• OCTOBER 2017 • US SPECIAL
US SPECIAL Exclusive interviews with DraftKings, Golden Nugget, Caesars, Gamblit, GameCo, William Hill US, IGT, Sports Integrity Alliance, LottoGopher, Ifrah Law
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
THE GOLD STANDARD OF IGAMING REGULATION New Jersey set the model for others to follow. David Rebuck explains how
HOW ESPORTS, SKILL GAMES AND MOBILE CAN BOOST CASINO REVENUE
GIQ US SPECIAL
4 Snapshot Top stories, top quotes, top deals and deal of the quarter 6 Thought leadership Scientific Games, Authentic Gaming and BetConstruct 12 People Caesars’ new strategy and M&A chief, Mark Daly 14 Lottery LottoGopher and the rise of lottery messenger services 17 Technology & new products MGM launches VR area; Nektan rolls out US mobile product 18 Games The games launching in time for G2E 22 Legal & regulatory Jeff Ifrah sets out what happens if the Supreme Court repeals PASPA 24 Daily fantasy sports DraftKings pushes ahead of FanDuel in the battle for DFS supremacy 30 Pennsylvania The ideological battle delaying iGaming legislation 32 New Jersey’s Gem How Thomas Winter has helped transform Golden Nugget from a late launcher to New Jersey’s iGaming market-leader 40 New Jersey gets ready for sports betting NJ Division of Gaming Enforcement’s David Rebuck discusses how he is preparing for legal sports betting 46 Keeping the lights on in Las Vegas How land-based operators can attract a younger clientele to Sin City 60 Finance New Jersey and Delaware’s iGaming numbers under the microscope 62 And another thing… US Sports Integrity Alliance CEO Matthew Cullen on the progress towards legal sports betting
E D I TO R
THE IGAMING IMPASSE A MING IN TELLIGENCE HAS been reporting on the US casino market for more than 10 years, from the clampdown on iGaming in 2006 to the rise of social casino in 2011 and the emergence of daily fantasy sports in 2015. However, the wave of stateregulated iGaming which was predicted when Delaware, Nevada and New Jersey moved online has failed to materialise. Not for a lack of trying. Over that time new bills have been introduced in numerous states, debated, then shelved, with too many competing interests to push forward legislation. This void was filled by social casino, which exploded onto the scene then quietly began to fade. Daily fantasy sports enjoyed a brief moment in the sun, but is now trying to evolve in the face of regulatory scrutiny (see page 24). Oh, and now there is eSports. The hype that accompanied social casino and DFS has somewhat dampened the enthusiasm for eSports, which some view as a fad, but scratch beyond the surface and the world’s newest ‘sport’ appears to be a natural fit for casinos. It could be one of three major new revenue streams, alongside skill games and on-premises mobile gaming, for the land-based sector. Casinos are not exactly
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struggling, but growth in entertainment and hospitality appears to have come at the cost of gaming revenue. We look at how operators can address this on page 46. So where will the next 10 years take us? We await the opening of new state markets, especially as they now have an excellent regulatory model to follow. New Jersey Division of Gaming Enforcement Director David Rebuck explains on page 40 how he and his team have developed the Gold Standard for iGaming regulation in the US.
Since 2006, new bills in various states have been introduced, debated, then shelved Casinos would be advised to look close to home when launching in a new market. Golden Nugget has muscled its way to the top of New Jersey’s iGaming industry, despite being one of the few offerings not backed by a European partner. The operator’s iGaming chief executive Thomas Winter reveals the secret to the operator’s success on page 32. The regulatory milestones that many predicted have not yet come to pass, but the US casino industry remains a fast-moving, innovative and progressive one. It’s hard to tear your eyes away. n
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GIQ US SPECIAL 2017 SNAPSHOT
Snapshot most popular news stories on GamingIntelligence.com Blog: A reality check for the UK gambling industry Aristocrat begins search for new Las Vegas-based finance chief GameCo partners Bandai Namco on Soulcalibur video gambling game London-listed Paysafe Group at the centre of M&A activity Blog: Breon Corcoran leaves to a hero’s fanfare, but what of the inheritance? PokerStars owner begins new era as The Stars Group MGM Resorts names Marcus Glover as president and COO of Borgata AutoLotto raises $17m to develop mobile lottery app Gaming Innovation Group acquires Scandinavian affiliate Stk Marketing Camelot outlines plan for private management of Illinois Lottery
Quote of the Quarter
It’s commonly mistaken that all gamers are introverted nerds who prefer to play video games alone in a dark basement” Kingsley Edwards, CEO, Leet (see page 50) 4
Are young people being priced out of Las Vegas? LAS VEGAS CASINOS are introducing new games and concepts to attract younger adults to their venues, but one simple factor may make their efforts futile. On page 46 we discuss how the average Vegas patron is getting older. According to the Las Vegas Convention and Visitors Authority (LVCVA), the average age of a visitor in 2016 was 47.4 years old. That is a big improvement on the average age of 50.6 years old recorded in 2008, and the lowest in the past decade, but can it be maintained or built on? Three quarters of Las Vegas visitors earn more than $40,000 a year, with a quarter earning upwards of $80,000. The average salary for people aged 25-34 years old in America is $39,416, according to the Bureau of Labor Statistics. Travel and accommodation in Las Vegas was once heavily subsidised, but only 11 per cent of visitors last year received a special rate when booking online via a travel agent. Only 12 per cent received a special casino rate or comp. At the same time, the average cost of a three-night travel package to Las Vegas has climbed 24 per cent over the past five years to $921. Alongside higher airfare costs, hotel rooms are also a lot more expensive. In 2002
the average room rate in Las Vegas was $77 a night. Last year that had increased by 64 per cent to $126 a night. Add in average local transport costs, food and beverage spend, shopping and a show ticket, and a visitor will have spent over $1,700 on their Las Vegas trip before they hit the casino floor. For the much feted millennial demographic, that represents almost five per cent of their gross annual salary. It is little wonder then that young adults would instead seek out entertainment options closer to home, where their money can stretch a lot further. eSports tournaments, skill games and virtual reality lounges will go a long way in attracting the younger players to Las Vegas, but will they be enough to attract them to the city in the first place?
It is little wonder that young adults would seek out entertainment options closer to home, where their money can stretch a lot further
GIQ US SPECIAL 2017
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Madison Square Garden acquires eSports team ESPORTS IS TO become the first major sport to break the hedgemony of football, baseball, basketball and ice hockey, and there is no shortage of companies rushing to secure a stake. The latest is New York-based sports and entertainment business The Madison Square Garden Company (MSG), which has acquired one of the sports’s bestknown teams, Counter-Logic Gaming (CLG). MSG has acquired a controlling interest in CLG for an OF THE undisclosed sum, with plans to use QUARTER its to spearhead the development of professional eSports in the US. “As eSports moves towards franin developing marketing partnerships, chise league models similar to the NBA media rights deals, event operations, tickand NHL, we intend to leverage our insight into eting, merchandise and fan engagement. the business of professional sports to play an MSG will also look to grow CLG’s fanbase active role in the development of this exciting through cross-promotional activities with industry,” explained executive vice president other sports teams owned by its MSG Sports of MSG Sports Jordan Solomon. subsidiary, including the New York Knicks CLG will be able to tap into MSG’s expertise and New York Rangers.
THE QUARTER’S DEALS IN 60 SECONDS Scientific Games has strengthened its mobile development capabilities with the acquisition of UK-based developer Red7 Mobile. The company develops solutions in multiple verticals, including slot and table games. It also provides sports betting middleware for user experience and user interface development, and in-play statistics and odds feeds through partners such as Perform Group, Sportradar and OpenBet. Scientific Games has also acquired supplier and long-term business partner Lapis Software. New Jersey-based Lapis develops SG’s gem Intelligence and gem Retailer business intelligence solutions and works predominantly in the lottery sector. Las Vegas’ iconic Stratosphere Casino, Hotel and Tower has a new owner after its parent company was acquired by New York-listed operator Golden Entertainment. Golden Entertainment acquired American Casino and Entertainment Properties (ACEP) in a $850m deal that also takes control of Arizona Charlie’s Decatur, Arizona Charlie’s Boulder and the Aquarius Casino Resort in Laughlin, Nevada. Canadian lottery supplier Pollard Banknote has finally agreed terms on a $51m deal to acquire US SPECIAL REPORT
Innova Gaming Group. Months of discussions concluded with Innova’s board unanimously approving Pollard’s CAD$2.50 per share offer. “We are very pleased to have the support of the Innova board and look forward to combining the strengths of our two companies” Pollard Banknote co-CEO John Pollard said. Private investment fund Orange Capital Ventures has struck a deal to acquire Toronto-listed gaming technology provider Gaming Nation. The deal values Gaming Nation at approximately $44m and will see the business delisted. The company owns electronic real-time raffle system 5050 Central, in-stadium betting operator BD Sport Group and media sites Fantasy Guru, Fantasy Guru Elite and Pick Nation. Private equity firm Z Capital has acquired US publisher and horse racing betting provider Sports Information Group (SIG). SIG publishes the Daily Racing Form and operates the Xpressbet-powered advance deposit wagering service DRF Bets. Following the acquisition, SIG appointed Richard Glynn, former chief executive of British bookmaker Ladbrokes, to its board of directors.
The quarter in numbers FINANCE
Online wagering spend in the past 10 years
Scientific Games online revenue in H1
Golden Nugget NJ iGaming market share in July M&A
Aristocrat purchase price for social gaming giant Plarium REGULATORY
US states to have legalised DFS
Illegal bets placed on NFL and college games this season
US states ready to move if PASPA overturned BUSINESS
iGaming brands live in New Jersey
US social casinos powered by Greentube’s BlueBat Games 5
GIQ US SPECIAL 2017 SPONSORED EDITORIAL
Going with the crowd Scientific Games’ ONE Voice™ market research solution is still relatively new, but it is already proving the benefits of effective feedback for lottery operators. By crowdsourcing feedback on games and concepts from players, lotteries can get a better understanding of what customers want from their products
INSTANT WIN GAMES walk the line between the lottery and traditional gaming. Some of the most passionate instant players will never touch other lottery products. Others are interested, or active, in other forms of lottery gaming, or even other gaming verticals. The challenge facing suppliers, operators and retailers is how to attract these players from one vertical to another. What gameplay will attract them? Are there any brands that are particularly appealing? Are new game concepts needed? Billions of dollars in potential revenue could await lotteries if this conundrum is cracked. This sort of data is occasionally highlighted in market research reports, discussed, debated and then disregarded. With its ONE Voice solution, Scientific Games is aiming to help operators acknowledge and act on these findings. Through the online market research community, Scientific Games is building engaged focus groups that can regularly provide feedback on concepts and products. This, the company believes, creates a more immediate call to action for its customers.
