific Games learned there is a high degree of crossover in lottery and gaming channels. Regardless of the type of game players preferred, the players’ core motivations remained the same. Key findings from the ONE study include: l 50 per cent of instant game players play slots

To build its real community of more than 2,000 consumers, Scientific Games worked with different market research vendors to identify and invite them to participate in ONE Voice. Once they are participating, they can also extend online invitations to their friends. ONE Voice is structured to enable 360-degree feedback, so Scientific Games and lotteries are able to let members know how the input they provide is guiding decision making. “Our panelists get excited when they see the feedback they’re giving us is being applied to the games we’re launching. It gives them a voice and empowers them,” continues Jack. Participants are engaged in various ways to participate in the ongoing research and share their feedback, including polls, member discussions, moderator-led discussions, surveys and more. Dialogue among players on the platform is encouraged. As ONE Voice members participate in various activities and socialise with each other, Scientific Games uses the platform’s back-end reports to monitor their participation, segment groups and incentives. “The goal with ONE Voice is to obtain a holistic representation of the market that we can communicate with – grounded in our ONE Segmentation Study. This way, we can track participation to ensure that we’re hearing from the right proportion of players and nonplayers,” says Jack. “We also monitor participants’ incentives because we have to keep them engaged. Without their participation, we don’t have a panel community.”

l 75 per cent of slots players play draw games

Past, present and future

l 74 per cent of slots players play instant games

Since its inception in 1997, Scientific Games’ Consumer Insights team has worked on more than 1,800 research projects, utilising a broad range of methodologies and employing an exciting array of research tools. The team analyses demographics and psychographics from different regions and cultures all over the world, and can evaluate global performance trends from game launch through the entire life-cycle. As Scientific Games continues to roll out ONE Voice throughout the US, state lotteries and gaming customers can opt to have their own ONE Voice community. The company plans to introduce the platform globally. As ONE Voice continues to grow, Scientific Games envisions it will become an integral part of its lottery and gaming customers’ market research efforts for on-demand, real-time insights. Because real counts. n

ONE Voice was then created to open a dialogue with players who represent the different segmentations. Scientific Games uses the platform to refine and tweak games and concepts they want to bring to lotteries to ensure a more engaging game experience. Lottery and gaming organisations can use this MROC to better understand their consumers and have a real-time pulse on their market. They can choose to geographically segment their ONE Voice community, or engage with the larger community. “We’ve built a community large enough to offer quantitative insights but we’ve structured it as an online platform that enables us and our customers to gain rich and valuable qualitative insights directly from our consumer panelists,” says Jack.

7


Record Breaking Performance and Scale

Find out more at:

www.openbet.com/performance

AN NYX GAMING GROUP COMPANY


S P O N S O RE D E D I TO RI A L SBTECH

The future is now for personalisation SBTech head of online Gregory Karaolis explains why personalisation is now a vital component of online marketing for iGaming operators

GIQ Q2 REVIEW

ANYONE WHO SPENDS even a short amount of time online these days simply cannot ignore the ubiquity of personalised offers and promotions. Whether idly flicking through Facebook on a phone or reading news sites on a laptop, potential customers are continuously exposed to ads and information that appears to have been specifically tailored for them. This is all a result of the increasing pervasiveness of big data throughout the commercial world. As companies and organisations continue to collect information on nearly every online move people make, they can create bespoke content on an individual customer basis. When it comes to the use of data analysis in online marketing, the iGaming industry has arguably led the way. A near-obsessive focus on player activity and preferences has ensured that online sports betting and casino operators have built up a massive bank of information on their customer bases. This information can – and should – be used to create targeted marketing campaigns that enhance the overall user experience. Fortunately, recent surveys have shown that a large percentage of web users are not only aware of the way companies use data to target them, but have begun to accept and expect it. Essentially, customers often appreciate being given the option to buy items or read content that’s similar to their previous choices. Personalisation is no longer a trend – it’s a prerequisite for effective online marketing throughout the player life-cycle. When used correctly, big data can transform the user journey, boost player value and increase engagement and activity. It can be used both to drive better segmentation and as a predictive tool – two core elements of any effective campaign. Segmentation has always been a vital component of online marketing. Since the late 1990s, iGaming operators have constructed campaigns targeting different groups, such as lapsed players, non-depositors and high rollers. However, the increase in

available data and technological advances for leveraging it have enabled operators to build tighter segments and create offers and promotions specifically for each of them. Operators can also collect vast amounts of data on player activity, which can then be used to predict the offers and promotions each customer will be interested in receiving in the future. This is significant when it comes to localised sports betting offers, such as price boosts for specific teams offered to fans in the appropriate catchment areas. Predictive analysis can be used to offer players opportunities to bet on games or teams they have bet on before, at the same time of day they usually bet. For example, if a player won money betting on Liverpool vs Everton earlier in the season, they could be in the market for a promotional offer to bet on a return fixture. The added value is that this kind of marketing generates even more data, which can then be analysed to create tighter segmentation and more personalised offers. Personalisation also applies to the communication methods used to target players. If a player is seen to be more responsive when contacted via SMS than by email, it’s clearly better to concentrate on using text messages to offer further promotions. The rise of omnichannel has added to the importance of personalisation, especially when it comes to cross-channel marketing. The use of GPS and geo-location for delivering push messages is another tool that can be used to target players effectively, such as by offering an online customer a specific promotion when they come within 100 metres of a retail location. Of course, it’s important to avoid being overly intrusive – nobody wants to feel like Big Brother is constantly watching. However, when used carefully, personalisation is one of the most important elements in attracting customers and retaining their loyalty in the face of stiff competition. n

9


F IPNA S O NNC S OERE D E D I TO RI A L GIQ20 Q3 2012 NETREFER

The importance of gamification Success depends on effectively motivating players by managing and measuring all manner of loyalty incentives and gamification initiatives. This, in turn, drives overall engagement, growth and profitability, NetRefer explains

GAMIFICATION MAY PROVE to be the solution to one of the industry’s most enduring problems: how can operators keep their customer base loyal? Gamification is the concept of introducing and applying traits commonly found in games (such as point scoring, competition between users and missions), to other areas in order to keep users engaged, as well as to drive and reward desired behaviour. This element of game-play, applied to other areas of activity, has been shown to increase customer retention and develop engagement between the brand and the player. Rather than offering players simple loyalty points or benefits for playing the operator’s games, companies are nowadays incorporating social engagement within their platforms, and giving them full visibility of the costs of their campaigns. To reward customers for playing their games, or playing them in certain ways, operators can offer gifts, tangible and otherwise. These include status symbols such as progressing through levels, or even useful gifts that can be traded in via a virtual shop. A lot of companies have embedded some sort of gamification within their products. This could be sign-up bonuses, referral bonuses or gamified campaigns to increase conversion rates. These are a good first step, but are generally limited. In many cases they are simply tacked on temporarily, with no concern for the collection of performance data and the effect it has on player retention and encouragement. Gamification motivates players to continue playing. While simple gamification generates above average conversion rates, one must stay ahead. The main motivation to gamble is to win money. But what if there was something else that could motivate people to continue playing which isn’t technically monetary? Gamification is directly associated with motivation. Triggers are used to keep the player engaged. These triggers boost 10

NetRefer’s Unified Performance Marketing team

motivation and encourage the customer to keep playing. It is all about the customer’s satisfaction. The more goals, objectives and social ranking a player achieves, the more they are motivated to continue playing. The real test, from a psychological point of view, is to create a customer journey beforehand, with every stage in the customer’s purchasing behaviour considered. After all, gamification will only work if it motivates the customer in the long-term. If done correctly, and configured appropriately, gamification can significantly increase lifetime value (LTV) with a low cost per acquisition (CPA), higher customer engagement, better brand recognition, optimum return on investment and keep customers happy. By basing the system on a rules engine, considerable power has been placed in the hands of the operator. Systems can be configured to meet any business need, using a myriad of features. The operator has the power to choose how they reward their customers. Leader boards, badges, points and

online currencies are all ingredients for a proper gamification engine within an operator’s platform. The trick behind this is to know how to use them. The application of these tools to increase customer LTV must be tailored to the core values of the brand. Certain attributes and processes must be built to scale and integrated to give the customer the best experience possible. Auditing practices within the software is useful, to reflect upon past player activity and understand how to cater for specific segments on a more effective level. This gives the ability to observe their LTVs, costs and accumulation of milestones within the system. The operator can then set up and fully customise the rules which govern the loyalty programme, and to meet their exact needs. n


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13 Stars Group, Camelot and more

If it ain’t broke… During his job-hunt networking he came across Swedish private equity house EQT, which has a stake in Sportradar. EQT introduced Murphy to Sportradar founder and chief executive officer Carsten Koerl. They hit it off and Murphy eventually joined as managing director of the betting and gaming division.

C O LU M N Steve Hoare

Following a year off, former Sporting Index chief executive Warren Murphy is back in the saddle as Sportradar’s new managing director for betting and gaming WARREN MURPHY HAS every right to be down in the dumps. Following a year off spent travelling around California with his family and enjoying every minute of the Tour de France, Murphy was all set to start a new job at Sportradar. However, one last holiday before the new job started was a holiday too far when Murphy smashed his leg skiing in such a way that he now needs a steel structure to support it and won’t be able to walk unaided for months. This injury understandably delayed his start at Sportradar for a couple of months. We speak a couple of weeks into his new job. While Murphy is still hobbling around and getting to know his new colleagues, his enthusiasm for his new surroundings is unmistakable. “Sportradar is a hypergrowth company,” he says. “It is growing at a rate of knots in terms of the number of people, the number of partners and its performance.” T he company has g row n from 9 8 0 employees at the end of 2014 to 1,690 staff at the end of 2016. During the same period, revenue shot up 123 per cent from €91m to €203m, with EBITDA rising 118 per cent from €28m to €61m. This growth rate has continued into 2017 to date. 12

A big data future

“When I came in I could not believe the scale of its offer and the number of companies that it provides services to,” Murphy says. For the record, it has more than 600 betting and gaming clients, including over 30 state lotteries, in over 80 countries, across five continents. These include the likes of bet365, William Hill, SBOBET, Ladbrokes, Tipico, Intralot, 188Bet, BetClic and Paddy Power.

Coming back Murphy had not really been looking at getting back into the industry. After giving his all to Sporting Index, ushering it through a sale from HG Capital to Touchbet and Pinnacle Sports owner Magnus Hedman, he was tired. He gave it a year post-sale to see if he could reignite his enthusiasm but when he could not he passed the reins to Simon Trim. And so started the year off. After recharging his batteries he looked at other private equity-owned businesses that might get the juices flowing. “I like the culture of private equity-owned businesses. Everything is about growth. They are very focussed on numbers and are obviously very financially-driven. The pace is fast and if you do a good job you get rewarded financially.”

Murphy takes charge of a team of around 300 staff, which forms the company’s core business alongside the integrity, rights holder solutions and digital services teams. Murphy’s team includes the virtual sports division; provision of pre-game fixtures and data, live odds and live data; and managed trading services. But if betting and gaming is where Sportradar has made its name, the vision for the company’s growth goes much further. The company has offices in 33 countries around the world. In the US, for example, it has a sports data business selling live data to media companies, which is growing at a fierce rate. “The company has what it calls a ‘data lake’, which brings together all the data it has,” explains Murphy. “It has an enormous amount of sports data. Underlying the business is this data and it is very sophisticated in its use of the latest analytical techniques, artificial intelligence and machine learning.” Of course, data underpins every digital business, but Murphy says most businesses are only scratching the surface of what is possible. “Carsten is an unbelievably driven visionary,” says Murphy. “I just see myself as a foot soldier delivering his vision.” Murphy sees his role as refining something that is already working successfully. Due to the injury, he has been unable to fly but once his leg heals he will be travelling from the UK to Uruguay and from Miami to Manila, as the company spreads its tentacles around the globe. Welcome back Warren. n


P EO P L E Q2 MOVES

BOWSKILL AND CHHABRA JOIN STARS

IN THE NEWS

A maya CEO Ra f i Ashkenazi has been building his management team ahead of the Rafi Ashkenazi rebrand to the The Stars CEO, The Stars Group Group. Former William Hill executive Robin Chhabra joins as business development director, with GTS founder Jerry Bowskill brought in as CTO. Both are impressive signings. Chhabra will be tasked with finding a partner to merge with or smaller bolt-on acquisitions to bolster the company’s sportsbook. It will be Bowskill’s job to unify Stars’ growing verticals.

PLAYTECH TO BOOST SPORTS

Gaming executives who have been making headlines and what’s in their inbox

Playtech believes that its new Playtech BGT Sports division will finally allow it to become as dominant in the betting vertical as John Pettit it is in casino. managing director, Playtech The division’s CEO BGT Sports and BGT founder Armin Sageder has appointed John Pettit as managing director. Pettit previously worked for Ladbrokes and Gala Coral before joining BGT in 2015. His new role will see him tasked with packaging the supplier’s online and retail sports betting assets into a comprehensive omnichannel solution. See page 45 for more.

NISSIM DEPARTS NEKTAN On the one hand, it does not look good when your chief executive departs after less than a year in the job, as Leigh Nissim has done with Nektan. On the other, the Nektan board can be thankful for the good work Nissim has put in, which has stabilised the business to some extent. Nissim has apparently been made an offer he couldn’t refuse, so it would be churlish if there were any sour grapes. Unsurprisingly though, the company’s share price fell upon announcement but as a relatively small listed business it does not take much to move the dial. The European business is trading well and has more than doubled in size in the past year. It could Leigh Nissim now do with a period of stability former CEO, but this is not a bad job for the Nektan next CEO. GIQ Q3 REVIEW

Andy Duncan former CEO, Camelot

CAMELOT CEO STEPS DOWN The departure of chief executive Andy Duncan was inevitable after a year when the UK national lottery operator was fined £3m for misleading advertising and saw its sales decline an unprecedented nine per cent during FY 2016. Chairman Jo Taylor did not quite cut a disconsolate figure as she announced the results but her acceptance of a further sales decline in 2017 was alarming. Duncan made efforts to move Camelot into the digital world but the lottery operator faces competition from the likes of Lottoland, which can offer its punters riches that dwarf even National Lottery jackpots. Despite the challenges, this looks like a plum job for an experienced and canny operator.

COINGAMING TRIES TO TAKE BITCOIN MAINSTREAM The Bitcoin revolution remains an intriguing proposition and there are Richard Walsh signs it could yet take off. managing director, CoinGaming Bitcoin gaming operator CoinGaming is a case in point. The Estonia-based company has just convinced experienced William Hill executive Richard Walsh to join as managing director. Walsh is CoinGaming’s third major hire from the real-money gaming sector. He joins Christopher Uren, another former William Hill executive, and former Betclic Everest casino and games director Dominic Bourke. Luring such hires suggests the operator and its new recruits are confident they can make a splash. 13


THE BIGGEST SOCIAL CASINO NEWS OF THE QUARTER ON THE FOLLOWING PAGE

26 Zynga, GAN, PokerStars and more

DoubleU Games becomes latest Asian power player in social casino C O LU M N Robin Harrison

South Korea’s DoubleU Games has taken charge of one of social casino’s most iconic brands through its acquisition of DoubleDown Interactive. CFO Won YongJoon speaks to Gaming Intelligence about the deal WITH ITS $825M acquisition of DoubleDown Interactive, DoubleU Games has leapt up to become social casino’s second largest operator. This is far from another example of a small, well-funded business snapping up market share through a reverse takeover of a larger competitor, however. DoubleU posted revenue of KRW421bn (€334.3m) in 2016, up 23.8 per cent, with net income soaring 255.4 per cent to KRW321bn. For a business established just five years ago this growth is impressive. “Since we started DoubleU Casino in 2012 we have been targeting the US, European and Oceania markets,” DoubleU finance chief Won Yong-Joon says. “Even though we are an Asiabased company, English-language markets have been our focus – 70 per cent of our revenue comes from North America.” A fter so many bemoaned a lack of growth opportunities in social casino, DoubleU has shown that the right company 14

can still make significant gains. Its deal to acquire DoubleDown, and an accompanying content licensing deal with IGT, puts it into a different stratosphere. Combined with its existing business, it will have a 10 per cent share of the global social casino market, behind only Playtika. Yet reaction to the deal has been relatively muted. Social casino is no longer the next big thing, as it was back in 2012 when IGT’s $500m acquisition of DoubleDown sparked a flurry of industry M&A. In 2016, DoubleDown even saw revenue decline, falling 12 per cent to $279m. Then again, DoubleU is one of the companies that has been eating DoubleDown’s lunch in recent years by snapping up US market share. Few are better-placed to return it to growth. Won is confident that DoubleU will be able to turn things around: “I think there are a lot of things we can improve,” he says. “DoubleU is growing fast, at a rate much higher than the market standard, and we have excellent social casino management strengths. “DoubleDown has good IP and a good user database, while DoubleU is skilled with technology, using big data processing and server architecture. We both have some real management know-how for social casino,” he continues. “Each party has some strong points, and we will combine these strengths.” DoubleU’s technology is key to this overhaul. It will be used to power DoubleDown, while free-to-play variants of IGT’s slots will be rolled out via the companies’ new licensing agreement. New apps based on earlier iterations of the DoubleDown product, such as DoubleDown Casino Classic, are also set to go live. Perhaps the most intriguing project Won reveals is a plan to bring DoubleU and DoubleDown into the Asian market: “The mobile gaming market in Asia is the world’s

Won Yong-Joon, CFO, DoubleU Games

largest, and the real-money casino market is much larger than Las Vegas,” he explains. “We know that there must be social casino players there, so the market does have high potential. We have been preparing to launch our titles in Asian markets, especially Singapore, Hong Kong and Taiwan. This will happen later in 2017.” Despite DoubleU’s local market knowledge Won argues that the DoubleDown deal has in fact facilitated its entry to Asian territories. “IGT is the top slot machine manufacturer, and they sell their machines to Asian casinos,” he says. “Many Asian customers will be familiar with IGT’s games, which we think will offer high scope for growth.” He believes that DoubleU’s local know-how, combined with DoubleDown’s already-familiar content, there is a “real chance” for social casino growth in Asia. It’s one thing to be at the forefront of a wave of social M&A in the region, but if the $825m deal finally kicks off meaningful uptake among players, that purchase price is going to soon be seen as a pittance. n


Scientific Games snaps up Bingo Showdown developer SCIENTIFIC GAMES HAS strengthened its social casino offering with the acquisition of Tennessee-based studio Spicerack Media. Founded in 2007, Spicerack Media has grown in prominence thanks to its flagship tournament-based title Bingo Showdown, one of the most popular social bingo titles of 2016 which has seen consistent quarter-on-quarter growth since its launch. The studio has also created a number of social titles such as Slots Tower, Tourney Slots and Bingo Shootout, with its games available across Facebook, Amazon, the Apple App Store and Google Play. SG Interactive chief executive Barry Cottle said he was excited to welcome Spicerack’s team to the company. “The acquisition will be immediately accretive and provide additional momentum in the mobile gaming space, as we look to exceed players’ expectations of exciting and engaging gaming entertainment experiences,” Cottle explained. The deal strengthens Scientific Games’ thriving social casino business and is expected to have an immediate effect on earnings and cash flow.