“With an online panel you can gain far more reactions and feedback, and this goes beyond tracking studies and focus groups,” says Cameron Garrett, Scientific Games director of market insights. The launch of ONE Voice was prompted not only by technological developments, but also by frustration at inefficient existing market research processes. “The way it was working is we would facilitate a lot of research with lottery customers directly, only to find that this work was being handed off to a research vendor,” he says. “We’d get the results back, there would be a presentation, and results would be looked at once, then put on a shelf.” Today, however, people “live their lives online”, Garrett explains. Consumers are more willing to participate in online surveys and research products – provided they are incentivised properly. With the technology available to build these research communities, Garrett says that Scientific Games simply moved to fill a big gap in the market. “If we had been able to build this 20 years ago, we’d have been using it 20 years ago,” he says. The company has led the industry for decades, with consumer research technologies driving game planning and portfolio management for its customers. The key focus is building up the community, which is handled by Scientific Games’ director of consumer insights Ambika Jack. Players join from a range of channels, primarily lottery players’ clubs, since these players are already playing lottery games, as well as from panel members recruiting their friends. “I think the health of this underlying community is one of the most important considerations,” Garrett says. “Are players engaged? Do we have a representative sample? Is there too much churn? “These are real people, so we have to catch their attention, not bore them, and compensate them properly,” he explains. “One of the ways this industry has an advantage is that gaming is inherently exciting – this is something people are passionate about.” Ga r ret t believes t hat one of the most important data points highlighted
GIQ US SPECIAL 2017
by ONE Voice to date is the fact that player segmentation is often wrongly skewed. Rather than breaking down players by demographic or behaviour, users should be grouped by motivations. “We see clear splits when we look at motivations rather than breaking down players by age or gender,” he says. “If you’re a young male or middle-aged female, I already expect that you are going to play every so often without spending a lot of money, but we as an industry need to find where the money is in each of those segments. And to do that we need to quantify the value of individual players and understand their interests.” “ Underlyi ng motivations for each player may not change, but when other games or products emerge that conform to these motivations, that can take a greater share of their wallet, which is a danger to Scientific Games and the industry as a whole.” The company was one of the first suppliers in the lottery industry to be certified by the World Lottery Association for responsible gaming practices. For example, a number of players may say they play lottery or casino games for entertainment. They are going to spend their money on what they feel is most entertaining. Fringe products such as daily fantasy sports, which effectively allow them to combine the entertainment of gambling-style mechanics with watching sports and what is effectively a sports management simulator, may then take wallet share from lotteries. US SPECIAL REPORT
is a massive effort that takes time. The way The players can essentially gain more gaming customers interact is different to entertainment from playing daily fantasy. how we interact with lottery customers. “Each individual only has one wallet and We’re working with several one budget after all,” Garrett lottery customers to estabsays – meaning lotteries have lish these panels, and it’s to react to retain and engage probably not going to be until these players. Otherwise they late December 2018 when risk losing them. we have the results back “A big success of ONE Voice and analysed. has been the validation of hav“We’re still at the building ing timely and dynamic data,” phase. We’ve seen a lot of interGarrett adds. “We can be much esting reactions to concepts, quicker to move. We can get some that work very well, or much more granular, visualothers that aren’t understood, ise findings, and put it into our and we’ve now got to expand ONE Voice dashboards to feed that and dig into it.” it directly through to our lotDespite its infancy, ONE tery customers.” Voice is already helping W h i l e G a r r e t t m ay “We need to find Scientific Games and its be focused on gathering lottery customers to optiinsights for Scientific Games’ where the money is. mise instant games, delivLottery division, he says the And to do that we ering an optimal portfolio data can be leveraged across need to quantify the of games that appeal to each the company’s Gaming and value of individual lottery’s unique community Interactive business. players and of players. This makes the whole understand As the size of the panel process cost-efficient as well their interests” grows and research techas helping to identify areas niques are refined, ONE for cross-selling between Cameron Garrett, Voice looks set to become segments. WILLY WONKA™ Scientific Games an indispensable tool for branded games, which have lotteries to test game concepts and select only proven successful in lottery products and in the best performing titles to add to their game land-based casinos, are a key example of this. plan. In this way, lotteries can offer games they Yet Garrett is keen to stress that this is only know their players want, rather than what early days for the ONE Voice solution. “We’re they believe they want. n still laying the groundwork,” he says. “This 7
GIQ US SPECIAL 2017 SPONSORED EDITORIAL
The real deal Authentic Gaming has revolutionised the live dealer sector in a matter of months, putting its partners in the driving seat to capitalise on the vertical’s growth, says head of sales and B2B Magdalena Podhorska
For operators to capitalise on the huge potential live casino presents, they must offer their players the most authentic and engaging experience on the market 8
DESPITE ENTERING THE sector with its first commercial launch less than a year ago, Authentic Gaming has already taken significant steps towards completely revolutionising the live dealer market. Its innovative Authentic Roulette product takes live table games to the next level, delivering unrivalled authenticity, engagement and excitement to players. The supplier’s business model is unique in that it caters to both land-based and online operators in terms of partnerships and revenue optimisation. Authentic Roulette enables land-based casino operators to stream games from tables located on the gaming floor to a theoretically unlimited number of online players. This is done via Authentic Gaming’s network of B2B online casino partners, which includes all Kindred Group brands, Mr Green, LeoVegas and more. There are plenty of upsides for online operators too, such as offering their players a unique product that is highly sought after in today’s live casino sector, allowing them to capitalise on the rapid rise in revenues the vertical is seeing. Authentic Roulette studio-based live roulette games are not just realistic, they are actually real. The casinos are real, the tables are real, the cards and chips and balls are real, as is the dealer. But, most importantly, the other players around the table are real; patrons who have just walked in through the casino door and sat down at the table to play. The power of its products, which include side bets and the industry-first Live! Entertainment platform, have seen it strike major operator deals in recent months. Most of its partners now take advantage of its full suite of products, including Lucky Ball side bets which offer payouts of up to 120:1. Four Lucky Ball wagers are offered, each defined by a colour – green, blue, orange and purple. Green pays out at 120:1, blue at 100:1, orange at 75:1 and purple at 60:1. All of Authentic Gaming’s partners also gain access to its Live! Entertainment platform, which allows operators to stream live
events to players while they wager. To showcase the flexibility of Authentic LIVE! Entertainment, the supplier recently hosted a twoweek live cabaret extravaganza performed at the Casino International at Hilton Batumi. Performances were streamed each night over the two-week schedule, and included acts such as the IT Girls from London and the Paris Cabaret Group. The performances were a big hit among players, adding significant value to their live casino experience by placing them at the heart of the action. LIVE! Entertainment Cabaret Weeks resulted in a 50 per cent increase in player sessions and a near doubling of gameplay during the shows, with a significant number of new players acquired through the initiative. These are just a couple of examples of the provider’s ground-breaking approach to live dealer. The live casino market is expected to be worth in excess of €1.9bn per year in Europe alone by the end of the decade. This is being driven by the migration of land-based players to online, and online players seeking out a more authentic experience. Studio-based live dealer games have certainly moved the needle when it comes to adding additional value to the table game experience, but they simply can’t compete with those streamed from the floors of realworld casinos. For operators to capitalise on the huge potential live casino presents, they must first offer their players the most authentic and engaging experience on the market. And when it comes to doing this, Authentic Gaming is very much the real deal. n
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GIQ US SPECIAL 2017 SPONSORED EDITORIAL
BetConstruct gunning for growth at G2E
BetConstruct can offer a complete suite of solutions to help any US operator make a success of moving online, says CEO Vahe Baloulian
AS WE LOOK to expand into the US, we will up for an all-in-one package. Be it marketing, not be seeking approval from individual states. customer service, risk management or legal Our focus is on providing technology and sersupport, BetConstruct is your down-to-earth, vices to the operators who have secured such flexible and friendly one-stop shop. approvals, and work with them to satisfy their We eliminate the need for outside consultregulatory requirements. A significant part ants. By partnering with us, the operators gain of the US gaming market is controlled by the access not only to technology and services, but Native American tribes, so we are working on also to all know-how they require to dominate a very promising project with the Tribal Gamtheir markets. ing Network. Our experience in other markets gives On the land-based side, our sportsbook us a good grounding as we look to establish technology is in the process of being licensed BetConstruct in the US. After all, any expein Nevada by a local supplier, which aims to rience is valuable if you don’t ignore its lesprovide sports betting services to Nevadasons. Every interaction prepares you for the based casinos. next one. BetConstruct’s sophisticated product Having lived here for almost 30 years, I portfolio includes fantasy sports, skill games recognise that the US is a peculiar market. and social gaming. All these For many reasons, it is are very popular entertainunlike any other market in ment choices in the US and which we have been active. By partnering have been regulated by It dictates its own rules on with us, operators many states or require no different levels. The comgain access not regulation at all. plexity of being able to cater only to technology When it comes to online to a myriad of cultures is not gaming, the US is a very helped by the requirement to and services but immature market. Many adhere to numerous regulaalso to all the potential US operators are tory regimes. It’s like being know-how they not familiar with the intricain 50 countries at once. As a require to dominate cies of running online gamcompany active in multiple their markets ing operations. They need markets around the world, technology and products this is hardly new to us. that are cutting-edge yet straightforward to Hence why G2E is such a big opportuuse. This is where we can help. nity for us, not just to meet new potential USOur Spring BME (Business Management focused clients, but also to look for new partEnvironment) meets these demands elegantly ners further afield. and with very little effort. The operators also G2E is a very international show. It maybe need a partner who understands the local envitilted towards the Western Hemisphere a litronment and appreciates its complications tle but nevertheless is a truly global gathering and opportunities. We are that partner, and of the gaming industry. That’s why here we our Los Angeles office was established to be present not only what’s relevant to the US maras close to our operators as possible. ket but also our entire line-up, from sportsbook Unlike some suppliers, BetConstruct is a to virtual reality, and from data services to our full-service company. This means that we prolive dealer studios. vide absolutely everything the operator needs G2E has always yielded good results for to succeed. And we do it in a modular way. This BetConstruct. Last year we were extremely allows customers to pick and choose the solubusy and that called for a bigger stand this tions they require, rather than having to sign year. We hope to build on this dynamic. n
GIQ US SPECIAL 2017 PEOPLE