GIQ Q2 REVIEW

Plumbee Plumbee co-founder and CEO Raf Keustermans has left the company after six years. Keustermans founded the Mirrorball Slots developer alongside CTO Jodi Moran and chief product officer Gerald Tan, and has stepped down to pursue new opportunities. He is the last Plumbee founder to leave, after Moran and Tan departed in February 2016. That month Plumbee was acquired by GSN Games for an undisclosed amount.

Zynga

Spicerack Media’s Bingo Showdown

Zynga revenue climbed four per cent to $193.4m in Q1, driven by mobile growth and the strong performance of Zynga Poker. Total revenue was ahead of the company’s previous guidance by $9.3m, driven by the mobile channel which hit record highs in revenue and bookings during the quarter, up 19 per cent and 27 per cent respectively. Zynga Poker mobile revenue was up 63 per cent year-on-year, with mobile bookings climbing 76 per cent. Average mobile DAU rose 78 per cent.

KamaGames “We are excited to bring our product portfolio into a company with the reputation of Scientific Games,” Spicerack co-founder Davy Campano added. “[Its] interactive business has seen rapid growth over a sustained period of time, and we are proud to be joining such a successful part of the company.”

PokerStars launches Jackpot Poker on Steam platform POKERSTARS CONTINUES TO expand the reach of its Jackpot Poker social product, with the title now live on Valve Corporation’s Steam online gaming platform. The roll-out of Jackpot Poker for Steam marks the first time the app has been made available for desktop play, having previously been launched for iOS, Android, Amazon Fire TV and the Asia-facing Playphone.

IN BRIEF

“We are so pleased that players will now be able to experience and enjoy what Jackpot Poker has to offer via their desktops,” said PokerStars director of social gaming Lloyd Melnick. “Having the game on Steam allows us to reach a whole new audience who will enjoy playing the game just as much as our mobile players.”

Social casino developer KamaGames has expanded the range of games available via its flagship Pokerist Texas poker offering, adding the Omaha poker variant to the app. Omaha joins Texas hold’em, blackjack, roulette and baccarat on Pokerist, with all games accessible through a central lobby.

Greentube Minnesota-based Treasure Island Resort & Casino has gone live with a Greentube-powered social casino offering under an agreement signed by the pair last year. The Prairie Island Indian Community-owned venue becomes one of the first Minnesota casinos to go live with a free-to-play gaming offering, launching under the playTIcasino brand.

GAN GAN has rolled out its free-to-play gaming solution for Oklahoma-based tribal operator Chickasaw Nation. It has launched a Simulated Gaming website and supporting mobile apps for Chickasaw’s WinStar World Casino and Resort. The supplier has also rolled out a new custom slot game based on Las Vegas’ iconic Stratosphere Casino, Hotel & Tower for long-term partner ACEP.

15


F I NA NC E GIQ20 Q3 2012

ZEAL looks to give back with Lottovate expansion drive C O LU M N LOTTERY

Kio Dawson

ZEAL Network’s international strategy is gathering pace this year through its Lottovate subsidiary, and will see new charitable lottery games rolled out in Norway and the Netherlands. Lottovate director Peter-Paul de Goeij gives us some background THE NORWEGIAN DEAL sees Lottovate act as a full-service provider for UNICEF Norway, with a significant portion of the proceeds providing funding for global UNICEF initiatives. It is the first big test for Lottovate before it launches as a full-scale lottery operator in the Netherlands during the third quarter. “This is the first in its kind for Lottovate, as we have built the UNICEF-lotteriet game ourselves from scratch,” says de Goeij proudly. The game had its first draw on 9 June and is themed around UNICEF’s various international projects. “It uses UNICEF’s name and trademark and they are, quite rightfully, very careful with that,” says de Goeij. “Also, the marketing must be completely in line with UNICEF Norway’s core beliefs and guidelines.” While Norway may be Lottovate’s first real B2B deal, Lottovate’s Spanish sister company Ventura24 has been providing online marketing solutions to the Spanish state-owned charitable lottery ONCE since 2013. “The partnership with ONCE is a proof of concept really,” 18

explains de Goeij. “We always suspected that our online expertise for lotteries would be valuable to existing lotteries and charities in a B2B/B2G set up, and the ongoing success of the ONCE project proves we were right.” Lottovate was launched as ZEAL’s B2B division back in 2014 and while it has taken the company a few years to get to this point, it is entering two established multi-billion-euro markets and has a significant opportunity to break new ground in the B2G sector. De Goeij has been heavily involved in both licence applications, which he admits took a lot of time and effort. The Norwegian approval came after the country recently amended its gaming regulations to award five private lottery licences, although only two have been issued so far. Things were even more complicated in the Netherlands, where Lottovate was forced to take regulator Kansspelautoriteit (KSA) to court after being refused licensure in early 2015. The KSA had refused to issue any licence until 2017 at the earliest, but accepted the court ruling and granted its approval late last year.

Going Dutch The launch in the Netherlands will be another landmark for the company. It is the first ‘real’ lottery licence for Lottovate (and indeed ZEAL) and will see the operator compete directly against the incumbent lotteries, including the state-owned Nederlandse Loterij, Novamedia’s BankGiro Loterij, Vrienden Loterij and the Nationale Postcode Loterij. It is the first new permanent lottery operator licence awarded by the Dutch government since 1989. “In the Netherlands, there is a general requirement to contribute at least 50 per cent of stakes to charities – but the lottery licence is issued to Lottovate, and not to a charity or an incumbent lottery operator. That is a first for us,” says de Goeij.

The expansion of Lottovate into the Dutch lottery market means that lottery players will benefit from more competitive offers, innovation, choice and, above all, more money for charities and sports. “It is good news for everyone really,” says de Goeij. As with Norway, Lottovate will focus on a new type of mobile lottery game, which is being developed following extensive interviews and ideas testing with over 900 Dutch players in the 21-35 age bracket. “What we have done is, as far as I can tell, completely new for the lottery industry,” says de Goeij. Lottovate is yet to officially name the game, but it has already agreed partnerships with three well-known Dutch charities – The Royal Dutch Guide Dog Foundation, the Netherlands CliniClowns Foundation, and the Dutch Ronald McDonald Children’s Fund. Players have the choice of which charity will receive the proceeds of their lottery ticket. It is an exciting time for Lottovate and the charities that it supports. n


YEARS IN A ROW

Scientific Games has been internationally recognized as “Lottery Supplier of the Year” for three consecutive years at ICE Totally Gaming Recognition is always nice. Being recognized three years in row? That’s downright humbling. We were honored to be named “Lottery Supplier of the Year” for the third straight year at 2017 ICE Totally Gaming. The awards summary said it best: "No other company rivals Scientific Games in the lottery supplier space. On the interactive side of things, it has put blue space between itself and the likes of IGT and Intralot. For the third year in a row Scientific Games is the clear winner." Exciting stuff. And further affirmation that the work we do on behalf of our customers – and the results we help them achieve – are real.

Because Real Counts © 2017 Scientific Games Corporation. All Rights Reserved.


500.COM ACQUIRES STAKE IN MELCOLOT AND MULTILOTTO

BIG LOTTERY STORIES The Q2 lottery lowdown

Chinese lottery provider 500.com is targeting new revenue streams as its core online lottery business is hampered by the Chinese government’s ongoing suspension of online lottery sales. The company has acquired a 40.7 per cent stake in rival supplier MelcoLot, and a majority stake in lottery betting operator Multilotto for a combined €87m. This adds to last year’s purchase of a controlling stake in social poker developer

Qufan Internet Technology. MelcoLot manufactures point-of-sale lottery terminals, and distributes scratchcards for the Chinese Sports and Welfare Lotteries. 500.com acquired the stake at the end of May for HK$322.2m (€37.1m). This followed a €50m deal to acquire a 93 per cent stake in Malta-based The Multi Group, owner of Multilotto, which allows players to bet on the outcomes of 11 of the world’s largest lotteries through its proprietary platform.

MOBILE LOTTERY TRIAL CONCLUDES IN CHINA

LOTTOGOPHER COMPLETES TORONTO IPO

There was further good news for 500.com and other operators as the Chinese government concluded a two-year trial of mobile lottery sales in the province of Jiangsu. The pilot programme was first implemented in May 2015 alongside the national suspension of online sales by resellers. Since then the government has authorised a number of other provincial mobile sales trials. China’s Ministry of Finance said that the strict implementation of regulations governing the pilot programme resulted in a smooth and standardised process which identified no significant risk associated with the use of mobile phones as a sales channel. The ministry has now ordered Jiangsu province to terminate the trial and report its findings to government. The findings will then be used to “further improve” the mobile lottery sales channel.

Lottery messenger service LottoGopher began trading on the Toronto Stock Exchange during the second quarter and is now focused on growing its business in the US through a partnership with Lottoland. LottoGopher.com operates an online platform which allows lottery players in California to legally order tickets for the official Powerball, MegaMillions and SuperLotto Plus lottery games. As a messenger service, the site is fully compliant with the US Unlawful Internet Gambling Enforcement Act. The site does not take any portion of winnings, with its revenue model based exclusively on monthly and annual membership plans, where players can order and manage their state lottery tickets online using a debit or credit card. LottoGopher then purchases these tickets from an authorised lottery vendor and provides safe storage until the draw. The company intends to expand its operations to up to 22 of the 44 US states that currently offer lottery games.

CAMELOT TO REVIEW NATIONAL LOTTERY STRATEGY

LOTTOLAND SIGNS FIRST B2B DEAL

Camelot will conduct an in-depth review of its National Lottery strategy after seeing sales fall by nine per cent to £6.93bn last year. Led by Nigel Railton, CEO of Camelot Global, who took over Camelot’s UK operations following Andy Duncan’s resignation in April, the review will focus on four key business areas to enable the company to return to growth. It will cover Camelot’s commercial plans to boost sales performance, investment in technology and systems, the current business structure, and long-term succession. Despite the year-on-year sales decline, it was the fourth-best sales performance since the National Lottery’s launch in 1994, with sales of draw-based games down 13 per cent to £4.02bn and sales of GameStore games dropping two per cent to £2.90bn. Camelot also warned that it expects sales to further decline this year.

Stockholm-listed gaming operator Kindred Group has entered the lottery betting business in partnership with Lottoland Solutions. The B2B division of Lottoland has deployed its turnkey lottery betting service with Kindred brands Unibet, Maria Casino and Bingo.com, offering players bets on the outcome of some of the world’s leading lottery draws, including Italy’s SuperEnalotto, Spain’s El Gordo, the US-facing Powerball and the OZ Lotto, among others. Lottoland has integrated its fully responsive lottery betting client with Kindred’s platform, enabling the operator’s brands to offer a dedicated lottery betting tab, providing cross-sell and direct customer acquisition opportunities. “Kindred is constantly seeking to innovate and we’re hugely excited to be the first operator to offer Lottoland Solutions’ new turnkey lottery betting B2B service to our players,” said Fredrik Kjell, head of gaming at Kindred.

20


NE W PRODUCTS Q2 LAUNCHES

GVC RELAUNCHES PARTYCASINO GVC has relaunched its PartyCasino brand in a bid to reestablish the site as the world’s largest online casino.

What’s the big idea? The revamped brand and product offering is the result of efforts by a new management team appointed by GVC to overhaul the brand following its acquisition of bwin.party last year. The new team, led by

BIG LAUNCHES

group head of casino brands Jon Salmon, has worked on establishing PartyCasino as a standalone brand, aiming to offer a simple and transparent experience with an emphasis on fun. PartyCasino has been enhanced by multiple content supply deals, most recently with NYX and PariPlay, more transparent promotional offers and shorter account withdrawal times, as well as a focus on customer service.

BETGENIUS SIGNS CODERE DEAL

deal will see Codere use Betgenius’s automated InPlay and PreMatch trading tools across its retail estate and online in mar-

kets such as Spain, Italy and Latin America. These solutions cover all pre-match events, as well as in-play football and tennis trading. Betgenius’s business development director Matt Stephenson said that the partnership was a “great example” of the supplier’s flexible and bespoke service in action.

WATCHANDWAGER LAUNCHES IN NEW YORK STATE

VICTOR CHANDLER RETURNS WITH BET LION

IGT APPROVED FOR MOBILE BETTING IN NEVADA

Webis Holdings has launched its WatchandWager.com advanced deposit wagering business in one of the largest markets in North America after being approved by the New York State Gaming Commission.

Following a three-year hiatus, BetVictor founder Victor Chandler will return to the iGaming industry with the launch of Bet Lion.

International Game Technology (IGT) has received approval to roll out its PlaySpot mobile betting solution in Nevada following a trial with MGM Resorts International.

Five of the quarter’s major product launches and what they mean for those involved

What’s the big idea? WatchandWager now has a licensed presence in two of the largest US states for horse racing by value of wagers placed. Webis estimates that California and New York residents wager over $1bn through ADW operations per annum, representing over 40 per cent of the total US pool betting market. The operator believes that the licences are critical as it continues to focus on the development of its B2C operations. 22

Betgenius has secured a contract to serve as the primary trading solutions provider to Spanish gaming operator Codere.

What’s the big idea? The long-term

What’s the big idea? Bet Lion is a new brand powered by sportsbook supplier FSB Tech, which will focus on the East Africa region. It is scheduled to go live in August this year. The launch sees Chandler return to the sector after leaving the company he founded in May 2014, when Michael Tabor acquired full ownership of BetVictor. He had led the company since 1974 when it was a racecourse owner, and pivoted it into gambling. It was the first operator to move to Gibraltar in 1998.

What’s the big idea? IGT’s PlaySpot solution is powering MGM’s first mobile sports betting offering, with the playMGM app enabling members of the operator’s M life Rewards programme to place sports bets on their mobile devices in the state of Nevada. The launch also marks the first deployment of IGT’s betting technology in the US. The Race & Sports books offer a menu of betting options, available on playMGM, including live in-game wagers as well as prop and future bets.


ON THE FOLLOWING PAGES

26 World Regulatory Briefing

ASK THE LAWYER…

Australian ad ban explained Jamie Nettleton, partner at Addisons Lawyers explains Australia’s new gambling advertising restrictions

Gambling advertising around daytime sports broadcasts will be banned. The Australian government proposes to prohibit all gambling advertisements during live broadcasts, for the period from five minutes before the scheduled start of play to five minutes after the conclusion of play – or to 8.30pm, whichever is earlier. The restriction will apply to live sports programmes broadcast between 5pm and 8.30pm on TV, radio and online services that are aimed at Australian audiences. The existing prohibitions relating to the advertising of live odds during a match will remain in place. The current exemptions allowing gambling advertisements during the broadcast of racing events and the prohibition of lotteries will continue to apply. These exemptions permit the broadcast of live odds and gambling advertisements during horse racing, harness racing and greyhound racing events. The proposed restrictions will extend to prohibit the broadcast of on-screen promotions, sponsorships and updated odds during live sports broadcasts. The restrictions are intended to take effect from March 2018.

This proposal is seen as a compromise for all relevant parties. The minister for communications and the arts, Mitch Fifield, has considered the interests of various stakeholders to propose reforms that satisfy industry participants. The gambling industry, media industry and general public agree that the current extent of gambling advertisements is excessive, and that restrictions on the broadcast of these adverts along the lines proposed will be beneficial to consumers. 24

While there may be some reluctance about gambling advertisements in sports broadcasts continuing after 8.30pm, the ramifications of a total ban would cause detrimental effects to the commerciality of the media and gambling sectors. It is clear that the Australian government’s proposal provides a compromise to address public concerns about the ease of access to gambling advertisements for children, as well as a measure to ensure that the commerciality of both the media and the legal gambling sectors is upheld.

revealed to incorporate the 8.30pm moratorium, the sporting bodies have not expressed any further concerns.

Further changes to the proposals may be on their way.

While the restrictions on gambling advertisements form part of the Australian government’s broader Media Reform Package – which includes changes to restrictions on the ownership and control of media companies, broadcasting licensing There is no specific fees, the anti-siphoning scheme and the source of media content guidance given – and will be legislated, they are It was sporting bodies, not the bookmakers, that at this stage to unlikely to be introduced by statdetermine how resisted initially. ute. This makes it more likely that the changes will be introduced. Corporate bookmakers are the proposed The Australian government supportive of the Austral- restrictions will be has been in consultation with ian government’s propos- implemented for the media industry to determine als. However, the AF L , online services the process for implementing the NRL and Cricket Australia restrictions. Traditional media were concerned that the platforms with established codes of practice are reforms would ban gambling advertiseexpected to implement the restrictions through ments completely, which would affect sales the normal process to amend those codes. of broadcasting rights. However, sporting bodHowever, the position with respect to online ies are aware of public concern around gammedia platforms is not clear. There is no spebling advertisements. cific guidance given at this stage to determine While many pushed for gambling advertishow the proposed restrictions will be impleing to be permitted throughout the course of a mented for online services. It is expected sporting game, the AFL was the leading advothat the Australian government will consult cate for a commercial and sensible approach. further with the industry to discuss options By asking for the restriction to be implemented for the implementation of restrictions on gamonly until 8.30pm, the AFL wanted gambling bling advertising in respect of online services advertisements to be treated in a manner conand will seek to give effect to those restrictions sistent with other forms of content. Once the as soon as practicable. n final form of the government’s proposal was


Schleswig-Holstein throws German gambling plans into chaos again Having broken away from the 2012 State Treaty before falling back into line, Schleswig-Holstein has once again rebelled. This time, however, it may finally force a total overhaul of German gambling regulations THE UNHAPPY VICTORY secured by the ratification of the amended State Treaty on Gambling proved to be short-lived. Once again, Schleswig-Holstein has decided to go it alone, rejecting the Treaty in favour of its own liberalised regulatory model. In 2012 its previous rebellion was ended by a change in government. In 2017 the rebellion has been facilitated by a similar change. The state’s ruling coalition, made up of the Social Democratic Party, Greens and South Schleswig Voters’ Association, has been ousted in favour of a new coalition comprising the Christian Democratic Union, Greens and Free Democratic Party. This so-called ‘Jamaica coalition’ (the three parties’ colours reflect those on the Jamaican flag) has finally put together a working coalition agreement, published on 16 June. A key pledge is to reject the amended State Treaty on Gambling. Instead it will look to build a new European Commission-approved framework similar to the state’s existing regime, which permits online sports betting, casino and poker. More worryingly for supporters of the State Treaty, Schleswig-Holstein claims to have the support of Hesse, Nordrhein-Westfalen and Rheinland-Pfalz. This is a major problem for GIQ Q2 REVIEW

the federal government, as the amended State Treaty requires the support of all 16 states to come into force. It appears now to only have the support of 12. It is also not the first problem for the ill-fated State Treaty. After all, the Treaty is only just coming into force as the planned term of the legislation comes to an end. And according to sources at the European Commission, the amended Treaty is also expected to fail to comply with European law. This means that if the legislation becomes effective as planned on 1 January 2018, the EC could immediately launch infringement proceedings against Germany. “The amended State Treaty is dead,” Wulf Hambach of law firm Hambach & Hambach says. “What Schleswig-Holstein is doing is backed by decisions of the EC and German courts.

“The lotteries in northern Germany are already facing competition in an open market, and I am yet to hear any negative comments about this situation. The so-called increased competition simply has not harmed them” Wulf Hambach, Hambach & Hambach

“Schleswig-Holstein was brave enough to step out and say that if German regulations are not compliant with EU law, why wait to change?” Industry association the Deutsche Sportwettenverband (DSWV) has also argued that the move by Schleswig-Holstein shows that an overhaul of the legislation is long overdue. “After the failure of the amendment, it is time to redesign the Treaty,” DSWV chair Mathias Dahms says. “We need high-quality, marketcompliant sports betting regulation in Germany. This is the only way to ensure that consumer and youth protection is guaranteed.” Once again the powerful Deutscher Lottound Totoblock (DLTB) will be expected to provide stiff opposition to calls for change. The state lottery association believes that any change to the Treaty will be harmful to its members. However, Hambach believes that the state lotteries will not prove to be major opponents this time around. “The lotteries in northern Germany are already facing competition in an open market, and I am yet to hear any negative comments about this situation,” he says. “The socalled increased competition simply has not harmed them.” In short, the arguments pushed by the DLTB about the danger of competition from private operators will be dismissed as without merit, he says. There has been much talk of a breakthrough in German gambling legislation over the years, and no actual progress. This time is different. The amended State Treaty was seen as no more than a stopgap by the industry. It has failed to even fulfil this basic function, and may now be rejected by a quarter of German states. The states have spoken, and the liberalisation of the German gambling market may finally get underway. n 25


L EG A L

Q2 REGULATION HIGHLIGHTS

US Introduced MAINE LD 1320: Exempts fantasy sports from gambling laws and introduces an annual registration fee of 10 per cent of revenue up to $5,000. Referred to Committee on Veterans and Legal Affairs. MISSOURI HB 502: Lowers the tax rate for fantasy sports from 11 per cent to six per cent, and sets licence fees from $1,000 to $5,000. The bill has passed the House and is before the Senate. TEXAS HB 1457: Legalises fantasy sports contests and introduces consumer protections. Does not set fees or taxes. Reported favourably out of committee. NORTH CAROLINA S 589: Introduced as companion bill to H 279 to legalise fantasy sports and impose registration fee of 10 per cent of annual gross gaming revenue, capped at $10,000. Referred to Commerce and Insurance Committee. NORTH CAROLINA H 750:  An act to establish the North Carolina Gaming Commission and authorise the regulation of video lottery terminals and fantasy sports contests. Introduced and referred to House Judiciary IV Committee. NEW HAMPSHIRE HB 580: Regulates fantasy sports contests and sets annual registration fee at $5,000 or 10 per cent of gross fantasy revenue from the previous year. Imposes a tax of five per cent of annual gross revenue. Set for Conference Committee. ALABAMA HB 354: Exempts daily fantasy sports from gambling laws and imposes tax rate of six per cent of gross revenue with a registration fee of between $5,000 and $85,000. Passed by the House.  PENNSYLVANIA HB 519: Amends Pennsylvania Consolidated Statutes to authorise sports betting subject to prior federal approval. Introduced and passed the House Gaming Oversight Committee. PENNSYLVANIA HB 865: To legalise fantasy sports and introduce licence fee of 7.5 per cent of gross revenue, capped at $50,000, and tax rate of 12 per cent of gross revenue. Introduced and passed the House Gaming Oversight Committee. PENNSYLVANIA HB 271: Authorises iGaming, daily fantasy sports, iLottery, slots in liquor establishments, skill and hybrid slots, and tablet gaming at airports, among other measures. Amended and passed by the House. Referred to Senate Rules and Executive Nominations Committee.  

26

GERMANY MICHIGAN HB 4529: Allows parlay sports betting and authorises the Michigan Gaming Control Board to develop a system to allow parlay bets on lottery terminals. Introduced and referred to Committee on Regulatory Reform. MICHIGAN HB 4611: Authorises advance deposit wagering. Passed by the House and the Senate Committee on Agriculture. MICHIGAN HB 4743: Authorises fantasy sports with licensing fees set at the lesser of $5,000 or 10 percent of gross revenue. Referred To Committee on Regulatory Reform. NEW YORK  SB 3898: Defines certain forms of poker as games of skill and authorises internet poker. Amended in the Senate to include a ‘bad actor’ clause and passed. Referred to Assembly Racing and Wagering Committee. OHIO SB 153 / HB 132: Grants the Ohio Casino Control Commission the authority to regulate fantasy contests and to exempt fantasy contests from gambling laws. Imposes licence fee of $10,000 a year. Passed the House and referred to Senate Finance Committee. NEW JERSEY AB 3532/SB 1927: Provides for the regulation of fantasy sports activities in New Jersey. Imposes annual registration and renewal fee in an amount equal to 9.25 per cent of daily fantasy sports gross revenue. Passed by the Assembly. Senate counterpart reported from Committee with amendments and passed. ILLINOIS HB 479: Creates the Fantasy Sports Contest Act and authorises iGaming. Passed by the Senate and referred to the House for final vote.

Schleswig-Holstein has rebelled against the amended State Treaty on Gambling, pledging to set up its own EU-compliant regulatory framework. This all but kills the State Treaty in its current sportsbook-only form (see page 25). The state’s coalition government claims to have the support of Hesse, Nordrhein-Westfalen and Rheinland-Pfalz for these plans. Meanwhile, Hesse’s attempt to offer operators a way to legally enter the country’s online betting market has been halted by a court ruling.

BELGIUM Belgian Justice Minister Koen Geens aims to ban the broadcast of gambling adverts on TV before 8pm, and block any ads being shown during live sporting events. Geens’ proposal is supported by the Belgian Gaming Commission.

ARGENTINA Enacted WESTVIRGINIA HB 3106: Raises the number of video lottery terminals (VLT) at approved VLT locations from five to seven. ARKANSAS HB 2250: Fantasy sports regulations signed into law by Governor Asa Hutchinson. Imposes eight per cent tax on gross gaming revenue. MARYLAND SB 438 / HB 813: Prohibits the sale of lottery tickets over the internet. Unanimously approved by House and Senate, and signed into law by Governor Larry Hogan. NEVADA SB 240: Officially legalises betting on eSports. Signed into law by Governor Brian Sandoval. VERMONT SB 136: Authorises daily fantasy sports contests and sets registration fee of $5,000. Signed into law by Governor Phil Scott.

Argentinean state-regulated iGaming site Misionbet.com.ar has reassured players about the security of their deposits after the site was taken offline on 31 May. The closure is described as temporary by El Instituto Provincial de Lotería y Casinos Sociedad del Estado (IPLyC), though it remains offline at the time of writing.

SOUTH AFRICA South Africa has begun confiscating players’ winnings from unlicensed gambling sites in a new move to enforce a crackdown on illegal operators. Approximately ZAR1.25m (€87,400) has already been seized, with such funds being seen as the proceeds of crime, and therefore the property of the state.


L EG A L

Q2 REGULATION HIGHLIGHTS

UK The UK Gambling Commission (UKGC) has hit operator BGO Entertainment with a £300,000 fine for misleading advertising. The fine is the first financial penalty imposed by the UKGC over advertising failings, with BGO found guilty of misleading advertising on its own and its affiliates’ websites. The regulator has also begun an investigation to assess whether measures taken by 888

POLAND comply with the social responsibility requirements set out in its licensing conditions. UK online bookmakers will also find themselves required to contribute to the country’s racing industry after the introduction of the new Horseracing Betting Levy. All bookies, land-based and online, must pay 10 per cent of their profits from UK customers on horseracing back to the equine industry.

Poland’s gaming regulator has published its first blacklist of unlicensed online gaming websites, with bet-at-home.com and Marathonbet.com among the most prominent brands to be added to the list. The list comprises 43 websites in total from 28 operators, with a number of Curaçao licensees having more than one domain banned.

WORLD REGULATORY UPDATE Gaming Intelligence outlines the latest legal developments from around the globe

CHINA

AUSTRALIA

China may soon widely allow mobile lottery sales after a two-year field trial in Jiangsu ended with the government concluding that the channel proved no risk to consumers or the lottery sector. The Chinese Ministry of Finance said the implementation of regulations governing the pilot programme resulted in a smooth and standardised process which identified no significant risk associated with the use of mobile phones as a sales channel (see page 20 for more information).

The Australian government has introduced a package of media reforms that ban gambling companies from advertising around televised sporting events before 8.30pm. The new measures comprise a ban on ads being shown during any sporting event broadcast between 5am and 8.30pm, as well as five minutes before or after coverage begins. (See Ask the Lawyer on page 24 for more).

GIQ Q2 REVIEW

THE PHILIPPINES A new class of online sports betting licence has been introduced, covering betting on sports regulated by foreign governing bodies. The new licence regulates offshore gaming operators that offer odds on “regulated gaming events” – those that are supervised by a governing body – and also offer live event audio or video feeds alongside odds.

GO TO GAMINGINTELLIGENCE.COM FOR THE FULL STORY 27


F I NA NC E GIQ20 Q3 2012

How to get ahead in advertising C O LU M N MARKETING

Caroline Parry

Gaming sponsorship has grown into a key source of revenue for sporting bodies; no more so than in football. But how has this market developed and can it can continue in its present form?

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WHEN LONDON FOOTBALL club Fulham became the first team to sign a shirt deal with a betting brand in 2002, few could have predicted the impact it would have on the sports sponsorship market. The following years have seen new gaming operators caught up in a desperate battle for market share. Sponsorship is considered a fast and effective way to grow brand awareness, and it is a strategy that operators have grabbed with both hands. Little has changed since those early days, however, in terms of the deals signed. Headlinenaming rights for events or stadia, shirt deals and TV idents are still the norm, though official betting partner status is a relatively new addition to the mix. “Sponsorship drives brand awareness very quickly and in direct correlation to the amount of money you spend,” M&C Saatchi Entertainment and Sport director of sport Neil Hopkins says. Gaming companies’ limited activation makes operators ‘unsophisticated’ sponsors in Hopkins’ eyes. With huge overseas TV audiences for the English Premier League, where there is a glut of such deals, there is no sign of the demand abating. More overseas operators, such as Africa’s SportPesa and Asia’s Dafabet, are now tapping into the market. “Sponsorship has become a key battleground for betting and gaming operators,” says Carsten Thode, chief strategy officer at sponsorship agency Synergy. “It is a huge channel for betting companies. Meanwhile, betting brands have become way more important to the rights holders.”

State control In European markets with state-owned operators, such as Sweden’s Svenska Spel and Norway’s Norsk Tipping, spend tends to be more even across sports. Svenska Spel only sponsors sports federations and, while that includes football, it also covers hockey, handball and floorball. It does not sponsor individuals or teams. Sponsorship manager Nicklas Biverståhl explains the overall aim of its strategy is to strengthen its image and business. It hopes to support and develop sport over the long term, ensuring there is an attractive product to bet on. “The purpose of Svenska Spel’s sponsorship is to engage our customers in the long term by developing Swedish sport at all levels and thus creating unique conditions for our business. Through our sponsorship of sports we also show our strong commitment to society.” Norwegian national lottery Norsk Tipping is heavily involved in football, including a sponsorship of the Norwegian Football Federation and some commercial deals with clubs. As with Svenska Spel, the money generated is invested back into sports. Pål Enger, spokesman for Norsk Tipping, explains: “Our sponsorship strategies require that the [deals] focus both on the commercial communications and on the communication of our beneficiary role.”

Pouring rights For private operators the aim of their sponsorship strategies is to build brand awareness and grow market share first and foremost. In the UK, betting and gaming operators now sponsor half of the teams in the English Premier League – that’s 10 out of 20. “The only way these brands can differentiate themselves


is so far ahead in terms of TV audience that it is still something that sponsors will pay a premium for. The knock-on effect is that the rest of the market is soft.” The net effect of that, adds Hopkins, is that there are some major sponsorship properties out there that have yet to find partners. He points to the Rugby Six Nations. “We thought it would go very quickly,” he admits. “But as far as I know a deal is still yet to be signed.” It’s just not as attractive to partners as football.

A new approach

is through their marketing,” says Thode. “That is why their presence at the act of the bet is key, as it makes them front of mind. Being front of mind at the moment of truth is just about being the last thing that the bettor saw. That’s why football shirt sponsorships work so well.” Partnership deals are akin to ‘pouring rights’ – where beer brands pay to be the exclusive drink at an event, adds Thode. He admits the outcome is the same, however. “It is either being front of mind from a brand perspective and the other from a location perspective. Both are about winning at the moment.” Meanwhile, betting and gaming operators’ thirst for football deals is impacting on

“Sponsorship has become a key battleground for betting and gaming operators. It is a huge channel for betting companies” Carsten Thode, Synergy

GIQ Q2 REVIEW

both the football sector and the wider sports market. In football itself, operators have driven up the value of sponsorship of the Premier League’s smaller teams. Thode explains: “Betting companies very much understand the value of sponsorships and are willing to pay more than many. “What they have done is increase the value of the smaller football teams as they are willing to pay more for the second-tier teams. Meanwhile, the increased competition from the entrance of overseas operators is pushing that competition even further.” Kenyan operator SportPesa is reported to have paid £3m for a three-year shirt deal with Hull City, signed last season, and is thought to be paying around £10m a year for its five-year deal with Everton. Meanwhile, in the English Football League Championship, 888Sport sponsored four teams last season – Birmingham City, Nottingham Forest, Brentford and Preston North End – in a bid to get cut-through away from the crowded Premier League. This is also impacting on the rest of the sponsorship market, adds Hopkins. “Football

Over the long term, changing viewing habits are also expected to have an impact on sponsorship. The proliferation of official and unofficial sources for highlight clips as well as digital streaming means there has been a decline in viewing figures. According to the Broadcasters Audience Research Board (BARB), the body that compiles viewing figures, average viewership for Sky’s live coverage of the Premier League was down by 14 per cent last season. While Hopkins does not believe this will hit overseas viewing figures any time soon, he says it should prompt rights holders to take a different approach to their sponsorship strategies. Manchester United’s portfolio approach, which raised more than £158m last season, is a pioneering model. “Manchester United has been ridiculed for having an official sponsor for everything, but I think the challenge is for other teams and sports to mimic that approach. For betting and gaming companies, I think the answer lies in a focused approach enabled by technology that allows different brands to target different markets.” Norsk Tipping’s Enger also believes the future of sponsorship deals lies in tailor-made content. “More exclusive content adapted for social media, bigger events with product focus and more one-to-one communication with customers to promote brands and build value.” While paying big bucks to get into sports has certainly paid off for the betting operators to date, that strategy is unlikely to continue working over the long-term. The fragmentation of viewing, if nothing else, will require better strategic thinking and a lot more creativity in the future. n 29


G A M ES

Q2 RELEASES

The quarter’s biggest game releases

New games that caught GIQ’s eye in Q2

NYX/NEXTGEN GAMING – SHANGRI LA “The legendary and harmonious valley of Shangri La is beckoning,” proclaims NextGen Gaming’s 15-line, five-reel slot. “Shangri La is dedicated to the passion of the trailblazer and the exotic creature-companies that come to life in our dreams...” says NextGen. “For those that seek adventure, no matter the cost, and can picture a paradise beyond our wildest imagination.”