A new beginning for Caesars New senior vice president of strategy and M&A Michael Daly reveals what to expect from Caesars as it emerges from bankruptcy and restructuring MICHAEL DALY JOINED Caesars as senior ments as a principal across business cycles, vice president of strategy and M&A in July this global geographies and industries.” year, following a major restructuring. One of the biggest single factors in the He says that what attracted him most Caesars restructuring was the $4.4bn sale t o C ae s a r s wa s t he t e a m . “C ae s a r s of social gaming powerhouse Playtika to a Chipresident and CEO, Mark Frissora, and Eric nese consortium. While the sale represents a Hession, Caesars CFO, have assembled a massive 5,400 per cent uplift on the $80m it terrific group of industry experts who have paid for the Israeli company in 2011, it leaves built a culture of creativity with a resultsCaesars almost bereft of any interactive driven approach. The company is a market assets whatsoever. leader with great brand value, and these assets It relies on 888 Holdings to power its interacgive me the opportunity to apply my skills in tive offerings in Nevada, which are very small, a new and different way. Caesars is in an and in New Jersey, which generated $38.7m in exciting, multifaceted, heavily regulated and net gaming revenue during 2016. Daly claims complex industry with limitless opportunities the company still sees opportunities and value for expansion.” in social gaming as an extension of its prodDaly sees an opportunity to “reinvigorate” ucts and services – also as a new medium for the world’s most recognisable casino brand customer engagement and as a vehicle to drive name after two years of continued growth. Chapter 11 proceedings, “Despite this, our ability which culminated in a deal to deploy capital into these “We will be exploring with creditors in January areas was significantly conadjacencies that this year. strained due to the restrucallow the company He joins Caesars after turing,” he admits. “With to leverage its 12 years at General Elecour expected near-term tric’s former financial emergence and very positive competencies in services unit GE Capital, past experiences in the seggaming, hospitality, where he was responsible ment, we’ll seek to explore food and beverage, for strategy, M&A and corinvestment opportunities and entertainment” porate development. over time. I’m excited not Michael Daly, Caesars While he has gained only by the opportunities considerable experience in but equally in the company’s hospitality, franchising restaurants and hotels, demonstrated discipline to cultivate a new platand real estate from his time at GE Capital, he form and not ‘integrate’ it – often a tempting reacadmits that the intersection of gaming and hostion to new and potentially disruptive ideas.” pitality is new to him. However, GE Capital was This is an interesting strategic gambit. It spun out of General Electric two years ago after has proved wildly successful for Caesars in the industrial conglomerate completed its own one sense – financially – and you could argue restructuring. that it saved the company. However, the small “In terms of transferable experiences and number of US casino operators who are enterskills, like Caesars, GE is a large, dynamic set ing the interactive or social market, are doing of businesses that compete and win in heavily so with the plan of cross-selling interactive regulated industries through customer focus, products to land-based clientele and vice versa. commercial intensity, process rigour, financial This requires a certain degree of integration. discipline and integrity, and embraces change Indeed, land-based gambling operators as an accelerator of success,” says Daly. in more highly developed internet gambling “I expect to leverage these foundational markets such as the UK’s bookmakers, are building blocks along with deep functional looking to integrate their internet and landexpertise, having closed over $125bn of acquibased operations with a so-called ‘omni-chansitions, divestitures, alliances/JVs and investnel’ approach. This sees identical products 12
offered online and offline and a linkage in accounts that allows bonuses and promotions to be offered on mobile, web and retail. Caesars might be back to square one when it comes to social and interactive gaming, but what else does it have its eye on? “Once Caesars Entertainment emerges from bankruptcy this fall, the company will have significant runway to reinvest in existing properties and grow through organic development and acquisitions,” says Daly. “While we aren’t yet ready to make formal announcements, what I can say is that we will be exploring adjacencies that allow the company to leverage its core competencies in gaming, hospitality, food and beverage, and entertainment in ways that enhance our value proposition and continue to delight our customers. “Some of these growth areas will be achieved through acquisition as well as developing partnerships and licensing arrangements. Finally, as consumer tastes and preferences continue to evolve, we will look to meet those needs by investing in new concepts through small investments in white space as a window into the future.” The company will have a significantly deleveraged balance sheet, and a stronger and more efficient operating business with great cash flows and a large day-one cash balance to deploy against its growth initiatives and to return capital to shareholders, he says. “Currently, we expect that the REIT will spin out as an independent company soon thereafter,” he concludes. “While we’ll continue to optimise the company as opportunities arise, we believe this structure ideally positions the company for near- and long-term growth.” n
GIQ US SPECIAL 2017
LIPPARELLI TAKES CHAIR AT GALAXY
IN THE NEWS Gaming executives who have been making the headlines and what’s in their inbox
Tom Delacenserie, president and CEO, Kentucky Lottery
FLORIDA LOTTERY SECRETARY TAKES KENTUCKY CEO ROLE KENTUCKY LOTTERY CORPORATION has named Tom Delacenserie as its new president and chief executive officer. Delacenserie will leave his role as secretary of the Florida Lottery after 17 years. He has big boots to fill, taking over from lottery legend Arch Gleason, who passed away last year, just weeks after announcing his retirement following 23 years in the top job. Delacenserie will be expected to embrace the innovation that has seen Kentucky become one of the few US lotteries to offer interactive sales. He will need it to right a slight 2016 revenue decline. A new mobile app might be just the beginning. US SPECIAL REPORT
Marcus Glover, president and COO, Borgata Hotel Casino and Spa
MGM NAMES GLOVER AS BORGATA PRESIDENT NEW YORK-LISTED CASINO operator MGM Resorts has appointed Marcus Glover as president and chief operating officer of Atlantic City’s Borgata Hotel Casino and Spa. Glover, who has worked at MGM since 2015, replaces Tom Ballance, who took over as executive vice president of operations for MGM Resorts earlier this year. Glover’s challenge will be to retain brand leadership in a market that has been buoyed by interactive gaming but remains unsteady. The closures of rivals has made Borgata stand out further, but the newest, glitziest casino in Atlantic City has been overtaken by the Golden Nugget in the online space. If Borgata is to retain its pre-eminence it will eventually have to up its interactive game, especially if it gets the opportunity to embrace sports betting.
CONNECTICUT LOTTERY NAMES NEW CHAIRMAN NEW CHAIRMAN OF the Connecticut Lottery Donald DeFronzo has no experience in the lottery industry but has a long history of public service – as a mayor, state senator and commissioner of administrative services, among other roles. His immediate task is to find a permanent chief executive officer to lead a lottery that has suffered under the shadow of a fraud scandal in the past two years. The lottery has had two interim CEOs since Anne Noble stepped down in September 2016 during a fraud investigation into a five-card cash-lottery game, which ultimately delivered damning criticism of the lottery’s handling of the matter. DeFronzo will use his political nous to restore the lottery’s reputation but will need to appoint an experienced CEO to get the organisation back on track.
LAS VEGAS-BASED SUPPLIER Galaxy Gaming has appointed former Nevada Gaming Control Board chair Mark Lipparelli as chairman of the board, with Todd Cravens promoted to president and chief executive officer. Cravens succeeds founder Robert Saucier, who will remain with the company as executive vice president of business development and chief product officer. Lipparelli has previously served as a senior executive for several publicly-listed gaming manufacturers, including Bally Technologies, Shuffle Master and Casino Data Systems. He is also a former Nevada state senator. Galaxy Gaming is a relative minnow in the casino supplier space, supplying casino table games to land-based venues, but the appointment of the experienced duo is a sign of the supplier’s ambition. It will be expected to execute on grand growth plans.
SG APPOINTS NEKTAN CEO SCIENTIFIC GAMES HAS appointed former Nektan chief executive Leigh Nissim as managing director of its B2B interactive business, after previous spells at IGT and GTECH. Nissim described the role as a dream job and well he might, given that he now oversees one of the most impressive games catalogues in the industry, assembled through the various acquisitions and mergers of SG, Bally, Barcrest, SHFL and WMS. Given his industry connections, there is no better man for the job. Breaking the hegemony of the European suppliers, which have already established a strong lead over their US counterparts, might be more of a challenge, but perhaps that is the big opportunity for Nissim.
Leigh Nissim, managing director interactive B2B, Scientific Games
GIQ US SPECIAL 2017 LOTTERY
Lottery messengers go online as State lotteries are yet to embrace the internet but other companies are now filling the void, writes Kio Dawson NEW HAMPSHIRE BECAME the seventh US state to legalise online lottery sales in July. But regulatory progress for online lotteries remains slow, resulting in the emergence of a new breed of lottery provider. Last year’s record $1.6bn Powerball jackpot created unprecedented interest in lotteries, and helped to drive the growth of lottery betting operators such as Lottoland and Multilotto. They are not the only ones looking to cash in. Lottery messenger services have been around for a few years, with official messengers purchasing tickets on players’ behalf – effectively acting as a concierge. Fully compliant with the Unlawful Internet Gambling Enforcement Act (UIGEA), their move online
“People are catching wind of what we’re doing. Time is money these days – for us and for our customers. In 2017, convenience is everything” James Morel, LottoGopher
offers US players the chance to play lotteries from the comfort of their own home. San Francisco-based AutoLotto raised $17m in a Series A funding round to support the expansion of its Lottery.com app (see below), a ticket purchasing service for Powerball currently restricted to New Hampshire. WinTrillions, alongside its LottoKings and Trillionario brands, has been acquired by Legacy 8 Gaming. LottoGopher, meanwhile, underwent a successful IPO in Toronto and is working with Lottoland to grow its business Stateside, starting in California. It has ambitious plans to roll out its messenger service in another 22 states. “We were expecting a whirlwind and we got a tornado – in a good way,” says LottoGopher CEO James Morel. “When you’re looking at these long lines at retailers, traffic there and back, and where people have to pay for a ticket with cash, our online ordering system has become a lot more attractive. “With the IPO and marketing starting, people are catching wind of what we’re doing and word is getting out there. Time is money these days – for us and for our customers. In 2017, convenience is everything.”
Morel believes that there is a pressing need to reach millennials and generations accustomed to making purchases online. “Something we learned from our strategic investor and partner over in Europe, Lottoland, was to concentrate on owning the desktop space first,” he says. “They launched in 2013 and are now doing revenue nearing half a billion euros a year, so we tend to follow in their footsteps with the approaches that have worked.” LottoGopher doesn’t put a premium on ticket prices or take a commission on winnings. Its revenue model is based exclusively on monthly and annual membership plans. It is currently working to establish a foothold in California, the second largest US lottery market after New York, before expanding to other states. “The California launch is progressing well. We have a strong foothold in the state and a good relationship with the California Lottery,” says Morel. LottoGopher aims to boost its Californian presence further by partnering professional ice hockey team the Anaheim Ducks to offer promotions to fans. It has also appointed Kevin
CAMELOT OUTLINES PRIVATE MANAGEMENT PLANS IN ILLINOIS
BIG LOTTERY STORIES The quarter’s lottery lowdown 14
CAMELOT HAS SET out its vision for the future of the Illinois Lottery as the sole bidder for the 10-year contract to serve as the lottery’s private manager. Camelot Illinois, a division of Camelot Global, has pledged to increase digital performance and innovate the product portfolio in order to reinvigorate the lottery brand. It aims to introduce an iLottery platform in 2018 alongside a significantly improved retail experience to boost play across digital and retail channels. The operator also plans to introduce new draw-based games and a more focused range of instant products with improved prize structures that increase the chances of winning. Camelot is expected to take over the private management of the Illinois Lottery this year, replacing former private manager Northstar Lottery Group, which has managed the lottery since 2011.