PLAYTECH – GOD OF STORMS

NETENT – HANSEL AND GRETEL

The five-reel, 25-line progressive jackpot transports players back to Ancient Greece and is the eighth title to go live in the supplier’s popular Age of the God series of games. “The global success of our Age of the Gods suite across our many international licensees and their players has been incredible, adding a dynamic dimension to our extensive casino offering of more than 600 cutting-edge and classic, tried and tested, best-performing titles,” says Playtech casino director James Frendo. “Our latest addition, bursting with unique features and bonuses, is certain to take the gaming world by storm.”

Hansel and Gretel is a five-reel, three-row video slot which takes players into the deepest, darkest woods. It is the second slot title from its FairyTale Legends trilogy following the launch of Red Riding Hood last October. “The latest chapter in our FairyTale Legends series is another thoroughly enchanting one. With its engaging features and breathtaking design, the game demonstrates NetEnt’s creative capabilities at their best,” says NetEnt chief product officer Simon Hammon. “Hansel and Gretel is a fantastic follow-up to Red Riding Hood and we look forward to continuing the story later in the year.”

MICROGAMING – BEAUTIFUL BONES

PLAY’N GO – VIKING RUNECRAFT

BETSOFT GAMING – THE SLOTFATHER: PART II

This is a five-reel, 243-ways-to-win Day of the Dead-inspired slot featuring vibrant and elaborately decorated reels. “Beautiful Bones is a stunning game that combines a bold and colourful theme with a topnotch game engine, where players earn bonuses and then have the freedom to choose their free spins rewards,” says David Reynolds, games publisher at Microgaming.

The supplier’s first ever 7x7 grid slot takes players on an epic journey among the Norse Gods and immerses players in ancient mythology. “We continue to offer the latest in gaming technology with our first ever 7x7 grid slot, and this addition will cement our position as one of the most creative and innovative gaming suppliers in the industry,” says Play’n GO CEO Johan Törnqvist.

Betsoft has released the long-awaited sequel to its popular title The Slotfather. “By making the most of the strength of HTML5, we have come ever closer to representing our true vision for our games,” says Betsoft’s head of product development Stephen Jackman. “The detailed animation in The Slotfather: Part II is immaculate. It represents the very best of Betsoft, and we are proud to offer this sequel.”

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SCIENTIFIC GAMES – SPACE INVADERS This is the supplier’s first landbased slot to feature a skill-based component. Modelled on the classic arcade game, it is a sixreel, 60-line slot game that also features Space Invaders Bonus. “Space Invaders is a classic arcade game and a childhood favourite for many who grew up in the era of video games. We are thrilled to bring it to casino slot game play,” says Derik Mooberry, group chief executive of gaming for Scientific Games.


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PUSHING THE BOUNDARIES The innovation driving the evolution of sports betting By Robin Harrison. Additional reporting by Bobby Mamudi ANY SPORTS CONFERENCE you attend, the talk is all about innovation in sports betting, or the lack thereof. One executive recently suggested that the sports betting industry is awaiting its Tesla moment – a completely new way of doing exactly the same thing. As groundbreaking as Tesla was for the automotive industry, it was not the launch of its electric car that changed that sector as much as the knock-on effect it had. Telsa encouraged the rest of the industry to jump on the bandwagon

GIQ Q2 REVIEW

with a drive to make the new technology affordable and practical for any consumer to own such a vehicle. It made companies that had previously dismissed electric car technology reinvest. Some argue that mobile betting was the industry’s Tesla moment, with what has followed being described as incremental innovation. These include innovations such as the Goals Galore! Coupon or Cash Out, which have been very successful, without fundamentally changing the way people bet. What these innovations do not

necessarily do is make betting available to a wider audience – for many it remains a complex process. But there are examples within the gaming industry of companies pushing the boundaries, finding ways to open up the market to a new customer base. These companies are trying to position themselves for the future of the industry. On the following pages we look at what is being done, and what can be done, to help sports betting operators push their business into the future. n

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F E AT U R E INNOVATION

Bet personalisation

Time to get personal THE SPORTS BETTING industry has long taken an ‘all you can eat’ approach towards betting markets. Customers can bet on just about any sport taking place around the world, either pre-match or in-play. Yet despite the highly competitive nature of the sportsbook supplier space, many sites tend to look and feel the same. And with operators reliant on a small group of data suppliers, betting markets are increasingly homogenised. The sheer range of markets on offer is simply confusing for some players, leading operators to pursue a more personalised approach in which historical data is used to offer players a narrower selection of markets and games based on their preferences. “When it comes to betting there are only markets that have been offered for years, and nothing that aligns with the fantasy space,” Digital Sports Tech executive director Ari Lewski laments. “It is quite limited.” Lewski argues that these limitations are due to operators’ reliance on data providers for the information to offer markets. “They are constantly growing and evolving all the team-based data they offer,” he explains. “Operators are left to do player-focused bets themselves, but have lacked the resources to do so. It’s so manually intensive; they have to get someone to price up each bet, put it on their platform then result it – all manually.” “This does not match the convenient sport event, market selection paradigm, so they no longer fit into the traditional sportsbook platform,” ioSport’s Joe Bryan adds. “They are really more like customised derivative contracts.” Simply put, personalisation is a problem. It requires a lot of manpower. But despite this, the rewards are there for operators prepared to put in the time, as illustrated by Sky Betting and Gaming’s Request a Bet product. The operator’s head of football and sports trading, Andy Wright, is quick to point out that Request a Bet is a “customer-centric product”. “It came from customers, sits nicely in social and really reduces that homogenised 34

market offering which is all based around the correct score grid and who’s going to win,” he says. “A few years ago there was a huge rush to offer as many odds as possible but this puts control back in the customers’ hands. [Now] Request a Bet has changed the way people think about betting.” The product is simple. Players send a tweet to Sky Bet asking for their odds on whatever event they choose. The social media team passes this to its traders who then price it up manually, add it to the site, then pass it on to the social media team to tweet the bet back to the customer. Customer uptake has been rapid. Request a Bet captured customer interest around the 2015 Champions League final, when “around 10 per cent” of total stakes on the match were placed via the service, Wright says. Up-to-date figures may not be available, but the roll-out of services by rival operators William Hill (#YourOdds)

“This puts control back in the customers’ hands. Request a Bet has changed the way people think about betting” Andy Wright, Sky Bet Request A Bet

and Paddy Power (#WhatOddsPaddy) show others are keen to tap into the market. “If customers weren’t interested in the product, competitors wouldn’t bother with it,” Wright notes.

Financial backgrounds Lewski’s company Digital Sports Tech and the emerging supplier ioSport are looking to fill this gap. Digital Sports Tech is building a name for itself through its Player Prop Bets, athlete-focused proposition betting, while ioSport offers bets on markets between the traditional markets of pre-match, in-play and accumulators. Lewski and ioSport founders Joe Bryan and Justin Worrall come from finance backgrounds. Lewski worked in accounting, corporate finance and investment banking, and did a lot of work on pricing, while Bryan and Worrall both worked as derivatives traders for more than a decade. “If you assess what is being done in the finance world with algorithmic trading, there is no reason odds can’t be calculated instantly,” Lewski suggests. “Advances in financial technology are happening so quickly, so why can’t this be adapted and transferred to sports?” Bryan argues that coming from a financial trading background allows ioSport to tackle problems from a different perspective. “ioSport is centred around sports modelling, trading and engineering. These are historically separate disciplines, but we think there is a lot of value to be had in approaching industry problems from this ‘holistic’ perspective,” he says. “It means we can do unusual stuff such as exposing pricing models directly to customers, rather than assuming prices have to be inserted into a database and served up as a fixed menu.”


F E AT U R E

INNOVATION

This has led to both Digital Sports Tech and ioSport developing solutions that take away a large chunk of the manpower required to price up personalised bets.

Player Prop Bets Digital Sports Tech’s Player Prop Bets allows users to pick a player, then choose from a selection of different bet types based around that player’s statistical performance. For example, this could comprise a bet on Tottenham Hotspur’s Harry Kane having six shots on goal in the North London derby against Arsenal. “As much as possible we try to provide flexibility,” Lewski says. “We are not setting headto-head match-ups or over-unders that users have to take – they can build their own.” Users can build their own markets then have these instantly priced, processed and settled by Digital Sports Tech. “The operator really just has to provide the player interface that we put together and bring users to the product. They don’t need to worry about traders pricing or managing risk,” he says. “We have developed our own IP and algorithms and models for pricing, and they are continually evolving. We have been taking bets for a year and the algorithms have evolved significantly for the better. Everything is done instantly without the need to wait for a trader to set it up.” Lewski believes that this helps bridge the gap between real-money betting and fantasy sports, using the data-heavy approach favoured by fantasy competitors, monitoring player performance to determine bets. Digital Sports Tech’s Player Prop Bets are currently live with Ladbrokes, Topbetta and MadBookie in Australia, in Russia with Fonbet and in Mexico with Caliente. The product has also been licensed to Betradar.

Market focus ioSport, meanwhile, moves in a different direction. “Most of the approaches to football modelling you hear about are statistics-based, focused on minutiae recording data, grading shots, then seeing if you can build something which beats the 1x2 or Asian Handicap market,” Worrall explains. “We’re a bit different in that we’re solely market focused; our expertise lies around taking information from incomplete and related markets, and using GIQ Q2 REVIEW

ioSport: tailored approach

that partial information to generate a consistent ‘pricing surface’ in a mathematically sound way. Practically speaking this implies a focus on starting prices – generating low-error estimates of where market prices are likely to settle, before the market has listed. Not that useful if you are trying to beat the market, but very useful if you are trying to build new products.” This allows the supplier to develop what it terms “the long tail of bets” or “exotic” bets. E.g. betting on Chelsea to win the Premier League was relatively dull as the 2016-17 Premier League season progressed. “So what about a bet on how many games before Chelsea lose? The odds on Chelsea winning their next three games or five games?” Bryan suggests. “This is potentially much more interesting, and we can put accurate prices on them all.” Bettors could even create mini-leagues based on a selection of teams’ performances over a number of weeks. “You could have a guy who wants to bet on Crewe accumulating more points that at least two of Liverpool, Barcelona and Bayern over the next three weeks, but lose at least one game in the process,” Bryan continues. “There is only one person in the world who wants this bet – he probably lives in Crewe. Historically there has not been UEFA a cost-effective way to service Champions this request with a price. PassLeague ing every request like this to a trader is simply too expensive

in terms of trader or quant time. But the attraction is obvious – he is relatively margin-insensitive and he is not able to do any price comparison on Oddschecker [as it is a custom bet].” ioSport allows users to change the bet structure as and when they desire. This means the customer can see the change in price as every possible change is made. ioSport is yet to secure its first operator partner, but aims to partner UK companies to develop a market foothold. Digital Sports Tech and ioSport can be seen as pioneers. They are carving out a new market, providing solutions to the sportsbook sector similar to the way games developers provide their products to casino operators. As the labour-intensive Request A Bet product shows, operators must invest heavily to offer these products. But these are products that players want. Personalisation therefore creates a new, incremental revenue stream for operators. Lewski is under no illusions of the challenges ahead: “There is a natural inertia with sportsbooks. It has been standard to take a third-party feed of betting markets, but companies are scared to integrate a product,” he says. “Operators are unwilling to be more openminded with sportsbook products – they are so used to doing it themselves. “We are pioneering the way for third-party sportsbook developers. They are not going to do this themselves internally – the effort to build it alone just wouldn’t make sense. Why not just use a third party?” Bryan agrees. Operators are “hungry” for new revenue streams, but find it hard to innovate given resource constraints. “In many cases they are looking to keep the core business growing and running as best as they can – which leaves tactical partnership opportunities for nimble companies like ourselves.” n 35


F E AT U R E INNOVATION

Future-proofing sports betting

Betting on eSports ESPORTS IS HERE to stay. Research firm Eilers & Krejcik Gaming estimates that the sector had a betting turnover of $7.4bn in 2016, and believes stakes will soar to $23bn by 2020, generating $1.8bn in revenue. In April last year, bwin estimated that its rapid growth meant there would be more bets on League of Legends – one of the most popular eSports titles – than on the winner of the UEFA Champions League. “Feedback from our clients and the rest of the market suggests that eSports is the fastest growing betting category across all measurables,” Betradar head of eSports James Watson says. “In a world where content is king, which often means betting operators simply moving down the hierarchy of the football pyramid to find additional matches, it is not often that a whole new sport arrives for operators to form a betting product around.” Sportsbook operators have long been engaged in an arms race to acquire as large an audience as possible, but they find themselves catering to an ageing pool of players. Video 36

games are often dismissed as something for younger people, but the generation that first got its hands on home consoles is growing up and has not lost interest in these games. “[eSports] directly appeals to a new generation of punters that can fill some glaring gaps,” Watson says. “Ultimately this generation won’t be betting on horse racing or greyhounds, and will instead turn towards what they know and love.” The cost of following a preferred sport is also a factor. Whereas top-flight live football requires an expensive subscription to watch, skewing it towards an older, more affluent audience, eSports coverage is freely available online via platforms such as Twitch.tv. “Let’s just say the average MLB fan is 54 years of age,” says Rahul Sood, CEO of eSportsfocused bookmaker Unirkn. “That means every day an MLB fan dies and a new eSports fan is born. eSports is an entirely new way to reach this next generation of sports fans.” “All indications at this stage suggest that the stereotypical eSports punter doesn’t look

“Feedback from our clients and the rest of the market suggests that eSports is the fastest growing betting category across all measurables” James Watson, Betradar


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F E AT U R E INNOVATION

anything like the stereotypical sports punter,” Watson adds, “They are likely to be younger and less experienced with traditional betting mechanisms, but equally show brand loyalty and rate a good user experience very highly.”

A new approach This may make some operators wary of offering odds on eSports – to make a product successful it will have to appeal to an entirely different customer to those usually targeted. mybet Holdings CEO Markus Peuler admits that his company is certainly interested in entering the vertical, but is wary of doing so without being able to ensure it will appeal to customers. “It has to look like it comes from the industry, as the people and audience are different to our usual consumers,” he explains. “I’d almost think of setting up a separate eSports site, populated with editorial content, providing more insight and content on tournaments and leagues.” He believes that simply offering odds on a traditional bookmakers’ site is not enough. A lot of operators may do that, he says, but Peuler worries that this will be too dull and inaccessible for a younger, tech-savvy audience. “This is why some of the more dedicated eSports platforms have seen the most success in the market to date, since they invest some effort in resonating with this new demographic, rather than just hoping they will come at some stage,” Watson adds. Experience of eSports is crucial, and simply adding odds on contests to a standard betting site is not enough. It is a case of creating an entirely new offering rather than adding to the existing product. “It is about more than just having its own microsite – we believe if you want to have longterm success you have to be a genuine part of the eSports ecosystem,” Sood says. “We don’t just slap up markets on a website. “Unikrn was founded by gamers who also like traditional sports betting. We knew from the start that in order to gain traction in this market we would need to grow with the community. Authenticity is everything, and we treat our customers as fans and evangelists, not just customers.” This has seen the business create Skylla, a grassroots tournament for up-and-coming players to hone their skills. It features eSports content creators’ work on a dedicated news site, and backs tournaments worldwide. “There are a lot of things we do to support the eSports community, and people tend to recognise that when they think of Unikrn as a brand,” he says. 38

“It doesn’t have the regulation that makes other sports feel trustworthy. It is at a young stage, and gambling authorities struggle to get their heads around it” Markus Peuler, mybet Holdings

Regulatory concerns As a relatively new sector, eSports is largely unregulated. “It doesn’t have the regulation that makes other sports feel trustworthy,” Peuler says. “It is definitely at a young stage, and you can see the gambling authorities struggling to get their heads around it.” Having worked on Sportradar’s eSports product for the last two and a half years, Watson argues that he has worked hard to create an integrity-driven approach to eSports products. “Unfortunately this viewpoint is not shared by everyone in the betting industry,” he admits. “There exists a real power struggle to offer as many matches as possible to compete with other operators and, indeed, providers. “Beyond the top-tier competitions, there are a whole host of semi-pro and amateur tournaments with very low prize money that still attract betting interest,” he explains. “Browsing bookmakers today, you can see more than 60 offering tournaments with a prize pot of $2,000, with 30 bookmakers also offering BYOC (‘Bring Your own Computer’) tournaments that are completely open to all participants.

“As a player in one of these low-level events, with pennies on the line and little chance of detection, the incentive to manipulate matches is clear.” Therefore the sector has to be regulated if it is to reach its full potential. Operators need to discontinue the minor eSports markets, or offer them only in conjunction with a “rigorous anti-match-fixing programme”. Work is already underway. The eSports Integrity Coalition (ESIC) is a self-regulatory body formed by industry stakeholders to protect competitions, and has already shown it is not afraid to take action. In May this year Conner Huglin (zonC), formerly of team Armor Legion Gaming, was hit with a two-year ban for cheating in a match of Counter-Strike: Global Offensive. “It is important that the industry as a whole embraces regulation and is proactive on this,” says Sood, whose company is an ESIC member. “As eSports reaches a tipping point of mainstream acceptance, the legitimacy of match results is more paramount than ever. Advertisers, investors and fans depend on it.” What can aid the integrity push further is a growing interest in eSports from professional sports teams. A number of Bundesliga clubs have already established their own teams, playing the popular football simulation FIFA 17. Any suggestion of corruption or match-fixing would be damaging to their reputation and business, even if it did not centre around their core sport. Clearly there are issues to be ironed out, but those that get it right will gain access to a significant new revenue stream, and at this point it remains to be seen who that will be. n


F E AT U R E

INNOVATION

Reinventing traditional sports Short, sharp and exciting matches mean new ways to bet

MILLENNIALS HAVE A short attention span and are easily bored. That’s the conventional thinking whenever the subject of attracting a younger generation of players to betting is raised. Then again, those old enough to remember will know that we’ve heard this all before about Generations X and Y. So what’s changed? Bitesized communication through Twitter, 30-seconds of hilarity on YouTube, and the ability to access pretty much anything else you want instantly via superfast web access. Contrast that with the game of cricket. OK, it’s not the most fast-paced game in the world to begin with, but eight hours a day over five days to get to the result of a test match! Maybe the fast pace of tennis is more your thing – an average men’s match could be wrapped up in under four hours. That puts it on a par with baseball or an 18-hole round of golf. That’s why whenever you hear the words ‘Millennials’ and ‘betting’, they are shortly followed by the word eSports. The conventional wisdom is that this consumer group grew up with consoles and has a natural interest in the ‘sport’, while it lacks the attention span to follow GIQ Q2 REVIEW

more traditional competitions. This has not gone unnoticed in the world of sport, which is desperately looking for new formats with which to attract the next generation of fans.

GolfSixes The European Tour launched a new golf tournament format this year which it hopes will help modernise the sport and attract new viewers. It cuts the standard game of golf to just six holes, with two-man teams representing each country competing for a prize pool of €1m. The rules are relatively simple, with one point awarded for each hole won, with the winner being the team that racks up the most points over six holes. “We have said for some time that golf needs to modernise and introducing innovative new formats is a major part of achieving that aim,” said European Tour chief executive Keith Pelley at the launch of the new format. “We want to broaden the appeal of our sport to the Millennial demographic and I think this format will do that.” The initial results seem encouraging, with

spectators particularly pleased with the level of noise and excitement at the event versus the usual ‘Quiet Please’ approach taken in standard golf formats. Unfortunately for UK viewers it was only broadcast on Sky’s subscription sports channel, not a subscription service that most Millennials can afford, which is the problem with a great number of televised sports these days. The grey men of the tour also missed a trick by making this an all-male event. If you are going to go to the trouble of creating a new format that breaks from the old, staid traditions, why not allow men and women to compete against one another? Or at least allow women to compete. And looking at the sponsors of the event – Jameson Whiskey, Moet & Chandon and Mouton Cadet, as well as the likes of IBM, Canon and Philips – it doesn’t look like the sponsors were convinced that it would serve a young audience.

Tie Break Tens Tie Break Tens is tennis’s answer to GolfSixes, with its third event taking place in Madrid during the same week as the new golf format. It first 39


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debuted in London in 2015, sponsored by online sports betting operator Betway. Tie Break Tens (TBT) is a short tennis format where only tie-breaks are played, with 16 worldclass players – both men and women (though in separate groups) – competing for a $250,000 prize. The three-hour knockout tournament features 10 first to 10-point tie break matches. TBT was broadcast free-to-air, helping it to reach a broader audience. It also featured a live DJ set by Carlos Jean, a popular Spanish DJ and record producer, with the focus firmly on entertainment. Many of the world’s leading tennis stars participated in the event, with the players entering the ‘ring’ as competitors would in a boxing match, complete with smoke machines, thumping bass, and a casual pen where the players sit together awaiting their turn on court.

Cricket Twenty20 Cricket was one of the first sports to recognise the need for a shorter, more action-packed format to attract a new generation of fans. The England and Wales Cricket Board (ECB) originally introduced the Twenty20 format back in 2003. It sees each team restricted to just one innings each with a maximum of 20 overs, with each innings lasting around 80 minutes. This has significantly reduced the length of matches, with most completing within three hours. The format has proved hugely popular with fans and today almost all cricket playing nations have a Twenty20 domestic cup competition, as well as competing in the ICC World Twenty20 contest. In England the ECB is now working on a reboot of the Twenty20 format, which is scheduled to begin in 2020. This will create something of a Premier League of cricket, with players drafted to eight new (possible city-based) teams from county clubs. Commenting on the new format, ECB chairman Colin Graves said: “Our members have seen the evidence for why the new T20 proposal is the right way to reach new audiences, create new fans and fuel the future of the game. “Together, we can now take a huge opportunity to not only create a deeper engagement with those who currently follow cricket but to attract a whole new audience and ensure the sustainability of our game. This is a watershed moment for us all to make the whole game stronger.” This has also caught the attention of South Africa’s cricket authorities, who plan to launch their own eight team Twenty20 league this autumn. 40

“It is our duty as Cricket South Africa to safeguard the future of the game. By backing a hi g h-va lue tou r n ament l i ke t he new T 2 0 Global League, and investi ng i n sy nerg istic pa r t nerships with key stakeholders, the T20 Global League is perfectly positioned to become an internationally successful sporting event,” said Cricket South Africa president Chris Nenzani. Full details of the new league are expected to be announced as this issue of GIQ goes to press, but Cricket South Africa has promised to deliver fans “epic game experiences, actionpacked stadiums, big entertainment and affordable ticket prices”. The overall aim of these efforts is to pack as much action as possible into a shortened timeframe and to make viewership of these sports – both in-venue and on TV – more affordable for young people. Of course, many sports have become addicted to the vast sums of money generated through media rights, costs which are then passed on to the consumer by subscription broadcasters, making viewing prohibitively expensive for the young. Once this dependence is broken and sports bodies begin to offer free or cheap live-streams, they stand a chance of attracting the viewers they so desperately need. The fan base of a sport is not something that can be created overnight and it remains to be seen whether these examples of new formats will succeed. However, they mark a turning point in so far as sports governing bodies have come to realise that without fresh blood, their sports will die out. At the same time, they present an opportunity for bookmakers to attract a younger audience of bettors by leveraging the new formats and helping to drive the buzz around these events. n


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Bet placement

New ways, not places, to bet THE RITUAL OF going to place a bet over the counter at a local bookmaker on a Saturday seems as odd to a whole new generation of customers as it would be to go to a local travel agent to book a flight. It’s just not how things are done. And to keep with the travel analogy, customers looking to book a flight do not expect to be presented with every possible flight out of their city when they visit a travel site. It is more intuitive to visit a site, make a quick selection based on origin, destination and date, and then be presented with the options that match requirements. More than ever, customers expect to be able to ask for what they want rather than have to drill-down through a range of markets. A number of innovative companies are already working to address this demand.

Betting by chatbot Facebook Messenger is one such offering that enables operators to give their customers a new way to bet. With 1.2bn monthly active users on the platform, Facebook and its business partners have begun to test Messenger’s capabilities. A range of brands have begun to GIQ Q2 REVIEW

use chatbots – computer programs that use natural language processing and keyword or word pattern matching to simulate a conversation with an end user. Travel search engine Kayak uses chatbots to allow customers to book travel via Messenger. News broadcaster CNN uses them to distribute breaking news to customers instantly, and allows them to use keywords to find the latest stories on a specific topic. UK broadcaster Sky uses Messenger as a live helpdesk, helping customers fix problems such as internet outages. Betting operators are starting to get involved, using the solution to better connect with younger customers and help users filter through the mass of markets to find exactly the bets they want to place. ioSport’s Joe Bryan describes Messenger as a “rabbit’s warren” for businesses. “You can squash all this hidden content into a messenger window, but you need to serve up interesting content,” he says. “You can serve up data to customers, which draws a lot of interest and content, such as YouTube videos. A bookmaker would never link to these as it takes traffic away from their site, but in Messenger

everything stays within a single window. You are giving more information than ever before to the user.” This, Bryan says, frees users from the “hierarchical” structure of a standard betting website, which – let’s face it – tends to be no more sophisticated than a Microsoft Excel spreadsheet. Users can quickly and simply move between bets, content and information while providing data back to the operator based on their choices, which helps the operator to tailor its offering to them. All this within an interface they already instinctively know how to use. Bryan calls this “iceberg innovation”, where a hugely different set of technology is powering barely-discernible changes on the surface. “All the user interface is done for you,” he says. “All you are doing is plugging into this clean and familiar framework.” One key concern, considering how strictly Facebook controlled its real-money gaming products in the past, is whether the social giant will allow operators to use the platform for betting. It seems the answer was there for any operator willing to ask. Onionsack, a bet messaging platform pro41


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vider, has launched a new chatbot feature for Paddy Power that allows users to bet via Messenger. The developer’s chief executive, Jonathan Power, says that the dedicated Paddy Power chatbot has been launched within Messenger, rather than being facilitated by Facebook. And Facebook is fine with this. “Facebook didn’t have any issue with the launch,” Power says. “There is an existing relationship between Paddy Power and Facebook, so the terms of that relationship are between those companies.” The chatbot allows users to type in something as simple as ‘bet Man United 5’. It then brings up the odds on the next Manchester United match, with a link to ‘Bet Now’. This takes the player to their Paddy Power account with an option to place the bet. The chatbot facilitates the bet being placed without actually allowing betting to take place within the chatbot. “It’s very, very clear that it’s a link to the Paddy Power-branded page,” Power says. “In the chatbot it’s simply person-tobusiness messaging.” This has been open to all bookmakers, but Paddy Power simply found out for itself. Facebook approved the launch of the service within 24 hours of submission. Power believes that the launch of the Paddy Power product is going to open the floodgates. “The opening-up of Messenger and WhatsApp moves the ability to communicate

“The opening-up of Messenger and WhatsApp moves the ability to communicate with customers via chatbots from niche to necessary. Operators will need this” Jonathan Power, Onionsack 42

with customers via chatbots from niche to necessary. O p e r at or s w i l l need this.”

Bookee Another approach to offering customers new ways to bet is to adopt the increasingly popular gesture-based cont rols of sites like Tinder. Operators have already experimented with this, with the Playtech-powered Roller Casino launched by Paddy Power in 2013 the most notable product. Bookee is the first to bring gesture-based controls into sports betting. As with betting through chatbots, Bookee aims to simplify the bet placement process by putting it in a context that new users can easily understand. The company has quickly become known as the ‘Tinder of betting’, as users swipe left or right to see different bets, similar to the popular dating app. Co-founder Adam Wilson says that despite these similarities with Tinder, Bookee has a broader appeal. “It is similar to Twitter, Instagram and Facebook,” he explains. “In each of those you swipe for content, and swipe to search through this content. It’s using controls that the market is already accustomed to using to engage with their mobile phone.” The product takes prices from FSB Technology, then curates this content to group bets into what Wilson calls “decks”. There are event decks, focusing on specific sports; curated accumulators where users swipe through potential coupon selections. It also features Safe as Houses, a deck of low-risk bets, and Strike it Lucky, offering a selection of bets with odds over 100-1. This is managed by a bespoke back office solution using a series of algorithms and filters, with a new artificial intelligence solution to be launched in time for the start of the 2017/18 European football season. Aside from the already-familiar controls, Bookee aims to provide a route into betting for novices. Rather than finding matches to bet on, users are offered a selection from which to choose. Wilson believes that this has helped drive uptake as much as the swiping.

Bookee founders, Adam Kalmanson and Adam Wilson

“We definitely used the swiping mechanism as the selling point, but people want a friendly place to bet, and it’s not just the swiping they come for,” he says. “It is also how we categorise the bets, and how simple it is to navigate the application. “The swiping is a good differentiator, but we are offering something different, which gets people through the door. They see how simple and entertaining betting can be.” Exact figures are not available from Bookee, but the company says it has enjoyed a strong start to 2017 with active users up 300 per cent from February to March alone. According to Wilson, things keep on going up.

Betfred Voice Bet Betfred probably went the furthest with giving customers a new way to bet when it launched Betfred Voice Bet, an app allowing user to place bets using voice commands for last summer’s Euro 2016 football tournament. Similar to voice-activated concierge services such as Apple’s Siri, Amazon’s Alexa and Ask Google, users simply accessed the app and stated their bet, which could then be placed instantly. It also allowed customers to ask for odds or upcoming fixture lists, as well as to check that their bet was correct onscreen before placing it. Betfred Voice Bet also streamed match commentary. The app has since disappeared, never to be spoken of again, which suggests it was not a resounding success. The concept however is exactly the type of innovation that tech-savy customers want. It is only a matter of time before a bettor can simply say: OK, Google. Bet £10 on X to score on Saturday. You can already add laundry detergent to your next grocery order in this way, and operators who can successfully introduce this to betting can be expected to reap the rewards. n


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ODDS-ON FAVOURITES Gaming Intelligence looks at the sportsbook platforms that are helping drive growth for the industry’s most successful operators TRY TO NAME a top-tier operator that has changed its sportsbook platform provider in the past decade. It’s not easy. Companies are traditionally locked into long-term deals, meaning we have seen very little movement or development of the vertical’s B2B side. OpenBet has long ruled the roost, with various challengers trying and failing to carve out a share. Things are changing. Five years ago many thought Playtech’s acquisition of Geneity would have given it the muscle to compete against the industry incumbent. Few would have pointed to a supplier focused on trading solutions or Gaming Media Group’s platform provider for Denmark as the future big beasts. Yet here we are. OpenBet remains top dog, but does not have as firm a foothold as it once did. The Geneity deal did not provide the breakthrough moment for Playtech, but last year’s Best Gaming Technology deal leaves it convinced it has found the perfect formula. And then we have Amelco and SBTech. These two companies have emerged from nowhere, with very different strategies, to become regarded as potential market-leaders of the future. Amelco offers modular solutions, allowing operators to plug in different products GIQ Q2 REVIEW

to existing platforms. This has given it an ‘in’ with some of the leading operators. It also powers PokerStars’ BetStars platform. SBTech has taken a different route, becoming the key provider for emerging markets, before making a massive statement of intent by snapping up the Czech Republic’s Sazka as its first lottery client. Both suppliers have already shown that rather than be cowed by behemoths such as Playtech BGT and OpenBet, they have the means to compete. The industry has come a long way in a short space of time. Just five years ago companies would send out press releases celebrating the fact their platform suffered no outages during a major event such as the Grand National. Today such outages are unthinkable thanks to the prevalence of live betting. Systems are much more scalable, capable of dealing with higher bet volumes and supported by automated trading solutions to offer odds on events as quickly as they become possible. This has created a system in which the suppliers with the deepest pockets, or the most sophisticated technology, can flourish. Over the next nine pages Gaming Intelligence talks to the people behind the platforms and examines the strengths of each solution. 45


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OpenBet

Market leader in a transitional phase OpenBet remains a market leader but its position finally feels under threat, says Robin Harrison OPENBET IS UNDOUBTEDLY a leader in the sportsbook supplier space, but its position at the forefront of the industry does not feel as assured as it has been. It went through a period where it said little, allowing speculation about potential internal problems to run rampant. This was addressed in recent years, at least. However, this refreshingly open approach may not be enough to protect the business from competitors such as Amelco, Playtech and SBTech. Questions remain over NYX Gaming Group, which acquired OpenBet for £270m last year, and its suitability to manage a business in 46

a vertical where it has never before been active. Recent news has not been encouraging. The line, since before it was acquired, is that it only brings in one new customer a year on average. The reasoning is that the sort of toptier partners it works with only come up for tender very rarely. This year, a number of deals OpenBet may have once been expected to strike have gone to rival suppliers. Amelco secured a development contract with Intralot. SBTech is to launch an online sportsbook for the Azerbaijan state lottery. Greece’s OPAP, by all accounts an ideal OpenBet partner, chose Betgenius and Playtech BGT Sports to revamp its sports betting platform. OpenBet, understandably, was unwilling to comment on whether it competed for these tenders. Yet in previous years it would have been expected to win these deals. The fact it is no longer a sure thing suggests a shift in the sector.

“Many years of excellent work have gone into OpenBet, so there is certainly no need to rip everything up and start again” Keith O’Loughlin, OpenBet

Not dead yet Let’s be under no illusions. OpenBet remains a major player in the sector, and the hiring of Keith O’Loughlin as executive vice president of sportsbook could be a masterstroke. O’Loughlin is an increasingly rare beast, an experienced betting and gaming executive rather than an experienced executive that works in betting and gaming. He has worked for the likes of Ladbrokes Coral, Gala


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The company is clearly trying to address its critics. It has brought in a highly-regarded figure in O’Loughlin, and plans to enhance the platform shows it is serious about future-proofing Coral Group and Boylesports, and is an experienced technologist. “Having been on the operator side of the fence for several years, I have a strong understanding of what an operator wants and needs to deliver to the end consumer,” he says. “I am aware of the nature of their business, as well as the opportunities, and the challenges that must be overcome.” O’Loughlin is not joining a business trying desperately to return to past glories. It still works with William Hill, Ladbrokes Coral, Paddy Power Betfair, bet365, Sky Betting and Gaming, as well as a host of leading state lotteries and former monopoly operators worldwide. “It is important to recognise the many years of excellent work that have gone into making OpenBet a market-leading sportsbetting supplier, so there is certainly no need to rip everything up and start again,” O’Loughlin says. The operator’s systems can already cope with massive volumes. O’Loughlin reveals the platform can handle 68,000 bets per minute across the platform and 19,600 bets per minute with a single operator. “The platform can handle significantly more than this, but this is the current peak that has been reached,” he adds. Bet placement times are around 0.1 seconds, and production systems regularly exceed 16,000 bets per minute on particularly busy days. It can also handle multiple brands, using feed aggregation and replication technology to allow multiple downstream systems to be fed from a central source. “This allows upstream systems to act as a master for data, whilst supporting different betting margins on downstream systems, or even for downstream systems to introduce new events, or completely different price structures,” O’Loughlin explains. “OpenBet has been supporting some of the world’s largest global bookmakers for many years and an ability to implement flexible solutions that support a multi-territory, brand-led approach has been a critical factor in our success.” Risk management, comprising customer profiling, event level exposure and external GIQ Q2 REVIEW

pricing and game information feeds, help automate the trading decision-making process. This can also be done manually by a trader to take full control of a book or set limit positions and configurable alerts, combining the cuttingedge automation solutions necessary in today’s market with old-school trading expertise.