NEW HAMPSHIRE LOTTERY SET FOR ONLINE MOVE NEW HAMPSHIRE BECAME the seventh US state to allow lottery tickets to be sold online after Governor Chris Sununu signed legislation into law in July. The state lottery could be online as early as next year, following in the footsteps of Georgia, Illinois, Michigan, North Carolina, North Dakota and Kentucky – all of which have regulated some form of online lottery sales. The amendment to existing regulations of the sale of lottery tickets was included in HB517. It permits lottery sales via mobile applications or over the internet, with the New Hampshire Lottery Commission set to introduce a number of player protection controls, such as age verification tools and geolocation technology to ensure all transactions are initiated and completed within the state’s borders.
GIQ US SPECIAL 2017
iLottery progress stalls Harrington – one of the original sharks from American TV show Shark Tank – to its board. “He is a huge asset for a number of reasons: he loves getting in front of a camera or a crowd to talk about a product or service; he has a fantastic Rolodex that he’s willing to share, and he knows a lot about the sales funnel,” says Morel. “He helps a company gain traction in the early stages of growth, and we are thrilled he joined our team. He’s made some key introductions that have set up some great promotional programmes we’ll be launching soon.” The future of the US lottery market is slowly moving online, but LottoGopher is in a unique position where it needn’t rely on state regulators to grow its business. “We like our position with each state as a third party – neutral, nimble and helping their lottery programmes reach a new audience,” adds Morel. State lotteries may be far too cautious in moving online, but this presents LottoGopher with a unique opportunity to step in and provide the service that modern customers expect. If it can get it right in California, the rest of the US beckons.
IGT RENEWS CAESARS BRAND LICENSING DEAL
IGT FORMS NEW JV FOR CHINESE LOTTERY MARKET
INTERNATIONAL GAME TECHNOLOGY (IGT) signed an extension to its long-running brand licensing agreement with Caesars Entertainment. It allows IGT to use a number of the operator’s casino brands in the lottery space, including Caesars, Harrah’s, Paris Las Vegas, Rio, Flamingo and Horseshoe. IGT said that the Caesars brands present an opportunity to offer second-chance promotions, giving US customers the opportunity to win trips to resort cities including Las Vegas and Atlantic City, as well as prizes from the operator’s venues. “IGT is happy to extend our partnership with Caesars Entertainment and continue offering lotteries and their players relevant licensed content and unforgettable experiences,” said Michael Chambrello, chief executive of IGT’s North America lottery business. “The Caesars Entertainment brands represent the ultimate in luxury and gaming, and meaningfully resonate with our customers and their players.”
IGT FORMED A joint venture in July with Shenzhen-listed Telling Telecommunication to provide innovative lottery products for the regulated Chinese lottery market. Telling will hold a 51 per cent stake in the JV, with the new business expected to be operational in the third quarter of this year, subject to applicable Chinese regulatory and licensing approvals. IGT has not divulged any further details about what kind of products will be developed by the two companies. “IGT is excited to join forces with a company of Telling’s stature and provide our latest technology and innovations to the growing Chinese lottery market,” said Walter Bugno, chief executive of IGT International. “As the lottery market continues to change, and the regulatory framework evolves, we believe that this partnership will be ideally positioned to successfully participate in China’s bright lottery industry future.”
US SPECIAL REPORT
LOTTERY.COM LAUNCHES MOBILE APP San Francisco-based lottery messenger service Lottery.com, formerly AutoLotto, launched a new mobile app in August ahead of the $650m Powerball draw – the second highest jackpot in the game’s history. It follows the company raising $17m in a Series A funding round the previous month to support the expansion of its app, a ticket purchasing service for Powerball currently available to players in Texas and New Hampshire. Lottery tickets ordered through the app are purchased in-person by Lottery.com from authorised lottery agents and retailers, with the company receiving commission from partner retailers. The app also includes lottery ticket scanning and tracking abilities, as well as results notifications, and is to be rolled out to further states in the next few months.
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GIQ US SPECIAL 2017
MGM RESORTS LAUNCHES VIRTUAL REALITY ARENA IN LAS VEGAS MGM GRAND HOTEL and Casino has introduced the first multiplayer virtual reality (VR) experience in Las Vegas, immersing players in a completely interactive digital universe.
THE BIG LAUNCHES Five of the quarter’s major product launches and what they mean for those involved MGM RESORTS EXPANDS PLAYMGM TO NEW JERSEY MGM R ESORTS I N T ER NAT IONA L launched a new GVC-powered online poker and casino offering in New Jersey in August. WHAT’S THE BIG IDEA? The launch marks the expansion of the playMGM brand into the real-money online casino and poker space for the first time, having initially been rolled out for mobile sports betting in Nevada. It follows a partnership earlier this year between the US casino operator and GVC, which has been powering the MGM Resortsowned Borgata since the opening of the New Jersey iGaming market in 2013. The playMGMcasino.com site offers more than 200 slots alongside a range of table games, while players can access daily and weekly tournaments, Sit’n Go and cash games via playMGMpoker.
WHAT’S THE BIG IDEA? The operator has teamed up with Zero Latency to create a 2,000 square-foot arena within its Level Up gaming lounge, which can host up to eight players at a time. Three 30-minute freeroam VR games have so far gone live, including Zombie Survival, Singularity and Engineerium. There are now seven Zero Latency-powered arenas currently in operation across the US, in addition to locations in Tokyo, Osaka, Madrid, and Melbourne. “There is simply nothing like this anywhere in Las Vegas and we’re proud that MGM Grand is the first in the city to roll out an exciting and fun virtual ‘wow moment’ for our guests,” said MGM Grand president and chief operating officer Scott Sibella.
NEKTAN GOES MOBILE WITH FIRST US CASINO NEKTAN HAS TAKEN its first real-money bet in the US following the launch of its in-venue mobile games solution in August. WHAT’S THE BIG IDEA? The Rapid Games platform has gone live via subsidiary Respin Games, with an undisclosed tribal casino in Northern California offering customers the opportunity to play casino games on their mobile devices while on-premise. The platform has been certified as a Class II (protected tribal gaming category) proprietary in-resort Bring Your Own Device mobile platform, and will be rolled out for another three casinos in California later this year.
TOPBETTA APPROVED FOR US BETTING EXPANSION SYDNEY-LISTED BETTING OPERATOR and B2B provider TopBetta was granted approval in August to launch its pari-mutuel betting services in the US. WHAT’S THE BIG IDEA? TopBetta subsidiary The Global Tote will be able to provide B2B facilities for an international tote in the US, while TopBetta has been granted an advance deposit wagering licence by the North Dakota Racing Commission (NDRC) to roll out a B2C retail betting business in 35 states. “This really completes the immediate regulatory requirements for The Global Tote and gives the company the reach to leverage the business as a true global player in online wagering,” said chief executive Todd Buckingham.
GREENTUBE POWERS NEW SOCIAL CASINO IN PENNSYLVANIA PENNSYLVANIA’S MOUNT AIRY Casino Resort has launched a free-to-play social casino in partnership with Novomatic subsidiary Greentube. WHAT’S THE BIG IDEA? PlayMountAiry.com features the look and feel of the land-based venue, including a virtual recreation of the lobby and main casino, and is intended to drive visits to the venue. It is the third social offering to be developed for a major land-based US SPECIAL REPORT
venue by Greentube’s social subsidiary BlueBat Games, following launches with Foxwoods Resort Casino in Connecticut and Minnesota’s Treasure Island Resort and Casino. “Our goal was to build a social platform that delivered the Mount Airy Casino Resort experience into players’ homes and hands,” Mount Airy executive vice president John Culetsu commented. “We are proud to offer this to regional players and casino enthusiasts throughout the country.” 17
GIQ US SPECIAL 2017 GAMES
GIQUS games round-up New games that caught GIQ’s eye in Q3 GAMECO PARTNERS DJ STEVE AOKI FOR NEW SKILL-BASED GAME
RESORTS CASINO LAUNCHES FANTASY SPORTS IN NEW JERSEY ATLANTIC CITY’S RESORTS Casino launched the first licensed fantasy sports game for players in New Jersey through a partnership with SportAD and FSB Technology. Launched under the Resortsowned brand FastPick.com, the game presents players with a range of pre-selected player match-ups across all major sports leagues. The FastPick game has also been added to the operator’s primary iGaming site, Resortsca-
sino.com, with a retail version to be introduced at the casino via kiosks later in the year. “We aim to appeal to sports fans who want a piece of the action but don’t have time to compete effectively against ‘professional’ DFS players”, said Ed Andrewes, lead consultant for Resorts Digital Gaming. “We are thrilled to partner with Sport AD to introduce fantasy sports to our casinos as well as online and mobile.”
GAMECO WILL DEVELOP a new game featuring internationally-renowned DJ and producer Steve Aoki to add to its portfolio of branded content on video game gambling machines. Steve Aoki’s Neon Dream is scheduled to be rolled out later this year on GameCo’s VGMs, which are currently available in casinos across North Carolina, New Jersey and Connecticut. The game is inspired by Aoki’s 2014 album Neon Future, using infinite running gameplay similar to popular titles such as Temple Run. Players will run along an endless track, collecting coins, avoiding barriers and listening to a range of songs released via the
DJ’s Dim Mak record label. “I can’t wait for fans to see what GameCo has done with Neon Dream,” said Aoki. “Using Dim Mak’s music, and images from our collection, the video game really is a neon dream, and I’m proud to be working with GameCo as we revolutionize the gaming floor.”
GAMECO BRINGS VIDEO GAME GAMBLING TO NORTH CAROLINA GAMECO HAS EXPANDED its video game gambling machines (VGMs) to a third US state following an agreement with Harrah’s Cherokee Casino Resort in North Carolina. Four gaming terminals have gone live with the Caesars Entertainment-owned venue, featuring the supplier’s Pharaoh’s Secret Temple match-3 game. “GameCo’s VGMs offer new experiences for current casino players while attracting new players who love the excitement of video games, such as the 23 million gamers who are over 21 and not intrigued by 18
existing slot machine offerings,” said Gameco CEO Blaine Graboyes. “Casinos are expressing a strong desire to generate revenue from a new generation of players, and our VGMs allow them to engage with guests seeking a more immersive gaming experience.” GameCo has already rolled out its machines in New Jersey and Connecticut.
GREENTUBE PARTNERS LEAP GAMING FOR VIRTUAL SPORTS LAUNCH NOVOMATIC’S INTERACTIVE SUBSIDIARY Greentube is aiming to attract more male players to its social gaming offering with the addition of Leap Gaming’s virtual sports titles. The agreement sees Leap Gaming deploy its turnkey virtual sports product on the Green-
tube Pro social casino platform, which will be made available to US land-based casino partners including Pennsylvania’s Mount Airy Casino, Foxwoods Resort Casino in Connecticut and Minnesota’s Treasure Island Resort and Casino, among others. “In the US, virtual sports is becoming a big thing and this is the way we can offer virtual sports to our casino clients,” said Greentube president of market development, Gabriel Cianchetto.