Still a force “As a product, OpenBet is the most robust, scalable and flexible platform in the world for sportsbetting,” O’Loughlin says. “As the platform that powers the Paddy Power, William Hill, Coral, Ladbrokes, Skybet and Betfair sportsbooks, it is the product that has supported these brands on their huge growth trajectory. “As a company, OpenBet is a genuine partner for our customers, and we see our success as being measured by the success of our customer base,” he continues. “We are focused on maintaining this success and delivering a new generation of products to power the next wave of growth for our operators.” And while the growth continues, NYX is turning its attention to the ‘next-generation platform’ for its partners. “Technology changes at a rapid rate, and we will leverage the very latest in cutting-edge technologies in our newgeneration platform,” O’Loughlin says. A few years back this would have been seen as OpenBet once again consolidating its position as a sports betting platform behemoth. But today it finds itself butting heads with a number of newer, more nimble competitors. This, NYX CEO Matt Davey is keen to

stress, does not mean the operator is being afforded a better service than OpenBet’s other top-tier customers. William Hill’s £80m investment in NYX was to facilitate the OpenBet acquisition he says, making it an investment in the business, rather than in products and services. Such bespoke projects are becoming increasingly popular, with operators working alongside their key suppliers to redevelop and differentiate their systems for competitors. The likes of Amelco, Playtech and Kambi have worked closely with clients to varying degrees of success in the past. This sees large companies using legacy systems attempt to ape smaller and more nimble competitors. OpenBet certainly has the experience and expertise to deliver a number of significant upgrades for William Hill, but it will be under close scrutiny. If it can roll out a series of updates quickly and without hitch – especially after the operator’s Project Trafalgar fiasco – more clients will be eager to engage it for similar projects. Should the project run into difficulty or fall behind schedule, OpenBet’s critics will use it as evidence that it is a business left behind in a changing world, alongside rumblings that it is losing tenders it would normally be expected to win. The company is clearly trying to address that. It has brought in a highly-regarded figure in O’Loughlin, and plans to enhance the platform shows it is serious about future-proofing. It is not even doing so to play catch-up. Deals with major partners are being renewed, and it remains a formidable competitor. It still has a major role to play in the industry. n 47


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Playtech BGT Sports

Giant finds perfect blend after shopping around Playtech has made numerous acquisitions as it attempts to make sports betting as successful as its all-conquering casino offering. So what makes BGT different to all the rest? Steve Hoare asks Playtech BGT Sports managing director John Pettit PLAYTECH ACQUIRED BEST Gaming Technology (BGT) for €138m in July 2016. It is Playtech’s biggest sports-related acquisition and it is the one that Playtech feels most confident about. It recently rebranded its entire sports division to Playtech BGT Sports, bringing together all its sports-related acquisitions into one happy family. However, Playtech has been down this road before. In 2009, it acquired the Players2Players exchange and tried to turn it into a fixed-odds 48

platform. In 2012, it acquired Geneity, which at the time was seen as the only serious rival to OpenBet in terms of technological prowess. It did not have any customers and even Playtech’s muscle has failed to turn Geneity into the force many expected it to become. Other sports-related companies have been absorbed in the shape of mobile front-end developer Mobenga, sports betting software developer UniLogic and trading business CMSS. So, what makes BGT different to all those?

“Once you put the BGT business in with the existing businesses, sports becomes a key part of the Playtech offering,” Playtech BGT Sports managing director John Pettit says. “Previously, it was always a major area of opportunity but it was never big enough to be considered one of the key areas.” From 2015 to 2016, Playtech’s sports revenue dropped from €32.2m to €30.9m – a mere four per cent of total revenue. That figure was boosted by BGT’s input during the second half.


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Playtech BGT provides omnichannel solutions

“Nobody can do self-service betting terminals to the same extent as BGT and you cannot be a true omnichannel provider without providing best-in-class technology on all channels” John Pettit, BGT

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This helped avoid a major revenue slump with a number of Mobenga contracts coming to an end in the period. BGT’s annual revenue at the end of 2015 (the latest pre-acquisition figures) was €41.6m. If sports can be boosted to somewhere between €60m and €70m then it is growing to around 10 per cent of overall gaming revenue – far dwarfing bingo and poker but still miles behind the €354m that casino reaped in 2016. Pettit also points out this is all regulated revenue and a lot of that comes from retail, which is “a good place for the multiple”. That gives sports more prominence in Playtech’s corporate eyeline. The number of clients already live with BGT also allows the sports team to have a more constructive conversation with its colleagues in the IMS team – the backbone of Playtech’s gaming operation and the key to its omnichannel ambitions. “It is not just a case of selling sports to existing casino customers but selling other products to existing sports customers,” says Pettit.

One-stop shop So how has the Playtech BGT Sports team evolved since Playtech acquired BGT a year ago? “We had disparate technologies. So we launched the ‘Best Of’ project, which will bring

them all together, taking the areas of expertise in each to create one powerhouse product under one management team with a team of employees, who were all working towards that one common product.” Under the previous leadership of Ian Chuter, who was recruited in October 2015 in another attempt to boost the sports betting team, a product was revealed at ICE that put the Mobenga front-end on the Geneity back-end. “This moves it to the next level because it brings retail and online together so you get a full omnichannel solution,” says Pettit. “We will finish up with a true omnichannel product that will take brick customers to click.” He gives the example of Coral customers, who can use their Coral Connect card on a BGT self-service betting terminal (SSBT) to place bets from their Coral Connect account. If you take that to the next level, Pettit says Playtech will be able to offer an operator a one-stop shop, where you can place a bet in a licensed betting office with BGT technology (whether on a terminal or at the till) and use that same wallet at home on an online or mobile sportsbook with the same back-end features and the same customer journey. “We’re looking at having one sports backend, which would sit on top of the IMS account with different front-end verticals – whether


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that’s mobile, web, SSBT or shop till. The consumers will have one seamless journey across retail and online channels.” Previously, Playtech did not have the retail customers. They were trying to sell a vision. Now, they are launching services for existing clients rather than asking potential customers to start afresh.

Taking the fight to OpenBet That is the strategy, but how does Playtech take on OpenBet? Pettit believes the real USP is terminals. “In very simplistic terms, a till is a till and there is not much differentiation between tills. If you spend enough money, you should be able to develop a competitive retail till solution.” Pettit would extend that lack of differentiation to online sportsbooks, no matter who supplies them. “They have differences in the presentation layer but, broadly speaking, a sportsbook is a sportsbook,” he says. “Getting people to change is very difficult because unless it’s a pure commercial decision, in essence the core sportsbook product isn’t anything very different.” It is difficult to name any tier-one operators, which have changed sportsbook technology during the past decade. Therefore, suppliers need a different route in. “Nobody can do self-service betting terminals to the same extent as BGT and you cannot be a true omnichannel provider without providing best-in-class technology on all channels,” argues Pettit. In terms of the platform itself, Pettit says it is fully scalable and built on a number of different servers so it has no single point of dependency. That makes it easy to scale up or down. “The key USP of our business (over 35 per cent of our business) is in-play, accumulator bets. By their definition, they have lots more traffic because there is so much more happening than in pre-match bets.” The majority of Playtech’s BGT Sports customers are retail customers. It services over 35,000 end-points – typically these are SSBTs and tills but the future development plan is focusing on web and mobile. All of these can have individual content sent to them. It has a fully automated risk management system, which can be adapted to manage different risk parameters for each frontend user. “It is a key driver of our margins,” explains Pettit. “It allows us to ensure we are not out of kilter and to optimise margins because we understand where we are in the market at any one point.” GIQ Q2 REVIEW

Playtech BGT shop till screen

“Everything is about size and scale. Our omnichannel product, underpinned by IMS, gives us a way into the market that nobody else has” John Pettit, BGT

The platform integrates all the data sources one would expect, including the likes of Betradar, Betgenius, SIS, and Sporting Solutions. It will also integrate those with an operator’s own feeds, when they want their own prices. “For example, we integrated Paddy Power’s horseracing feed. If you go into a Paddy Power shop, the horseracing prices will be identical on the terminal and on the screen system. If you go into another operator’s shop with BGT terminals, they are taking an industry early morning price feed, which we integrated, until they get to 10 minutes before the off when the board price kicks in.”

The next level While Playtech has a huge presence in the UK market, its sports betting targets lie further afield in countries such as Spain, Germany and Italy. Pettit also cites Africa as a possibility, and Australia, where Playtech has yet to make much of an impact but where the likes of Paddy Power have grown so impressively. Playtech BGT has a strong relationship with Novomatic, which uses the full suite of BGT spor tsbook software. Spain’s Codere uses BGT for its tills, betting termi-

nals and web products. The company won a huge deal earlier this year to provide betting terminals to Greek lottery OPAP. It is a deal that could be as big as Ladbrokes for Playtech BGT, though the BGT deal was not signed while it was being negotiated and Betgenius won the contract to supply a digital sportsbook. Playtech has not yet finessed its omnichannel sports offering but the OPAP deal could have been a model project to showcase the potential of Playtech’s new sports offering in a way that Gala Coral did with the IMS. The other question mark remaining over Playtech’s strategy is its extreme focus on omnichannel. What about purely digital operators? “Everything is about size and scale. Our omnichannel product, underpinned by IMS, gives us a way into the market that nobody else has,” Pettit says. “That allows us to spend more time investing in our product, which then allows us to provide attractive propositions to purely digital operators.” Throughout our conversation, Pettit talks about the evolution of the product. He is aware that the integration of BGT, Mobenga, Geneity, Unilogic and CMSS is a work in progress but that will not disrupt the omnichannel focus. “I also think you will see more consolidation in the market and some of those who are digital pureplays may start to buy into landbased presences,” states Pettit in one of his more surprising statements. This is a prediction that many might scorn but Playtech has clearly decided where the future lies and it rarely gets its strategy wrong. “The more successful omnichannel is,” concludes Pettit, “the more it encourages digital pureplays to go omnichannel.” n 51


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SPORTSBOOK PLATFORM

SBTech

A growing industry force SBTech chief product officer Ian Bradley gives a technical summary of a platform that is encouraging a diverse array of operators to sign up By Steve Hoare WHEN CZECH LOTTERY operator Sazka took advantage of the country’s new gambling regulations to launch an online lottery in March of this year, it also launched a new Sazka Bet offering, which provides a revamped fixed-odds solution for customers. The new sportsbook offers live betting markets on 250,000 sporting events per year – a threefold increase on the previous product – and more live streaming of matches. The surprise for some might have been its choice of supplier – SBTech. It was a massive win for the insurgent sports betting supplier and indicative of a company on the march. Sazka was the pick of a number of deals closed during 2016, which suggest SBTech is becoming the supplier of choice for emerging markets. This string of deals helped it win the Sports Betting Supplier of the Year gong at the 2017 Gaming Intelligence Awards. But what is it about SBTech’s platform that is impressing new customers? We asked chief product officer Ian Bradley to take us under the bonnet. “The drive for more and more content to offer to customers is only going to continue and we have designed our architecture to scale as our partners grow,” explains Bradley. “Our system is built with a microservice approach which allows us to scale up each component where necessary. “We have auto-scaling in place for parts of the system, with others we have monitoring in place to allow us to scale up if required or plan for added demand with major events like the Grand National.” The number of bets being placed is not the only pressure point. During major sports events the whole platform is tested: prices, bets, cashout, settlement, logins, registration, deposits and withdrawals. “If we hit the peak on any of these metrics then there will be issues so it is important to have a fully stable system. For example if you hit your peak of bets then settlement is going to be even worse. To ensure performance and stability we do this with our technology but also the operations, which is 24/7 and allows us to 52

make changes to support the business of our partners at any time of the day.” Data is also of utmost importance for all products and operators, and SBTech has a multitude of data access points, from the platform to real-time Kafka streams of events and transactions. “Ultimately we find the right solution for the job, be it internal, operators, third party or – as is increasingly the case – the regulator,” continues Bradley. “The solution we offer depends on the requirements for data and speed. For this we use our dedicated data team, who will support our partners for the solution. We have partners around the world so having multiple options with different technology ensures we meet their needs.” Automated risk management is built from strong customer profiling and looking at each bet based on the merits at that time. “SBTech doesn’t have hard limits when customers attempt to bet, and our smart decisions looking at bets individually based on customer KPIs has led to a two per cent increase in margin on singles alone,” says Bradley.

“Our partners get to determine their own strategy for liability management and ultimately their appetite for risk. This is bespoke per operator so they are in full control with the automated settings. We also see the value of the human touch, so if we can’t make decisions automatically our dedicated trading team will make the assessment with all of the customer KPIs at their fingertips to make the best decision possible and maximise revenue. “We are constantly refining our profiling using our VIP metric, beat-the-odds factor, clash theory and social responsibility algorithm to get the 360 degree view of the customer and ensure our automation and traders are acting correctly and as efficiently as possible.” It is a compelling proposition. Partners as diverse as ComeOn and 188Bet have chosen SBTech. If the company can continue to sell its product to emerging operators in Latin America while also supporting European lotteries such as Sazka, then it will have a diverse portfolio that few can match. n


F E AT U R E

SPORTSBOOK PLATFORM

Amelco

Punching above its weight Amelco has quietly and efficiently established itself in the sports betting sector and could become a leading supplier in the vertical. Founder Damian Walton and CTO Kilian Heneghan explain the key to its success By Robin Harrison

IF YOU’VE PLACED a bet on one of the UK’s leading sportsbook sites you’ve probably used Amelco’s software. Since its establishment in 2006 it has quietly and consistently grown its customer base to comprise a who’s who of the industry’s leading lights. Until now it has been happy to remain in the shadows, with its founders reticent to talk in-depth about the business. Its website is equally cryptic, talking about helping its “first betting customer” improve in-play trading and powering the launch of a “major newcomer to sports betting”. It is talking about William Hill, which Amelco helped to increase its in-play offering from five live betting markets to more than 200, and the launch of BetStars, PokerStars’ sports betting brand. No big deal. In a sector where B2B and B2C companies are entangled in a variety of relationships, Amelco remains entirely independent. It is owned by founder Damian Walton, who is supported by chief technology officer Killian Heneghan. Its technology has also been developed to offer as much flexibility as possible, allowing companies to plug its solutions into an existing platform or product rather than requiring a total overhaul and complex integration. With legacy systems often still the norm, despite efforts by rival suppliers to bring their solutions up to date, Amelco finds itself in a unique position in the industry. Its technology has been inspired by its founder’s financial technology background, bringing the sort of sophisticated systems used for financial trading into the online betting sector. At a time when automated systems are becoming increasingly vital to sports betting operators, Amelco has positioned itself to become the new supplier of choice, despite its founder having no sports betting technology experience. Heneghan begain working in soft54

ware engineering, developing software in the real time-messaging industry, then spent 15 years working in finance before joining Amelco. Walton, meanwhile, is a dyed-in-the-wool financial techie. “From university I went straight into programming for investment banking, and got stuck in that for 15 years,” he says. “I was working across different sectors of finance, and ended up responsible for managing a lot of technical teams writing pricing systems, trading systems and exchange systems across different sectors in finance.” It was this experience of developing exchange-based systems that planted the idea in his head that became Amelco. “We decided to start a business that also provided technical services to finance, building trading platforms, feed adaptors, using similar software for sports betting, focused on price discovery, feed handles, risk, trading and hedging,” Walton explains. The pair do not go into specifics on what the system can do. Instead they emphasise that it has been built to suit any partner’s needs. It provides services to some of the largest operators in the world, including governmentowned entities. “We do benchmark the systems, but the technology that we put in is dependent on what the customer needs,” Heneghan says. “If it’s for a particularly niche operator we can make it as cost-effective as possible, but the system

“We are a modular platform so we can supply an end-to-end service. We can supply trading and risk management, we can supply a white label solution or just key modules to clients” Killian Heneghan, Amelco

is as scalable as it needs to be. We can easily scale to compete with anyone in the market, for any customer.” “We offer the platform and managed services, so every customer is treated the same, whether they are large or small,” he continues. “As every customer grows, any one could become the next big player. You can have entrylevel systems, or something to compete with the biggest out there.”

Lego for sports betting What makes Amelco’s solution so popular is that it is entirely modular. This means clients can pick and choose which elements of the technology they need. “We had a strategy from day one to be a modular system, so the first three components we focused on were trading, risk and data-feed connectivity,” Walton says. “Then we moved onto product development before building the additional components for a bet engine – client-user interface canvas and customer management system – so we could build frontends. Finally, we built a wallet and player account system.” By having each component available separately, Heneghan says, Amelco can work with any client. It can work with the top-tier operators, or a relative newcomer, rather than restricting itself to one kind of client. “If we’ve got three customers with different appetites for risk, catering to different customer bases or looking at different regions, they will each have their own independent instance of the system,” Heneghan explains. “Unlike some of our competitors, one client’s offering is not constrained by what another has.” “It is very simple – we are a modular platform so we can supply an end-to-end service. We can supply trading and risk management, we can supply a white label solution or just key modules to clients,” he adds. If a customer just


F E AT U R E

SPORTSBOOK PLATFORM

wants a player wallet they can go to Amelco. Trading support? Amelco. An entirely new sportsbook platform? You guessed it. It is Lego for the sports betting industry.

Taking trading forward The ability to pick and choose elements is certainly appealing, but the quality of each part of the system makes it particularly appealing. The current strategy of sports betting operators is to offer as many markets as possible. Heneghan says this ‘arms race’ is often seen as providing punters with quantity, but that the need to do so at a fair price can be overlooked. There has been much discussion around the dying art of the sportsbook trader, but Heneghan argues that allowing automation to take charge is vital. “Pricing expertise is now in quants [quantitative analysts], so you do need trading expertise, but one person can’t keep up with every market on every game, so you have to get that GIQ Q2 REVIEW

expertise built into the systems,” he says. “The people with that expertise can then oversee these systems.” This way, Walton adds, the system and algorithms can create the prices while traders focus on risk management, whether they can offer better value in the market, and looking after the overall trading strategy. The system is sophisticated enough that clients can manage multiple brands from a centralised back end, sending out different prices to different sites. This means operators can run different offerings, prices and margins across different sites from the central system. “Some suppliers in the market will have a lot of customers, but a lot of these will have a similar product with different branding. We offer each a totally differentiated product,” Walton says. This flexibility is mirrored in the automated risk management solutions Amelco offers. “We’ve made a significant investment in

our risk management engine over the last eight years,” Walton explains. “It flags exceptions and provides traders with a lot of functionality around what-if scenarios.” It can predict against probabilities, giving clients an indication of the financial exposure from a traditional Saturday afternoon of football. This means traders do not have to analyse every game. “It is a real-time risk engine that lets you view exposure, such as potential payouts or what if a different outcome occurs rather than what is most likely,” Heneghan adds. “This links into real-time limit adjustments so we can do price-per-channel, limitsper-channel and time-based limits.” This allows for limits, pricing and offers to be changed before a game or during a game as bets are placed, using pre-set risk appetite and limits. This puts Amelco in a strong position when approaching prospective partners. It can and already does work with leading companies, who often have an existing sportsbook platform provider, but the market is in flux. As we say on page 48, the days when OpenBet was considered the only viable option are coming to an end. Playtech is emerging as an intriguing proposition, although right now it looks to be primarily targeting omnichannel partners. SBTech is another growing competitor, but one with a level of grey-market exposure that could deter some operators. Amelco is well-positioned to profit. And as a private, profitable business, it needs neither the financial support of a big brother or acquisitions to buy up market share. “There’s nothing that really interests us out there at present,” Walton says. “There are solutions we think could complement our platform, and if there is interesting tech out there we would certainly look at it. But I can’t see anything that makes strategic sense for us.” A sale is out of the question. Amelco is wholly independent, debt-free and profitable. “We feel like we are on our journey, we have a strong architecture that provides customers with a flexible set of solutions,” Walton says. “This way we can choose our own destiny,” Heneghan interjects. “So if we make any mistakes they will 100 per cent be ours.” The supplier has quietly and consistently carved out a position in the industry. Along the way it has built long-lasting relationships with a number of major UK operators, including those with other platform providers. And it’s not likely to be sold or acquired any time soon. Competitors will be looking nervously over their shoulders. Amelco appears to be in the best possible position to usurp the current industry order. n 55


Be Informed What do the world’s most successful interactive gaming companies have in common? They have empowered their organisations from the top down with the information they need to succeed in a rapidly evolving market. Ffitifi tifififififitifi tifififi fiti CEO fitififififififififiti fififififi fitifi fififififififitififi fitifitifififitititititifififififififififififififififififififi fififififififififififififififififififififififififififififififififififififififififififififififififififififififififififififififififififififififififififififififififififi fififififififififififififififififififififififififififififififififififififififififififififififififififififififififififififititititititi Sfifiti fifi fitifififi fifi fifififififififitififitifififififififitififififitifi fitifi jtifiti fififi fifitifififitififi tifi fitififififififi fifitifififififititifififi fifiti fifififi titi fifififitifi fitifififififififitififi fiti fififififififi fififititititititititititititititititititititititititititi fifififitifi fitifififififififitififi’fi fitififififififi fififififitifi tifififi fitifi fitififififififi fifi fififiti fifififififitififi titi Dtifi Jtitififi Ffifititititi

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F I NA NC E

GIQ20 Q1 2017

ON THE FOLLOWING PAGES

61 GIQ20 Q1 2017 results and analysis

The GIQ Q1 2017 NYX GAMING WAS the only company to break the stranglehold of Nordic-listed companies at the top of the GIQ20 chart during the first quarter of 2017. Cherry was the fastest-growing in terms of revenue, and took top spot following a strong contribution from its acquired ComeOn operations, while NYX’s OpenBet acquisition helped it climb into second place. Revenue growth at Oslo-listed Gaming Innovation Group also stood out, while Catena Media was the fourth company to see triple-digit percentage increases from the previous year. Evolution Gaming and LeoVegas continued where they left off in 2016 with another excellent set of results. The growth of Scientific Games’ interactive arm gathered further momentum. William Hill made a welcome return to the GIQ20, with its online business just outperforming rival Paddy Power Betfair in terms of revenue growth. Ladbrokes Coral won the battle of the British bookies, however, as its own online resurgence continued. Elsewhere, there were notable performances from Kindred Group, which will climb the table once it includes results from 32Red from June, as well as bet-at-home.com, NetEnt and GVC Holdings. At the wrong end of the table, it was a quarter to forget for the likes of Zeal Networks, mybet and International Game Technology (IGT), with the latter marking the final full quarter of contribution from DoubleDown Interactive – which it sold to DoubleU Games. GIQ Q2 REVIEW

The GIQ20 Q1 2017 COMPANY

ONLINE Q1 2016

ONLINE Q1 2017

% CHANGE

1

CHERRY

SEK138.6m

SEK504.4m

264%

2

NYX GAMING GROUP

CAD$19.7m

CAD$58.9m

200%

3

GAMING INNOVATION GROUP

€7.9m

€23.1m

193%

4

CATENA MEDIA

€7.5m

€15.2m

104%

5

EVOLUTION GAMING

€24.8m

€39.7m

60%

6

LEOVEGAS

€29.5m

€43.9m

49%

7

SCIENTIFIC GAMES

$72.6m

$96.3m

33%

8

MR GREEN & CO

SEK218.5m

SEK276.1m

26%

9

KINDRED GROUP

£122.4m

£153.2m

25%

10

LADBROKES CORAL GROUP

N/A

N/A

22%

11

BET-AT-HOME.COM

€24.5m

€29.4m

20%

12

FORTUNA ENTERTAINMENT

€23.9m

€28.3m

19%

13

WILLIAM HILL (EXCL. AUSTRALIA)

N/A

N/A

16%

14

NETENT

SEK345.4m

SEK397.9m

15%

15

PADDY POWER BETFAIR (EXCL AUSTRALIA AND US)

£195m

£224m

15%

16

GVC HOLDINGS

€215.6m

€241.0m

12%

17

JACKPOTJOY

£64.2m

£71.4m

11%

18

BETSSON

SEK1,000.1m

SEK1,102.0m

10%

19

AMAYA

$288.5m

$317.3m

10%

20

KAMBI GROUP

€13.3m

€14.2m

7% 59


F I NA NC E

GIQ20 Q1 2017

Cherry and NYX lead the way in first quarter Nordic-listed companies again dominate, but William Hill makes a return to the GIQ20 chart in a strong Q1 for operators and suppliers, writes Kio Dawson

CHERRY 264% Net revenue (SEK)

Online gaming (B2C) Game Lounge

Q1 2016

Q1 2017

Change

118.8m

453.2m

281%

9.9m

29.7m

200%

14.2m

33.3m

135%

n/a

8.8m

n/a

Eliminations

(4.3m)

(20.6m)

379%

NYX GAMING GROUP

TOTAL

138.6m

504.4m

264%

200%

Yggdrasil Gaming XCaliber

Stockholm-listed operator Cherry enjoyed a strong start to 2017. Its continued investment in its iGaming businesses helped group revenue soar 205 per cent to SEK541.4m for the first quarter. Revenue from Cherry’s iGaming portfolio rose 264 per cent, driven by significant growth from its B2C division, which now represents 84 per cent of total revenue. There were also year-on-year improvements for Cherry’s B2B businesses, Game Lounge, XCaliber and Yggdrasil Gaming. “With a strong acquisition year behind us, the first quarter was mainly characterised by consolidation,” said chief executive Anders Holmgren. “At the same time, we grew as planned and with good profitability. PartnerGIQ Q2 REVIEW

ships and synergies have enabled an even stronger focus on innovation, improved customer experience and continued growth.” Cherry expanded its wide-ranging portfolio of iGaming products by investing in virtual sports developer Highlight Games during Q2, as well as increasing its majority stake in Sunmaker.com owner Almor to 82.5 per cent.

Net revenue (CAD$) Q1 2016

Q1 2017

Change

Royalty and licences

17.4m

30.9m

78%

Professional services

1.4m

27.7m

1819%

Social gaming

0.8m

0.3m

-66%

TOTAL

19.7m

58.9m

200%

Toronto -listed supplier N Y X conti nues to see the benefits of its acquisition of OpenBet, with first quarter revenue nearly tripling to CAD$58.9m. Of this, OpenBet contributed $34.7m. It follows a landmark year for the Toronto-listed supplier in 2016, where revenue soared 213 per cent to $163.7m. The sportsbook platform provider contributed nearly half of 61


F I NA NC E GIQ20 Q1 2017

NYX’s annual revenue total despite only being acquired in May. In Q1, royalty and licence revenue improved 78 per cent to $30.9m, while professional services revenue soared to $27.7m, up from $1.4m a year ago due to the acquisition of OpenBet. Social gaming revenue fell to $285,000. The first quarter saw NYX sign 11 new customer agreements for its platform products, and launch content across six new client sites including PokerStars Denmark, Rush Street, Nederlandse Loterij, MarathonBet, Luckia and GVC. The company has also signed three new deals and launched two new clients since the close of the period. “Our customer development pipeline remains strong, and we are focused on profitable growth through our product-led strategy with targeted R&D investment in sportsbook, gaming and content technologies,” said chief executive Matt Davey.

GAMING INNOVATION GROUP 193% Net revenue (€) Q1 2016

Q1 2017

B2C

6.7m

18.5m

178%

B2B

2.1m

6.3m

198%

(0.9m)

(1.7m)

92%

7.9m

23.1m

193%

Elimination TOTAL

Change

Gaming Innovation Group (GIG) followed its breakthrough year in 2016 with another impressive set of results, boosted by strong performances from its B2B divisions, Innovation Labs and iGamingCloud. Revenue soared to €23.1m, with the company’s B2C operations contributing €18.5m as active customers grew to 188,879. This included a record 121,880 active users from GIG’s legacy brands Guts.com, Rizk.com and Betspin.com, for which revenue climbed 65 per cent to €11m. The Betit brands accounted for a further €7.5m during Q1, including a record monthly performance in March. 62

“We invested in marketing, acquired the largest affiliate to date, signed seven new contracts to the iGC platform and continued to develop the next-generation online casino” Robin Reed, Gaming Innovation Group

In Q1 it also struck a deal for casino affiliate Slotsia, with further deals likely after the company raised €50m to fund new acquisitions. The company’s acquisition spree has helped revenue more than double to €15.2m, benefiting from record levels of depositing customers (NDC) during the period. Revenue from the company’s Search business generated €10.9m, up 99 per cent yearon-year, driven by organic growth and recent acquisitions. The Paid revenue segment grew to €3.7m due to pay-per-click (PPC) traffic and the inclusion of results from the SBAT deal last year. “The first quarter of the year is seasonally strong and we are pleased to note stable growth numbers in our existing assets,” said CEO Robert Andersson. “AskGamblers is a great example of assets which we acquired early last year and which have trended very positively since. “Overall, the first quarter was primarily characterised by the successful integration of our US operation, several ongoing negotiations in multiple markets and the acquisition of the casino affiliate Slotsia.com.”

EVOLUTION GAMING 60% Net revenue (€)

“Results for the first quarter of 2017 reflect our focus on building business volumes,” said CEO Robin Reed. “We invested extensively in marketing, acquired the largest affiliate to date, signed seven new brands and contracts to the iGaming Cloud (iGC) platform and continued to develop the next generation online casino. “Our vision is to make the iGaming industry an open and connected eco-system for the benefit of all. The recent development and acquisitions contribute to the realisation of this strategy.”

CATENA MEDIA 104% Net revenue (€) Q1 2016

Q1 2017

Change

Search

5.5m

10.9m

99%

Paid

2.0m

3.7m

87%

n/a

0.6m

n/a

7.5m

15.2m

104%

Other TOTAL

The Stockholm-listed digital marketing specialist continued its M&A splurge into the second quarter, acquiring online casino affiliate Newcasinos.com and sports betting affiliate Online Media, owner of the Bets.co.uk, Bonuses. co.uk and iGamble.co.uk sites.

TOTAL

Q1 2016

Q1 2017

Change

24.8m

39.7m

60%

Stockholm-listed live casino specialist Evolution is on a roll, with Q1 marking the company’s 14th consecutive quarter of revenue growth. Revenue climbed 60 per cent year-on-year to €39.7m, with January and February particularly strong months due to high levels of customer activity. This included two billion bets by end users, up from 1.2bn a year ago, with mobile now comprising 47 per cent of the operators’ revenue. “There tends to be favourable activity early in the year and 2017 has been no exception,” said CEO Martin Carlesund. “We have seen generally high player volumes among all types of customers, both small and large well-established operators, while customers are also increasingly optimising their live casino offerings. “Many of our existing customers have launched new environments and expanded with additional tables during the quarter. Furthermore, our poker products have been launched with additional customers, with three card poker and our exclusive live version of ultimate Texas hold’em, in particular, gaining increased exposure to end users.” In a further boost to the company’s business, Evolution saw its shares upgraded to the main market of Nasdaq Stockholm in early June.


F I NA NC E

GIQ20 Q1 2017

SCIENTIFIC GAMES 33% Net revenue (US$)

46% Net revenue (€) Q1 2016

Q1 2017

Change

29.5m

43.9m

49%

LeoVegas was another Stockholm-listed operator to enjoy a strong first quarter, as revenue increased to €43.9m following continued organic growth and the first contributions from its launch in Denmark. LeoVegas’ Danish operations began at the end of Q4 and accounted for three per cent of Q1 revenue, helping offset the company’s exit from the Czech gaming market in January. The Czech market had contributed four per cent of revenue in the previous quarter. Chief executive and co-founder Gustaf Hagman described the Denmark rollout as one of the company’s most successful launches. “Owing to a combination of our mobile-first focus, product and technological innovation and effective marketing, we have quickly established ourselves as a significant contender in Denmark,” Hagman said. LeoVegas posted growth across all operating regions, although the Nordics continue to generate the bulk of revenue, representing 56 per cent of the total. The UK contributed 14 per cent of revenue, the rest of Europe 17 per cent, and the rest of the world 13 per cent. GIQ Q2 REVIEW

Q1 2017

Change

60.2m

80.2m

33%

Other interactive (B2B)

12.4m

16.1m

30%

TOTAL

72.6m

96.3m

33%

Interactive represented approximately 13 per cent of Scientific Games’ total revenue in Q1, with the division again outperforming the New York-listed supplier’s core Lottery and Gaming businesses. While there was growth across all business segments, helping group revenue increase six per cent to $725.4m, the bulk of this was driven by the Interactive arm, which saw revenue climb 33 per cent year-on-year. Within Interactive, social gaming revenue rose by a third to $80.2m, despite a four per cent fall in social gaming average monthly active users to 7.7m and in average daily active users to 2.4m. This was offset by a 42 per cent increase in average daily revenue per active user to $0.37, however. Other interactive B2B revenue climbed to $16.1m. “This is a great start to the year, with all three of our business segments contributing to growth,” said chief executive Kevin Sheehan. “We have a tremendous global team firmly focused on unlocking the power of our brands, strengthening our commitment to innovation, and executing a disciplined fiscal approach to enhance long-term shareholder value. We are building for our future.”

LEOVEGAS

TOTAL

Q1 2016 Social gaming (B2C)

MR GREEN & CO 26% Net revenue (SEK)

TOTAL

“Owing to a combination of our mobile-first focus, technological innovation and effective marketing, we have quickly established ourselves as a significant contender in Denmark” Gustaf Hagman, LeoVegas

Q1 2016

Q1 2017

Change

218.5m

276.1m

26%

Mr Green & Co is benefiting from its expansion in Western Europe, with the region contributing 39 per cent of the operator’s revenue during the quarter. Western European revenue was up 69 per cent year-on-year to SEK107.0m, offsetting a marginal decline from the Nordic region, down 0.6 per cent to SEK93.3m. Central, Eastern and Southern Europe increased revenue by 23 per cent to SEK69.9m, while revenue from the rest of the world rose 24 per cent to SEK5.9m. Active customers were up two per cent quarter-on-quarter to 115,601, with total deposits from customers amounting to SEK819.5m 63


F I NA NC E GIQ20 Q1 2017

“We are taking new strategic initiatives and further raising our level of ambition. This will provide us with the prerequisites to continue to meet our growth target” during Q1. “We are now accelerating by taking new strategic initiatives and are further raising our level of ambition,” said chief executive Per Norman. “This will provide us with the prerequisites to continue to meet our growth target in coming quarters. Combined with our improved product offerings, featuring a sportsbook and live casino, this has resulted in strong growth for the company.”

KINDRED GROUP 25% Net revenue (£) Q1 2016

Q1 2017

Change

Sports Betting

54.1m

66.4m

23%

Casino and games

61.3m

77.4m

26%

Poker

3.2m

3.7m

16%

Other

3.8m

5.7m

50%

122.4m

153.2m

25%

Kindred Group’s second quarter results will include the first contributions from its newly acquired 32Red operations after the £176m deal was concluded at the beginning of June. For now revenue growth remains consistently strong with Q1 marking the company’s eighth consecutive quarter of sequential 64

same period last year, offsetting declines in the company’s UK and European retail businesses. “We see encouraging trends in digital sportsbook and gaming with continued enthusiasm for our multi-channel products in all our major markets and over a million customers now signed up in the UK alone,” said CEO Jim Mullen. The British bookmaker said that trading for the period was in line with expectations, despite mixed sports results, with the positive impact of bookmaker-friendly UK football results in January reversed in February and March. The operator also experienced “very poor” midweek football results during the first week of April. Despite this, Ladbrokes Coral online sportsbook performed well with revenue up 40 per cent, while revenue from online casino and gaming products grew seven per cent versus a year ago. In Australia, Ladbrokes.com.au increased stakes by 49 per cent and revenue by 59 per cent.

LADBROKES CORAL GROUP BET-AT-HOME.COM

22%

20%

Net revenue (£)

Sportsbook

Per Norman, Mr Green

TOTAL

growth. The Stockholm-listed operator recorded year-on-year improvements across all products, although its sports betting margin (after free bets) fell to its lowest quarterly level since Q1 2013 at six per cent. Despite this, revenue for sports betting rose 23 per cent to £66.4m, while revenue from nonsports betting products increased by 27 per cent to £86.8m. Total active customers increased by seven per cent to a new high of 1,232,915 from a total registered customer base of 16.9m. “In line with the fundamentals of our growth strategy, we have continued to invest heavily in marketing for both new customer acquisition and reactivation of existing customers,” said chief executive Henrik Tjärnström. “While this may reduce profits in the short term, we are confident that, as we have previously proven, this will drive sustained growth in gross winnings revenue and profits.”