GIQ US SPECIAL 2017
SG TO LAUNCH ANCHORMAN: THE LEGEND OF RON BURGUNDY SLOT
GAMBLIT TO BRING SKILL GAMES INTO OKLAHOMA AND TEXAS GAMBLIT GAMING HAS signed an exclusive distribution deal with Poydras Gaming to roll out its first electronic skill-based gaming machines in Oklahoma and Texas. The supplier’s Model G gaming machines have gone live at Oklahoma’s Downstream Casino Resort, featuring titles including Gamblit Poker and the piratethemed Cannonbeard’s Treasure. The games offer players the chance to test their skill and dexterity through video game ele-
ments designed to appeal to new and experienced gamblers alike. “These consoles going live mark a milestone in our development, and position us as the leading provider of next-generation gaming devices in Oklahoma and Texas,” said Poydras CEO Peter Macy. “Gamblit’s games have been designed to appeal to a wide demographic, retain existing users, attract new players, increase game play and ultimately, increase cash flow for our customers.”
SCIENTIFIC GAMES IS preparing to launch a new slot for the land-based sector based on American comedy film Anchorman: The Legend of Ron Burgundy. Developed exclusively for the supplier’s new TwinStar V24/43 cabinet, the five-reel, 25-line video slot game includes footage from Paramount Pictures’ iconic movie, and features Will Ferrell’s Ron Burgundy and the rest of the Channel 4 News team. “Anchorman has woven its way into our culture, often referred to and quoted, and has proven to be an excellent story to base a slot game on,” said Derik Mooberry, executive vice president and group chief executive of gaming for Scientific Games. “Our development team worked diligently to stay true to the films and incorporate comical nuances and favourite scenes.”
POKERSTARS RELAUNCHES SOCIAL POKER APP ONLINE POKER GIANT PokerStars has resurrected its freeto-play app, PokerStars Play, with a new iteration initially released only in the US and Australia for iOS and Android devices. The mobile app offers a range of poker variants including Texas Hold’em, Spin and Go, and Omaha, alongside casino style slots. It allows users to compete against poker pros, collect trophies and climb weekly leaderboards, as well as entering fast-paced tournaments. “PokerStars Play is the next phase in our progress toward being a leader in social casino,” said PokerStars director of social gaming Lloyd Melnick. “PokerStars Play is a unique product, taking the best of real money gaming and merging it with the features players expect from mobile games.” US SPECIAL REPORT
NEXTGEN RELEASES EXCLUSIVE SLOT FOR GOLDEN NUGGET IN NJ
PokerStars Play originally went live in 2013 but failed to attract a large audience and wa s r epl ac e d by t he mor e successful Jackpot Poker app in December 2015.
NEXTGEN GAMING, THE independent game studio of NYX Gaming, has launched its Wild Play SuperBet slot game in New Jersey with Golden Nugget. It is the first in a series of bespoke slots to be released under the partnership. The game will be available exclusively to Golden Nugget for one year, before a wider roll-out to operators outside of New Jersey. It is the latest in NextGen’s series of SuperBet titles, such as Merlin’s Millions SuperBet, which offers
players the chance to up the ante for increased prizes. “Working in partnership from the initial stages of game design provided NextGen with insight directly from local players,” said NextGen’s chief commercial officer David Johnson. “The knowledge shared during the development of the game has proven beneficial for both parties, while enhancing the SuperBet innovation further will prove attractive to players and operators alike.” 19
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GIQ US SPECIAL 2017 PASPA
Ten states ready to move if Supreme
Jeff Ifrah and David Yellin of Ifrah Law look at the states likely to be early movers if New Jersey’s appeal against the Professional and Amateur Sports Protection Act is successful
ALL EYES IN the gaming community are turned to the Supreme Court this autumn, as it is set to rule on the constitutionality of the Professional and Amateur Sports Protection Act (‘PASPA’) in Christie v. NCAA. If the court strikes down PASPA – which is a very real possibility – sports betting will immediately become legal in New Jersey casinos and racetracks. But in other states, sports betting will remain illegal until state prohibitions are repealed by the legislature. This article will summarise the state of play in those states that have taken up the issue. Connecticut and Mississippi are the only states that have actually passed laws relating to sports betting. In Connecticut, state regulators are charged with regulating sports betting “to the extent permitted by state and federal law”. For this to have any meaning, not only must PASPA be struck down, but the Connecticut legislature will need to legalise sports betting under state law. But if the enthusiasm of Connecticut lawmakers for sports betting
remains after the Supreme Court rules, sports betting could soon be a reality in Connecticut too. Mississippi presents a much different situation. It has generally been one of the most pro-sports-betting states in the country and, last June, its fantasy sports law also struck the state’s prohibition on sports betting. Unfortunately, the bill’s sponsor has since claimed that this was not his intent, raising questions as to whether the state legislature would move forward to affirmatively authorise and regulate sports betting were PASPA struck down. Lobbying efforts may be able to keep things moving forward in Mississippi. Maryland, Michigan, Oklahoma, Pennsylvania, South Carolina and West Virginia all have introduced fairly straightforward bills that would permit sports betting were PASPA struck down, though none has passed. Oklahoma and South Carolina have included provisions in larger bills relating to gambling, though in Oklahoma any eventual law will
GIQ US SPECIAL 2017
Court strikes down PASPA depend on working out issues with Indian tribes in the state. West Virginia’s law is quite straightforward and hopes to build on the state Attorney General’s support for gambling and the state’s recent embrace of racetrack casinos. Pennsylvania’s sports betting bill has been voted out of committee but has stalled on the floor of the state legislature. Given Pennsylvania’s strong gaming growth and massive gambling tax revenues, there is reason to be optimistic. It also is likely that, were PASPA struck down, the immediate availability of sports betting would prove a powerful incentive to move sports betting legislation forward. Michigan and Maryland have also introduced sports betting laws, but both would require a popular referendum. In Michigan, this is largely irrelevant because the proposed legislation has stalled. But in Maryland, growth in casino gambling has been a big win for the state and there is a good chance that sports betting could be passed by referUS SPECIAL REPORT
endum. This makes Maryland an important state to watch. The most complicated procedural questions are raised by proposed constitutional amendments in two of the largest potential markets. New York likely has support to legalise sports betting, but the process to do so will take several years and require a public referendum. This means that New York is mostly a matter of patience. In California, a constitutional amendment has stalled on the floor of the state legislature, where it would require a two-thirds majority and public approval (as well as working out certain issues with Indian tribes). However, the initiative process for constitutional amendments may allow an end-run around the California legislature and quicker results. Of course, all of this depends on the Supreme Court. But if PASPA is invalidated, all attention will turn to state legislatures, as legal sports betting has the opportunity to spread. n
The most complicated procedural questions are raised by proposed constitutional amendments in two of the largest potential markets
GIQ US SPECIAL 2017 DRAFTKINGS
Merger? What merger? DraftKings is shrugging off the collapse of its merger with FanDuel as it looks to consolidate its dominance of the daily fantasy sports industry. By Robin Harrison
THE MERGER OF the two industry giants was opposed by the US Federal Trade Commission on the basis that their combined market share could be as high as 95 per cent. Rather than launching a legal challenge, as each company initially suggested, the operators decided to continue alone. At the time, FanDuel chief executive Nigel Eccles said: “There is still an enormous, untapped market opportunity for FanDuel, and we will continue to execute our strategy to grow our business and further expand the fantasy sports industry.” The operator’s next move was to withdraw from the UK in order to focus on the US business. This hardly suggests business as usual. FanDuel says it has six million US customers in a market comprising
53 million fantasy sports players. It believes it can fight for a bigger audience there, rather than spreading itself too thinly by moving further afield. Yet its main competitor and erstwhile former merger partner DraftKings has no intention of slowing expansion plans. It has eight million US customers. And it raised almost $100m in new funding earlier this year. There is a clear feeling that DraftKings is slowly but surely consolidating a position as the dominant player in the industry. FanDuel launched in 2009 – three years before DraftKings – but lags behind in terms of players. It tends to play catch-up on new product features and international launches. It is also wary of talking to the press – something that contrasts with DraftKings’ openness. DraftKings is now in a position to establish an unassailable lead in the daily fantasy sector.
Difficulty in the UK It will not all be plain sailing, though. DraftKings’ first international launch – in the UK – has not been easy. When FanDuel withdrew from the market it mentioned paying out around £1m in prizes, suggesting a relatively low level of participation. DraftKings chief international officer Jeffrey Haas says his company has attracted over 50,000 registered players in the UK. He estimates that there are around 8.5 million season-long fantasy football players in the UK alone. “[We] still have a lot of work ahead of us,” he says. “The biggest challenge in attracting customers remains educating them about our category and points of differentiation – for example, our global liquidity and massive prize pools. Once they understand that, our retention 24
GIQ US SPECIAL 2017
rates are very strong – and viral, thanks to our private ‘leagues’ feature where players can play with their friends. Players love our product, and remain engaged throughout the seasons of the sports they follow.” Unlike the US, real-money sports betting is widely – and legally – available in the UK, and he admits that there is “extraordinary” competition for the key player demographic. This is not helped by high street bookmakers paying high customer acquisition costs that simply “don’t make sense” for DraftKings. “We don’t necessarily compete for ‘football’ players directly, but rather focus our customer acquisition efforts on subjects and channels where we can exploit the special breadth and depth of the DraftKings product,” he says. The operator has also had to deal with a lack of awareness of its core product, and how to play, forcing DraftKings to rebrand its games as ‘daily fantasy football’ or in Europe as ‘daily manager games’ or ‘manager games’. Even a shop best known for selling sofas has caused problems: “[The] UK market still doesn’t broadly understand what DFS (daily fantasy sports) is, and the acronym itself is US SPECIAL REPORT
often confused with a prominent high-street homeware chain!” When Direct Furniture Sales is added to a list of problems, including customer education, adoption and competition from other sectors, this would normally create the perfect storm to justify pulling out of a market. But DraftKings will remain. Haas does not believe that a challenging start to life in the UK and the collapse of the FanDuel merger should see the company retreat to the relative safety of the US to lick its wounds. “As we have always said, we were prepared for both outcomes with the FTC,” he says. “We raised almost USD$100m earlier this year, and today we are in a position of strength.” The company will continue to pursue international growth, looking to enter the Irish and Austrian markets in October, with other countries to follow. “International markets are a big part of our growth strategy, and we see continued interest from players around the globe who register to play on DraftKings in anticipation of our opening in their markets. We want to be up and running in dozens of countries over the next few
“The biggest challenge in attracting customers remains educating them about our category and points of differentiation. Once they understand that, our retention rates are very strong” Jeffrey Haas, DraftKings
GIQ US SPECIAL 2017 DRAFTKINGS
years, expanding the addressable audience for our existing sports and adding new domestic leagues as we go.”