Q1 2016

Q1 2017

Change

n/a

n/a

40%

Gaming

n/a

n/a

7%

TOTAL

n/a

n/a

22%

Ladbrokes Coral highlighted the performance of its online sportsbook which helped group revenue climb five per cent for the 16-week period ending 23 April. Including Australian operations, total digital revenue rose 22 per cent compared to the

Net revenue (€)

TOTAL

Q1 2016

Q1 2017

Change

24.5m

29.4m

20%

After a record performance in 2016, Betclic Everest subsidiary bet-at-home.com expects to see further growth this year with gross betting and gaming revenue forecast to reach €144m. The operator remains on course to reach its target as a 30 per cent increase in stakes helped gross revenue climb 23 per cent to €37.2m for the first three months of 2017. This was just below


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F I NA NC E GIQ20 Q1 2017

the company’s record quarterly high of €38.3m achieved in the previous quarter. Betting fees and gambling levies rose 46 per cent to €5.4m, while VAT regulations for electronic services providers incurred a further €2.4m in expenses. As a result, net revenue was up 20 per cent to €29.4m. At the end of the quarter, bet-at-home.com had 4.7m registered customers, up nine per cent year-on-year.

FORTUNA ENTERTAINMENT 19% Net revenue (€)

TOTAL

Q1 2016

Q1 2017

Change

23.9m

28.3m

19%

While its retail business struggles for growth, Fortuna Entertainment expanded its online channel with the launch of its Playtech-powered online casino in the Czech Republic during Q1. The new product contributed turnover of €16.8m as Fortuna became the first to roll out a licensed offering in the country at the end of February. Total turnover rose 20 per cent to €302.2m during the quarter, with sports betting representing 93 per cent of the total with €281.5m and amounts staked from lottery falling 20 per cent to €3.9m. Overall, first quarter gross win for the Central European betting and gaming operator rose 12 per cent to €42.7m in Q1 as growth online offset a decline in its retail betting and lottery businesses. Sports betting gross win increased by 11 per cent versus a year ago to €40m. Of this, online grew 18.5 per cent to €28.3m, while retail gross win fell four per cent to €11.7m, primarily driven by a lower gross win margin in February and March.

WILLIAM HILL 16% Net revenue (£) Q1 2016

Q1 2017

Change

Sportsbook

n/a

n/a

26%

Gaming

n/a

n/a

8%

TOTAL

n/a

n/a

16%

Following its recent struggles, there was a welcome return to form for William Hill’s online division as revenue grew by 16 per cent for the 17 week period ended 25 April. Online sportsbook revenue was up 26 per cent year-on-year, with the prior year period impacted by customer-friendly sports results 66

and lower wagering activity. Online gaming revenue was up eight per cent, following growth in both core and non-core markets. The online channel benefitted from a nine per cent rise in sportsbook stakes and a 1.2 percentage point increase in sportsbook margin to 7.5 per cent, together with positive foreign exchange rate movements in gaming. “It has been a positive start to the year for William Hill across the board,” said chief executive Philip Bowcock. “Our online business continues to deliver growth thanks to the improvements in product, user experience and marketing we have made.” In the company’s other businesses, retail revenue was down one per cent, while William Hill Australia saw growth of 41 per cent and revenue from the US business climbed 19 per cent.

NETENT 15% Net revenue (SEK)

TOTAL

Q1 2016

Q1 2017

Change

345.4m

397.9m

15%

Casino games developer NetEnt saw revenue growth slow during the first quarter, but continued with its expansion plans by signing a record number of new customer agreements during the period. Despite a strong comparable quarter last year, the company processed 9.8bn gaming transactions during Q1, helping revenue increase 15 per cent to SEK398m. Revenue fell quarter-on-quarter for the first time since Q2 2013. “We continued to deliver on our growth strategy in the first quarter and revenues increased in line with our earlier comments about the quarter,” said president and CEO Per Eriksson. “For the first time, NetEnt’s games were launched on the regulated market in Mexico and the company announced that the first game for Virtual Reality (VR) will be developed in 2017. “For the rest of 2017, we see conditions for continued solid growth supported by new games, increasing market shares in the UK, mobile growth, many new customers to be launched and our ongoing expansion in North America.” During the first quarter the company signed 15 new customers and launched six new customers. It has since rolled out its games in Serbia through operator Mozzart, and will soon launch in Canada through the British Columbia Lottery Corporation (BCLC).

“Our online business continues to deliver growth thanks to the improvements in products, user experience and marketing we have made” Philip Bowcock, William Hill

PADDY POWER BETFAIR 15% Net revenue (£) Q1 2016

Q1 2017

Change

Sports

135m

163m

21%

Gaming

60m

61m

1%

TOTAL

195m

224m

15%

There was a solid performance from Paddy Power Betfair’s online division as revenue grew 15 per cent to £224m, representing more than half of the group’s total revenue of £416m during Q1. Online growth was primarily driven by a 33 per cent increase in sportsbook revenue, with its betting exchange seeing growth of seven per cent. The operator explained that its sportsbook results were slightly behind expectations in the quarter, but was up year-on-year due to the impact of adverse sports results in 2016, most notably at Cheltenham. Online gaming revenue increased marginally to £61m, with the company again noting that revenue was below expectations as it continues to focus on improving the performance of its products. Approximately 91.5 per cent of Paddy Power Betfair’s online revenue was generated in regulated markets, marginally up on


F I NA NC E

GIQ20 Q1 2017

JACKPOTJOY 11% Net revenue (£) Q1 2016

Q1 2017

Change

Jackpotjoy (incl. Starspins and Botemania)

44.5m

50.7m

14%

Vera&John (incl. InterCasino)

13.9m

15.7m

13%

5.8m

5.0m

-14%

64.2m

71.4m

11%

Mandalay TOTAL

last year’s 90.8 per cent. The company recorded year-on-year growth across all three of its other businesses. Retail revenue rose 23 per cent to £82m, while the Australian business saw revenue climb 47 per cent to £85m. US revenue was up 12 per cent to £25m with TVG revenue up five per cent to $21m and the operator’s New Jersey online casino contributing £4m. “Reversing the trend of the past two years, results at Cheltenham 2017 favoured bookmakers and this contributed to good revenue growth,” said chief executive Breon Corcoran.

GVC HOLDINGS 12% Net revenue (€) Q1 2016

Q1 2017

Change

Sports brands

152.9m

177m

16%

Gaming brands

53.9m

56.0m

4%

8.9m

10.5m

18%

215.6m

241.0m

12%

B2B and non-core TOTAL

There were decent returns for London-listed GVC Holdings, which saw revenue increase 12 per cent to €241.0m in the first quarter. Daily net gaming revenue (NGR) hit €2.7m in the first quarter, derived predominantly from GVC’s sports betting brands which saw daily NGR rise 16 per cent to €1.9m. During Q1, customers wagered an average of €12.9m per day. Daily sports NGR amounted to €948,000, up 12 per cent, while the operator’s brands also recorded strong growth in daily gaming NGR, GIQ Q2 REVIEW

which climbed 19 per cent to €1m. “I’m delighted at the performance of the group, with the positive momentum continuing in 2017,” GVC chief executive Kenneth Alexander commented. “Comparatives will get more challenging as we move through the rest of the year, particularly in the absence of a major football tournament this summer. “However, I’m very confident that the combination of continued enhancements to the customer offering combined with a return to more normalised marketing spend will deliver another year of strong progress at GVC.” The future also looks exciting for GVC’s bwin brand, with a ground-breaking deal signed in June (see page five for more) to launch in the lucrative Russian market and a new partnership with leading German football club Borussia Dortmund.

London-listed online bingo and casino operator Jackpotjoy continues to make good progress in executing on its strategy across its portfolio of brands, which combined to generate revenue of £71.4m during the quarter. This was up 11 per cent versus a year ago, with revenue from the operator’s core Jackpotjoy brand (including Starspins and Botemania) increasing by 14 per cent to £50.7m, representing 71 per cent of the company’s total. Revenue from Vera&John (including InterCasino) rose 13 per cent to £15.7m, offsetting a 14 per cent decline from Mandalay to £5m as results were impacted by a reduction to on-site promotional spend in preparation for the introduction of the UK Point of Consumption tax, when bonuses will be subject to taxation. “The past quarter has been an exciting time for the group as we have settled into our new home on the London Stock Exchange,” said chief executive Andrew McIver.

BETSSON 10% Net revenue (SEK) Q1 2016

Q1 2017

Casino and games

669.1m

822.9m

23%

Sportsbook

292.8m

250.3m

-15%

38.2m

28.8m

-25%

1,000.1m

1,102.0m

10%

Other TOTAL

Change

Betsson suffered from a 15 per cent drop in revenue from its sportsbook during Q1, although a strong performance from the company’s casino and games products helped total revenue improve 10 per cent year-on-year. Casino and games revenue grew 23 per cent to SEK822.9m, including a SEK7m contribution from new acquisitions NetPlay TV and Premier Casino. The casino vertical now represents 75 per cent of total revenue, up from a 67 per cent share a year ago. Gross turnover in sportsbook fell by 10.5 per cent to SEK6bn, with revenue down 14.5 per cent to SEK250.3m due to negative currency fluctuations and a high proportion of player-friendly 67


F I NA NC E GIQ20 Q1 2017

results in the major football leagues. Other revenue, which now includes online poker, fell by 25 per cent to SEK28.8m for the period. Betsson’s mobile channel continues to perform well, with revenue up 36 per cent to SEK533m and now accounts for 48 per cent of total revenue. Revenue from locally licensed markets rose 68 per cent to SEK223.2m, representing 20 per cent of total revenue, up from a 13 per cent share a year ago.

AMAYA 10% Net revenue (US$) Q1 2016 Q1 2017 Poker

Change

216.4m

218.7m

Casino and sportsbook

60.1m

86.8m

44%

Other B2C

12.0m

11.9m

-0.1%

288.5m

317.3m

10%

TOTAL

1%

A return to growth from its core online poker offering helped PokerStars owner Amaya to a 10 per cent increase in revenue during the first quarter. Toronto-listed Amaya, which will soon change its corporate name to The Stars Group, saw online poker revenue rise one per cent to $218.7m, representing 69 per cent of the company’s total quarterly revenue, down from a 75 per cent share a year ago. The operator’s expanding online casino and BetStars-branded sportsbook businesses continued to perform well, generating revenue of $86.8m for Q1, up 44 per cent compared to the same period last year. Other B2C revenue amounted to $11.9m. “We continued our momentum in the first quarter as we execute on our strategy and reinforce the foundation for sustainable and diversified revenue growth, including through the strengthening of our core management team and operations,” said chief executive Rafi Ashkenazi.

GOING DOWN… There were six companies that saw revenue decline in Q1, with Frankfurt-listed Zeal Networks the worst performer. Results for the online lottery broker were impacted by a €15m jackpot payout via its MyLotto24 subsidiary in March. Despite the large pay-out, Zeal said that the underlying performance of the business remained strong with billings up three per cent to €68.4m. The company also made progress with the further internationalisation of its business, launching lottery betting in Ireland and receiving charity lottery licences in Norway and the Netherlands (see page 25 for more). mybet Holding endured another difficult quarter in the first three months of the year, but remained on course to “break the downward trend” with its focus now firmly set on expanding its Amelco-powered sports book. The operator made the switch to the new betting platform during Q1, although the deployment came too late to aid revenue growth during the period, which also saw a high number of winning results. Toronto-listed social casino operator Tangelo Games saw revenue drop 17 per cent as monthly paying user numbers fell by 3,000 to approximately 56,000 users. Chief executive James Lanthier said that while Q1 revenue experienced an initial dip, revenue recovered near the end of the quarter and continued to trend positively into the second quarter.

International Game Technology (IGT) completed the sale of DoubleDown Interactive to South Korea’s DoubleU Games in early June, after the social casino business again struggled during the first quarter. Revenue fell by 15 per cent to $67.9m, with daily active users and monthly active users both registering significant declines, down 22 per cent and 18 per cent respectively to 1,455,000 and 3,525,000. New York-listed Inspired Entertainment saw its results during the period impacted by negative foreign exchange movements which pushed revenue down eight per cent compared to last year. The adverse movements offset growth in the company’s served-based gaming (SBG) and virtual sports products, without which revenue would have been up nine per cent yearon-year. The first quarter marked the first year-onyear decline for Big Fish Games since being acquired by New York-listed Churchill Downs Incorporated (CDI). Revenue fell by eight per cent to $112.0m, with social casino continuing its recent downward trend with a three per cent drop in revenue to $46.2m. The TwinSpires online betting business performed well however and saw revenue improve five per cent to $52.3m. Including its racing and land-based casino businesses, CDI’s total revenue for the quarter was down three per cent to $279.5m.

Net revenue Company

Q1 2016

Q1 2017

Churchill Downs Incorporated

% Change

$172.0m

$164.3m

-4%

Inspired Entertainment

$30.4m

$28.1m

-8%

IGT (DoubleDown only)

$80.1m

$67.9m

-15%

CAD$10.9m

CAD$9.0m

-17%

mybet Holding

Tangelo Games

€12.5m

€8.9m

-29%

Zeal Networks

€38.6m

€24.1m

-38%

KAMBI GROUP 7% Net revenue (€)

TOTAL

Q1 2016

Q1 2017

Change

13.3m

14.2m

7%

The Stockholm-listed sports betting supplier posted growth of seven per cent in the first quarter, although results were impacted by the lowest trading margins in its history. Revenue growth was driven by a 27 per cent increase in operator turnover, although the supplier’s results were affected by “an exceptionally low” trading margin of 5.9 per cent after including 68

marketing deductibles. The company attributed this to player friendly results in the major football leagues during the latter part of the quarter, where pre-match accumulators further accentuated the negative outcome. “It is in the nature of the business for the trading margin to fluctuate between quarters depending on the result of sporting events,” explained CEO Kristian Nylén. “The underlying strong performance and momentum within the company is unaffected by these events. This makes me confident in our strategy and business model which creates value for our operators.” n

“It is in the nature of the business for the trading margin to fluctuate between quarters depending on the result of sporting events. But the underlying performance within the company is unaffected by these events” Kristian Nylén, Kambi


C O LU M N AND ANOTHER THING...

Is there a future for betting shops? OPINION Steve Donoughue

It’s time for the industry to stop using retail as a crutch and instead bring focus and resources online

W

hen the Triennial Review is published in the autumn, I am predicting that the government in power will reduce FOBT stakes to £10 or £20, which will effectively end their role in being a lifesupport machine for retail bookmaking. Much like cafés in bookshops and Click & Collect in department stores, I believe FOBTs have provided the customers and money to cover up the fact that the future of betting is mostly digital. We will soon see a massive structural shift away from retail, leaving a large, redundant betting shop estate. The writing has been on the wall for retail betting since the advent of internet betting in the mid-1990s. I can remember writing about the next steps for betting shops back in 1999. Admittedly it has taken some time for the shift to happen. The uptake in remote gambling didn’t really start until 2013 ,when mobile betting exploded. I think it can be argued that before that, PC-based online gambling had brought betting a new audience of younger, more affluent customers. The thing with mobile is that it’s rapidly becoming the tool of choice for the older less-affluent traditional betting shop customers. Just as with the rest of retail, more people are deciding to not venture on to the high street to conduct their transactions, and are preferring to do it from the comfort of their own homes, or, more likely with betting, while watching the football in the pub. What is very apparent is that over the last few years the majority of the money going into betting shops has been going into the machines. 70

According to Gambling Commission statistics, in 2008/09 over the counter (OTC) gross gambling yield (GGY) was £1,658m, with machine GGY at £1,071m. By 2015/16 OTC GGY was £1,413m, with machine GGY at £1,743m. OTC has gone down by 14.7 per cent, machines are up by 62.7 per cent and combined GGY is up 15.6 per cent over seven years. Not great combined growth over a period of deregulated advertising but understandable due to growth in remote. If we take away a substantial part of the machines’ revenue – as FOBTs will be near enough gone by 2018, and with self-service betting terminals never, unfortunately, going to take their place – what you have is essentially a flat retail business with a customer base that is rapidly shifting channel. Becoming onlinefirst is better as your cost base is far lower but it does leave the question, what do you do with the shops? I can easily see 4,000 shops disappearing over the next five years. Half of these because bookmakers have been saying for the last 16 years that shops are of marginal profitability, and another 2,000 because of the scale of the shift at hand. You can argue that the first 2,000 is the cost of the FOBTs and the second due to structural changes, with a growing

eviction order on the rest. The rest being just under 5,000 shops, less than a third of peak betting shops in the 1970s. So the question is, what do you do? Do you do the same and add some tweaks or go big? My belief is that over the next few years we will see the ‘big three’ operators making tweaks to the retail offer while slowly scaling down operations in the channel. Why? Because I don’t believe they have the vision to come up with entirely new retail concepts that the new world needs. That isn’t entirely their fault, because a lot of what is necessary involves regulatory change, and with their dismal track record in parliamentary affairs, as evidenced by FOBTs, they don’t have the friends in Westminster to get the changes necessary. My ultimate goal would be alcohol in ‘sports bar’ betting shops, which I admit would be like climbing Everest on your fingertips to achieve. Something of this conceptual magnitude is how you embrace the structural challenges ahead. Tinkering achieves nothing. My first recommendation would be some major expense on corporate social responsibility projects. No real change can happen until the bookmakers are no longer seen as political pariahs. n


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Profile for Gaming Intelligence Quarterly

GIQ - Gaming Intelligence Quarterly Jul-Sep 2017  

The global gaming industry's leading source of independent news and analysis. Brought to you by Gaming Intelligence.

GIQ - Gaming Intelligence Quarterly Jul-Sep 2017  

The global gaming industry's leading source of independent news and analysis. Brought to you by Gaming Intelligence.