“We want to be up and running in dozens of countries over the next few years, expanding the addressable audience for our existing sports and adding new domestic leagues as we go” Jeffrey Haas, DraftKings
Development is not confined to the European offering. The core US product is currently being refreshed, with a number of updates being rolled out for casual players in the third quarter. “Over the last year, we have made a myriad of improvements for the casual player, including the launch of our Leagues product, where players can create private contests exclusive to their friends and family and customise them as they see fit,” he says. “Since this product launched in August 2016, over 4.2 million line-ups have been created, which is a telling sign that updates like this are promising for the growth of our business. We also solicit customer opinions about what we could do to improve the experience, and based on their feedback we recently introduced multientry limits, head-to-head player blocking and high-volume player entry-fee restrictions.”
Integrity is imperative The business has progressed rapidly since 2015, when it was wrong-footed by a sudden regulatory crackdown in the key state of New York. It was facing allegations of misleading customers with its ads and duping players by allowing employees to bet. This saw DraftKings and FanDuel forced to pay $6m each in fines. The New York affair saw sign-up promotions come under fire, effectively forcing DraftKings away from offering bonuses for new players. A key example saw FanDuel rapped for offering a $200 bonus for new registrations which would require players to spend an initial $5,000 before qualifying. The companies were also ordered to ensure they made clear that a small number of players were likely to be the most successful. The companies have huge reach. DraftKings is a partner of the National Hockey League, Major League Soccer and Major League Baseball, while FanDuel works with a range of National Basketball League teams. This means the leagues have vested interests in ensuring
GIQ US SPECIAL 2017 DRAFTKINGS
these companies succeed. They may be forced to be less aggressive in acquiring new customers, but their reach has not been shortened. Much has been read into the decline in ad spend by DraftKings (and FanDuel), but the vast sums spent on more than 73,000 TV ads by the companies in 2015 was always likely to fall once they had established their brands. Haas claims his company has gone further than simply complying with the new regulations, many of which are now included in state regulations for DFS. “We have a driving imperative to ensure the highest level of integrity for our contests and that is evident in everything we do,” he says. “A lot of the regulation is rooted in technology – such as geo-location and identity verification – and we are prepared to scale and adjust consumer protections based on which state or country we are in,” he says. This is all underpinned by “incredible” compliance and data security teams, Haas adds. “One bright spot here is that our Compliance team is growing, and we invite Gaming Intelligence readers with relevant experience to reach out to us about openings,” he says with a laugh. “From our world-class security technology, to our internal Game Integrity & Ethics team, to our best-in-industry contest transparency, DraftKings embodies the spirit of fair play.”
Regulatory reality check While the debate over whether DFS is a form of gambling or a game of skill appears to have died down, that has not stemmed the flow of bills to regulate contests across the states.
Having said this, Haas is at pains to note that the changing regulatory climate in the US is not a key driver behind the international expansion plans. “This is not about risk mitigation, but leveraging our massive contest sizes through global shared liquidity to become the clear numberone player in our space. With that size combined with technical and commercial scale, we believe many more interesting business opportunities will open up for us.” With US regulation, a reality check is in order: the bulk of the legislation has tended to be rather forgiving for the DFS giants. Licence fees are around $5,000 a year, and it is more unusual to see operators taxed than it is not. Many predicted that regulatory costs would cripple daily fantasy businesses. Instead, they must comply with common-sense rules and pay some nominal fees. “Regulation is not only something we are becoming increasingly familiar with, but embracing. It’s good for our players and great for our industry. As you know, there are 16 states that regulate DFS to date, and we hope for more to follow this year,” Haas says. “We also maintain licences in the UK and Malta, and will announce additional international licences as we expand. “We are engaged in public policy initiatives with legislators, regulators and other stakeholders around the world, and we are always excited to see significant interest in our category, as well as an intent to regulate it.” DraftKings has the largest DFS customer base in the US. It is active in the UK, and pushing for a larger market share, with innovative
products such as The Drop Zone, which sees players battle to avoid relegation each week. It will be active in more countries before the end of the year, with a beta roll-out underway in Germany. Contests for the Women’s National Basketball Association and EuroLeague Basketball have both been added, which means DraftKings offers the widest range of contests for the sport. Football will also be expanded, with new leagues and competitions added to support international growth. It is also enhancing its offerings for sports such as golf, which has seen an 81 per cent hike in the number of contests created in the past year. The rationale seems to be that if DraftKings is going to have to act as a pioneer for daily fantasy, it has to find new ways to make it work outside of the US. Whether this is rebranding the product to give users a better understanding of its games or finding non-traditional sports that work well for fantasy contests, it has to test each and every potential growth opportunity. The small matter of operating in heavily regulated markets is even being addressed to an extent by the roll-out of DFS regulations in the US. It gives DraftKings an opportunity to gain a better understanding of working under a set of constraints – albeit without the hefty financial burden it faces in the UK and beyond. Considering DraftKings has only recently seen a long-cherished merger plan collapse amid a flurry of US regulation and slow international uptake, Haas is in remarkably high spirits about the business’s prospects. Profitability may be a way off, but the company has raced through life as a start-up and is now scaling up the business as it looks to become an international phenomenon. “In just five short years, DraftKings has grown a customer base of almost eight million – that’s over 80 times the number of users than at the end of our first operating year in 2012,” he says. “Revenue from fantasy contests is up year over year for each month of 2017, and that growth has been over 30 per cent year over year for revenue from DraftKings contests since March. “What’s important to note is that we have listened and learned from our players, allies and critics alike to improve our product and ensure we are continuously offering the most dynamic and innovative fantasy sports experience,” he says. Haas sees things coming together at just the right time. “We feel we are just at the very initial stages of what the company can become and how we can diversify and expand in this space,” Haas adds. “We can’t wait for what’s next.” n
GIQ US SPECIAL 2017 PENNSYLVANIA
Ideological war delays iGaming in Pennsylvania It has long been presumed that Pennsylvania would be the next state to legalise iGaming. However, battles in the state legislature may prove too big a hurdle to jump, says Steve Hoare
THE GOOD NEWS for the gaming industry is that there is broad support within the Pennsylvania legislature for the expansion of gambling in the state. There is no unified consensus about internet gambling, but that is not a key sticking point. That honour falls to the rollout of video gaming terminals in licensed liquor establishments, which has split the state House of Representatives and Senate. At the time of going to press, the Senate and House of Representatives were embroiled in a battle of wills about how best to fund the state budget. This is an ideological debate, and a long-standing one at that. The trouble with ideological debates is that each side tends to have an entrenched point of view, from which it is unwilling to deviate. Pennsylvaniaâ&#x20AC;&#x2122;s problem is its $ 3bn structural deficit, which has its roots in the 2008 financial crisis. The state government shifted money around and relied on federal aid in the years after the crash rather than raising recurring revenues through increased taxes or other initiatives. Republicans continue to shun tax rises and turned to public spending cuts to fill the gaps.
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“Gaming expansion is inextricably linked to the need to balance the $32bn budget,” says experienced Pennsylvania lobbyist David Bonsick of law firm Cozen O’Connor. In late June, the Republican-dominated Senate passed a $2.2bn package that it said would balance the budget. The package included $200 million that it said would come from expanded gaming, including online gambling and lottery, daily fantasy sports and satellite casinos, added to existing land-based operations. Democrat Governor Tom Wolf has said he supports the package. Indeed, Bonsick says expanded gambling has been a key element throughout these budget discussions.
have the votes on VGTs,” says Bonsick.“The issue of VGTs has a tortured history. The only difference this year is the significant deficit and need to prioritise a strong, sustainable revenue base. It is thought that will win out over the VGT debate.” The inclusion of satellite casinos in the Senate’s budget proposal is seen as a sop to those fearing that internet gambling will cannibalise existing land-based revenues. But this does not please all of Pennsylvania’s casinos. While Sheldon Adelson’s Sands Casino Bethlehem is clearly against internet gambling, Parx Casino has repeatedly raised concerns about cannibalisation, despite having a deal in place
A split industry For its part, the House of Representatives has voted in favour of an amended gambling bill which puts it at odds with the Senate over proposed tax rates and authorised games. The House voted 102 to 89 in favour of an amended version of HB271 on 7 June (just before the Senate’s budget proposal), which would authorise online gambling, internet lottery sales, daily fantasy sports contests, video gaming terminals (VGTs) in liquor establishments and truck stops, and tablet gaming at airports. The House is in favour of VGTs, while the Senate is not. The Senate has also proposed the satellite casinos (facilities with 700 slot machines and 100 table games, located more than 25 miles from any other casino), while the House has not. Both are potential sticking points. “The House leadership insists on the inclusion of VGTs and the Senate doesn’t
“iGaming has been pushed to the rear of the line and, unfortunately, it is proving very difficult to focus anyone’s minds on the ridiculous tax rates” Eric Schippers, Penn National with GAN to offer social gaming and, when it is legally possible, real-money gaming. Penn National, for its part, is supportive of online gaming but does not support the Senate’s proposal on satellite casinos. The proposed 25-mile protection zone around existing casinos helps protect city-based casinos but Penn National’s mid-state position and the fact that most of its customers travel more than 25 miles to get there, means it would not be protected. However, it does support the House’s proposal on VGTs as it owns a VGT business in Illinois – Prairie State Gaming – which it believes could operate in its home state. “The industry is not united on this,” says Bonsick. “That transfers to support and lack of support among certain legislators.”
The numbers game Bonsick works with trade association iDEA (iDevelopment and Economic Association), which represents most of the online industry’s key players, such as PokerStars, GVC, Paddy Power Betfair, IGT, Scientific Games and NetEnt. He says that iDEA has done a great job of addressing legislators’ fears about online gambling – particularly on the issue of cannibalisation. It published a paper in June that outlined the $124.4m in tax revenue and 3,374 jobs which have come to New Jersey since it legalised online US SPECIAL REPORT
gambling in 2013. The former figure indicates why such large-scale gambling expansion is being backed. Remember, the Senate is counting on $200m a year from increased gambling revenue. New Jersey has reaped $124.4m in three years of online gambling. Of course, New Jersey Governor Chris Christie made his own outlandish claims about the potential revenue from iGaming back in 2012, when he stated that New Jersey would benefit to the tune of $200m each year. The Pennsylvania Senate did not break down how its $200m would be earned, but with the addition of iLottery, daily fantasy sports and satellite casinos to, say, $50m from online gaming, perhaps we can accept their figures. Beyond VGTs and potential cannibalisation, the biggest point of contention between the House and Senate proposals concerns tax rates. The House proposed a tax rate of 16 per cent of gross gaming revenue, while the Senate’s proposed rate of 54 per cent is equivalent to the tax rate for bricks and mortar casinos. “It is an ongoing education process to show legislators the difference in business models between land and online,” says Bonsick. The Senate’s stance meant that the rate for iGaming slots was jacked up to 26 per cent and the rate for table games was raised to 20 per cent, with separate licences needed for both. The other spanner in the works is the emergence of a right wing Republican faction in the House, which is against all gaming expansion and wants to cut spending further and reduce the size of government to balance the books. “iGaming has been pushed to the rear of the line and, unfortunately, it is proving very difficult to focus anyone’s minds on the ridiculous tax rates,” says Penn National senior vice president of public affairs Eric Schippers. The deadline for the state budget was 30 June, so the September return of the House of Representatives couldn’t come fast enough – especially for those working in public services. However, there is one more option that Schippers would welcome – and this might be one that his opposite numbers at Parx and Sands could agree on: do nothing. “The last time this happened, they just raised the taxes on casinos,” says Schippers. “Clearly, we’d prefer the status quo to that option.” This may suit the land-based operators, but would be a major blow to supporters of regulated internet gaming in the US. It has been four years since a state enacted iGaming legislation. Pennsylvania has long been tipped to be the state to follow New Jersey in passing a bill, but this may prove to be nothing but hype if the current impasse continues. n 31
GIQ US SPECIAL 2017 GOLDEN NUGGET
New Jersey’s gem Golden Nugget senior vice president and general manager of iGaming, Thomas Winter, tells Gaming Intelligence how a business with a stuttering start went on to dominate the market. By Robin Harrison
“For the year our brand should be up around 50 per cent, and around 70 per cent for the first seven months” Thomas Winter, Golden Nugget 32
BORGATA’S R EIGN A S the largest iGaming operator in New Jersey came to an end last October, when Golden Nugget settled into pole position. Borgata had ruled the roost in New Jersey since regulated iGaming began in 2013, while Golden Nugget held just a two per cent market share at the start of 2014. Having remained on top for so long, this was not a case of Borgata’s decline allowing Golden Nugget to creep in. Rather it was a case of the Landrys-owned brand consistently growing into a strong and viable competitor. In the most recent results at the time of writing, Golden Nugget generated $6.3m in revenue in July 2017, 30 per cent of the market total and 40 per cent more than the erstwhile market leader. “That was our record month, which was nice when most other licensees were down,” Senior vice president and general manager of online gaming Thomas Winter says. “For the year our brand should be up around 50 per cent, and around 70 per cent for the first seven months.” During this time, Golden Nugget has been consistently praised for its seeming determination to expand and innovate by rolling out new products. It was the first to bring live dealer to the state, in partnership with Ezugi, and now around half of its 50-strong team works on that vertical. It is also set to be among the first to roll out virtual sports in the state and has launched a number of slots exclusively.
While Golden Nugget was one of the first to sign up an iGaming platform provider in Scientific Games’ Bally Technologies, it took an unusual approach to establishing its iGaming offering. The standard route was for landbased venues to bring in an iGaming partner. Usually an operator, this partner would operate a site under the casino’s licence, alongside a casino-branded site. Instead, Landrys brought in Winter to lead what was effectively a start-up within the business, giving him full autonomy to build a Golden Nugget-branded site. “Although we are in the gambling business, similar to the five land-based Golden Nugget casinos, we run the only purely digital business within Landry’s, which calls for some level of separation from other more mature businesses operated by the company,” he says. “Landry’s culture believes in business unit leadership, accountability and autonomy,” Winter continues. “Large corporations often come with heavy processes and rigid structures, and are slow to make decisions. What I’ve experienced is the exact opposite. The comfort of counting on highly-skilled support functions, sizeable financial resources and a large degree of day-to-day autonomy, quick decision-making and an appetite for calculated risk. That’s critical for us to keep growing. “More generally speaking, our lasting growth has been made possible by a constant focus on product and marketing.”
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Winter wants to have the best product offering in New Jersey, supported by effective marketing that guarantees a return on investment. This is evident from his first moves upon taking the Golden Nugget job. “The first two calls I made when I joined Landry’s were for [former Betclic Everest colleagues] Warren Steven and Julie Aeschbacher,” he says. Steven, formerly the French operator’s gaming director, now serves as Landry’s product director for online gaming, while Aeschbacher was poached from Betsafe to become head of CRM and operations. “I needed iGaming professionals and you didn’t have many of them in the US since it was a nascent industry. More importantly, I needed doers with an entrepreneurial spirit, prepared to take a risk and who had the experience to deliver in a short time-frame. I was very fortunate to have both of them ready to take on such a challenge.” Aeschbacher has since moved back to Malta – “She is thriving in her new job [with Gaming Innovation Group’s Betspin brand]” – while Steven remains. Both product and marketing have played a role in Golden Nugget’s success. Marketing helped its initial emergence, and product is now taking over as a key driver. “US players tend to be more loyal if they’re happy with the service you provide,” Winter says. Golden Nugget’s slightly delayed launch proved to be a boon in marketing the brand. The offering was delayed in order to integrate four games providers and six payment methods – more than any other provider – in order to make sure everything worked. At the time Winter was adamant that it was a case of “being the best, not the first”. Four years on, he admits that behind the scenes things were less relaxed about the delay. But with hindsight, he says, things worked out surprisingly well. “The late start was a bad thing in that we let other operators acquire very valuable players but this was a blessing in disguise, as we only started to
“The late start was a bad thing in that we let other operators acquire very valuable players but this was a blessing in disguise, as we only spent advertising dollars when the product was in good shape” Thomas Winter, Golden Nugget 34
spend advertising dollars when the product was in good shape,” he says. This limited the impact of geolocation and payment processing issues that plagued the market in its early days, but also helped make marketing more effective. Its advertising could stand alone and benefit from media coverage by itself, rather than being drowned out in the wave of announcements that greeted the opening of the market. Since then, he says, Golden Nugget has invested solidly in marketing, spending less heavily than most competitors in the early days, but not reducing spend in the following years. While marketing has supported its growth, it’s easy to read between the lines and see that product is Winter’s ultimate focus. “At the end of the day, what we do is sell games,” he says. “Patrons come to us to play games – it’s as simple as that.” The fact that Golden Nugget’s initial launch in New Jersey was delayed may suggest Winter is relatively cautious in running the business. But when it comes to product, he is willing to take a risk. This led to Golden Nugget switching platforms two years after launch, migrating from the Bally platform to NYX Gaming Group’s Open Platform System (OPS). This is not something a risk-averse executive would do, and he readily admits it could have gone wrong. “Usually platform migrations are synonymous with a loss of players, but this is mostly true if your core product loses some key features, as is often the case in poker or sports betting,” Winter says. “We were able to keep all our casino games, and add new ones from NYX and NetEnt at the same time.” He says that the original platform was “decent” and “did the basics right”, but that the NYX solution gave Golden Nugget access to multiple APIs to improve the user experience. Coupled with a bespoke front-end developed in partnership with NYX and Grand Parade, Winter argues that the offering is stronger than ever. However, he adds, it is not perfect. But then again, no company is likely to find a perfect product: “I don’t believe you’ll ever find a perfect platform, nor have I ever heard of any operator that is 100 per cent satisfied with a platform vendor. “You often have to compromise; state-of-theart platform vendors are not necessarily ready to bear the cost of operating in a highly regulated market the size of New Jersey. Vendors with a limited number of clients tend to be more agile but come at a higher cost.”
For Winter it’s a case of finding the provider that will “act as a partner when difficulties arise” – the company that has the most to lose from losing your business, and the most to gain from your success. “I think NYX and its team, from the senior management down, fits this definition.” It is then incumbent upon the operator to come up with new, quality content, presented in a slick and user-friendly interface. To be a leading operator, he believes that it is then crucial to add “things that players won’t find anywhere else.” Golden Nugget has launched a number of exclusive games, including Wild Play Super Bet, Fu Dao Le or Destiny of Athena, though
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Winter admits that “unique content is difficult to find.” This will see it roll out virtual sports – another random number generator game – but one that offers a unique sport-centric product, helping fill a gap caused by the lack of legal sports betting. This focus on differentiated content has also prompted the company to take a calculated gamble in launching live dealer, becoming the first in New Jersey to do so. He says this was a “no brainer” for Golden Nugget, but admits that the costs were particularly high. Unable to run a low-cost offering from Eastern Europe, Winter estimates that running an offering located in New Jersey costs around three times as much. Revenue per US SPECIAL REPORT
table is lower, too. Blackjack is the most popular game to date, which means only seven players can sit at each table. This limits how much can be generated compared to European markets, where roulette is the most popular, or in Asia, where baccarat rules the roost. Despite this he says being the first to roll out live casino was “a unique differentiator” for Golden Nugget. “[It] was the perfect way to expand our reach and convince traditional casino players that online gaming could also bring this authentic, lively, interactive feel they’ve enjoyed on the floor,” he says. “I believe that live dealer could end up generating more revenue than poker.”
Golden Nugget’s iGaming offering is now a market leader
GIQ US SPECIAL 2017 GOLDEN NUGGET
Golden Nugget offers the largest selection of online games in New Jersey
“The online casino market has grown 35 per cent year-on-year between 2015 and 2016, and is expected to grow another 25 per cent this year; 15-20 per cent in 2019 and 10-15 per cent in 2020. That’s healthy” 36
Winter believes that this has a knock-on effect on the company’s brand positioning. He sees Borgata as the most successful casino for savvy gamblers in Atlantic City, and aims to position Golden Nugget as its online equivalent. “Today we have the best front-end. We have the largest games offering. We have exclusive slots and unique products,” he says. “We have the product, marketing strategy and user experience to show what the brand stands for.” Winter’s approach may have allowed Golden Nugget to grow into the New Jersey market leader. This may not be as prestigious as it once was. iGaming revenue in the state has never reached the wildly optimistic first-year estimates, which ranged from $410m (H2 Gambling Capital) to Wells Fargo’s $850m. He sees New Jersey as comparable to Scandinavian markets such as Sweden and Norway with “high player value, low player volume, and high acquisition costs. I think it’s coherent with what you see in other parts of the world in terms of the overall share of gaming,” he continues. “The online casino market has grown 35 per cent year-on-year between 2015 and 2016, and is expected to grow another 25 per cent this year; 15-20 per cent in 2019 and 10-15 per cent in 2020. That’s healthy. “If we stay with only poker and casino, we’ll reach $400m gross gaming revenue (GGR) in five years. If you were to add sports betting and fix the credit card processing issue, that could end up being a $800m market. Not bad
for a state with less than 10 million residents!” After all, he points out, revenue may be disappointing but the state has not come in for criticism as a result. Its stringent regulatory framework is today seen as a blueprint for other regulating and re-regulating jurisdictions. He hopes that the slow-but-steady upwards trajectory can kick-start regulatory progress in other states – something Winter describes as “frustratingly slow”. “When Nevada, New Jersey and Delaware went live, we were all hoping for another two to five states to be regulated by now,” he says. “I think the industry was very shy and slow in pushing its agenda in other states. “Only a couple of operators would get involved in lobbying until last year, when multiple NJ operators and vendors created iDEA, a trade association aimed at educating law-makers, regulators and the general public. We had very interesting conversations in Pennsylvania and could see first-hand how such educational efforts were helpful. The more we are aligned, the higher the chances to see a quick roll-out of sensible iGaming regulation expansion in the US. “Since I am an optimist, I’ll bet on five more states passing laws within the next two years and 10 within five years.” With an ‘iconic’ brand in Golden Nugget, he sees no reason why it could not expand into new states where possible. “We have an iconic and well-trusted brand that will work nationwide, an eager team in
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GIQ US SPECIAL 2017 GOLDEN NUGGET
place, a competitive product and we’ve proven our worth as an operator and a partner in New Jersey,” he says. “I think this recipe would allow us to do well in any state and we’re willing to operate wherever the law and sensible regulations allow for it. We’d surely prefer to do it under our brand but would also consider bringing our management expertise to a local brand if that was the only option.” He is remarkably candid about where he sees Golden Nugget’s main competition coming from. Rather than worrying about other brands, such as PokerStars – “We consider their casino as one of 14 competitors, no more, no less” – he believes that the real threat comes from other forms of entertainment. He certainly feels frustrated with the light-touch regulation benefitting daily fantasy sports. “[Daily fantasy sports] is already regulated in 13 states, with open licensing regimes. You can always argue over whether DFS is gambling or skill-based, but it is for sure real-money betting”, he says. “It targets the same players as online poker and casino, and requires the same controls when it comes to game fairness, anti-money laundering and responsible gaming. 38
“If it’s possible to achieve these consumer protection objectives with an open licensing regime for DFS, it should be possible for other forms of real-money gaming.“ DFS and even Netflix are the companies iGaming operators should be watching closely, Winter says. What could offer gaming an edge over daily fantasy sports and streaming services, however, is legal sports betting. This has seemed all but impossible for years, and while New Jersey has succeeded in having the Supreme Court take on its case finally, the process has been particularly torturous. “When I moved to the US four years ago, I was repeatedly told that I wouldn’t see legal
“The question is not anymore if, but when. I’d be surprised if sports betting was not rolled out in other states or online 10 years from now. Perhaps sooner than that”
sports betting outside Nevada, let alone online, in my lifetime,” Winter says. “Since then, some prominent stakeholders such as the NBA Commissioner have publicly taken a stance in favour of sports betting regulation. “Americans are big sports fans. Hundreds of thousands of them already gamble through so-called free websites and local agents dealing with their cash, outside any forms of regulation or consumer protection. This has to stop at some point,” he argues. “Regulating sports betting would be in the best interest of sports teams, consumers and tax payers. For sure that would be a popular move. I think the question is not anymore if but when. I’d be surprised if sports betting was not rolled out in other states or online ten years from now, perhaps sooner than that.” This looks set to keep Winter in the US for the foreseeable future. He has regularly been rumoured to have been a target for a number of positions with high-profile European operators. However, he says that while these roles may be “exciting”, he denies that any have piqued his interest. “[For] the foreseeable future the most exciting prospects for this industry are in the US,” Winter explains. “What I like to do is to grow a business and US market growth is likely to be stronger than the EU’s for the next 10 years, both in percentage and in absolute value.” “I enjoy working for a successful, agile, private company, led by first-class businessmen, who have the appetite and financial capability to succeed in the iGaming space. It is hard to match that kind of offering.” Landrys’ move in appointing Winter has certainly paid off. Golden Nugget has established an increasingly solid position at the forefront of the New Jersey market. This has been led by a dedicated in-house team, effectively making it the first casino company to establish an in-house iGaming business. Only tribal operator Pala Interactive, led by former bwin.party CEO Jim Ryan, has followed suit. This has proved a masterstroke. Further regulation will give Winter more chance to burnish his credentials, and should Golden Nugget’s growth trajectory continue, the operator’s biggest problem may be chasing away competitors clamouring for his services. n
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GIQ US SPECIAL 2017 DAVID REBUCK
New Jersey gets ready for sports betting If New Jersey emerges victorious from the Supreme Court and sports betting is rolled out across the US, it will be the biggest thing to hit the gambling market in decades. New Jerseyâ&#x20AC;&#x2122;s director of gaming enforcement David Rebuck is getting prepared. By Steve Hoare
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GIQ US SPECIAL 2017
US SPECIAL REPORT
GIQ US SPECIAL 2017 DAVID REBUCK
“WE ARE OBVIOUSLY ecstatic and optimistic that the Supreme Court has accepted our argument and is giving us the opportunity to make our argument in the highest court,” says New Jersey’s director of gaming enforcement David Rebuck. This has been a long, hard battle. It began in 2009, when the now-disbanded Interactive Media Entertainment and Gaming Association, and others such as state senator Raymond Lesniak filed a suit against the federal government in the US District Court, District of New Jersey. They asked the court to declare the Professional and Amateur Sports Protection Act of 1992 (PASPA) invalid and void, and to permanently restrain the federal government from enforcing it. Thus began a near-decade-long saga of claim and counterclaim, victory, defeat and appeal, which will climax in the Supreme Court sometime this winter or early next year. “Some days I was optimistic. Other days I was not so optimistic. We have been through a lot of court hearings,” chuckles Rebuck. “I think we have been before seven hearings and we haven’t won any!” The Supreme Court sessions begin in October and run through to April 2018. The Court has accepted New Jersey’s case, which remains the same as it was in 2009. It aims to legalise sports betting and overturn the federal law that prohibits it. The Court has announced the cases it will hear during October but New Jersey did not make the list. However, oral arguments will be heard sometime before April, with the judges handing down their decision up to six months later. “We’re where we want to be. If you’re seeking to overturn a federal law, then you know you’re ultimately going to have to get before the Supreme Court,” says Rebuck. “We’ll have our day in the sun to make our arguments.” Rebuck believes that the gambling market has evolved to such a degree – with daily fantasy sports, online gambling and land-based gambling throughout the US – that there is general agreement it can be regulated efficiently and effectively, and take into consideration the concerns of numerous special interest groups that like a say on this matter. “It is just a matter of time before sports wagering is legalised beyond Nevada. And I think that time will be very, very soon,” he says, before adding a small disclaimer, “Compared to a couple of hundred years of history in the United States.” Rebuck and his team have started preparing and planning for the rollout of sports betting already. He is looking at the best practices 42
that can be learned from jurisdictions such as Nevada and from the UK. He realises that this will not be done with the flick of a switch and is prepared for a lot of hard work in the months and years ahead. “We will do exactly what we did with online gambling. You can take the best of what exists throughout the world and develop a US model that gives people a hell of a lot of confidence.” However, he warns us that not everyone who operates a sportsbook around the world will get a licence in his state. There will be some who are denied because of their past actions. “Let’s be honest, the Bovadas and Bodogs of the world, they’re out. They are not getting into the United States,” says Rebuck. “But if you look at the Paddy Powers, the Ladbrokes, the William Hills and the casinos which have operations in Nevada; these companies have already been vetted. They do business the right way and will be well positioned.”
Putting in the hard yards Rebuck has proved he is prepared to make big calls on potential licensees. Back in 2013, his team had just nine months to get up and running after Governor Christie signed off the state’s online gaming legislation. Most operators and suppliers were granted a transactional waiver that allowed them to operate while Rebuck’s team conducted a thorough check on their suitability. Some were quietly turned down, others were told to cleanse their operations of any significant employees or shareholders with a n u n s at i s f a c t o r y track record. PartyGaming founders Russ DeLeon and Ruth Parasol were made to sell their remaining shares in bwin. party. Amaya, now The Stars Group, was told to purge its management team of executives who had been involved in operations after the passing of the Unlawful Internet Gambling Enforcement Act of 2006. The Stars Group is the biggest name still operating under a transactional waiver. Rebuck is full of praise for the way the company has conducted itself and “done everything we have asked for”, but he has yet to get himself entirely comfortable with the remaining stake of former CEO David Baazov, although
he acknowledges it is now small. More importantly, he needs to run rule over Hong Kong-based investor Tang Hao, who has acquired more than 10 per cent of the company’s shares this year. Checking all these foreign companies, which the Division knew nothing about, was a huge task, but it was not its most difficult issue. Geolocation was Rebuck’s biggest concern. Before New Jersey, accurate geolocation had not really been tested in the online gaming market. Nevada had gone live in April 2013 but it had been able to squeeze in its
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“Individuals concerned with online gaming being a tool for terrorism, organised crime, compulsive gamblers, or underage gambling just don’t understand their facts are skewed” David Rebuck
mostly unpopulated borders to make sure that there were no mistakes with geolocation technology accepting people from just outside the state. New Jersey has a huge number of people living close to its borders and had to be a lot more precise. “If we had let someone gamble online who was living outside the state, the federal government would have shut us down in a heartbeat,” says Rebuck. He says GeoComply rose to the occasion and developed a system that outperformed all other geolocation suppliers. When it was turned on it worked too well and produced a few false negatives with, for example, customers using spoofing devices which needed to US SPECIAL REPORT
be switched off. This glitch required operators’ customer services to help customers out but was eliminated as a problem after about a month. “I don’t lose any sleep over geolocation anymore,” says Rebuck. His other major problem was convincing the banking industry that online gaming was legal in New Jersey. Rebuck acknowledges the work that Vantis put in towards liaising with the credit card companies and ultimately coming up with new payment processing codes for online gambling in 2015. This was all new. It was groundbreaking stuff and absolutely necessary for implementing an online gambling market that
was restricted to one state. These were technical necessities but the establishment of the Division’s monitoring room was perhaps its biggest innovation. Every operator is monitored, with different screens tracking different activities. There are screens monitoring who is trying to log in, where they are logging in from, which operator they are playing with, what they are playing, how much they are gambling and every hand they play. “We record every gambling event and save it for 10 years,” states Rebuck. “Everything.” Not every regulator does this. Some rely on operators to monitor themselves. Rebuck is adamant that this is a mistake. It is done 43
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Left: Governor Chris Christie at Monmouth Park Racetrack, New Jersey
in partnership with the operators but the monitoring station makes sure no stone is left unturned. While there have been attempts at collusion and fraud, Rebuck is confident the bad guys have been caught. “This is a $250m business. If you had a bricks and mortar casino that was making $250m a year, the amount of fraud and number of attempts to engage in crime would far exceed the number found online.” He says the tools he uses to uncover fraud, to investigate it and to uncover illegal activity are far superior to what he can use to do the same in a bricks and mortar site. “The individuals who are concerned with online gaming being a tool for terrorism, being a tool for organised crime, being a tool for compulsive gamblers, or being a tool for underage gambling; they just don’t understand that their facts are completely skewed. They have emotional moral points that sound good but, at the end of the day, if you see the operations, the safeguards that are built into online gambling are really strong.”
Looking to the future There was a lot of grumbling from experienced European operators when US regulators started talking about the gold standard of regulation and tougher regulations than anywhere else in the world. But Rebuck and his Division have shown what can be done with minimum disruption to the industry. While its treatment of Amaya could be described as heavy-handed, it has implemented a system that really should be the envy of the world. The UK Gambling Commission, Gibraltar Gambling Commissioner or Malta Gaming Authority might be vastly more experienced, but their light-touch regulations have US SPECIAL REPORT
gaps. New Jersey could not afford to have anything slip through its fingers or online gaming’s critics would have slapped it down and it would have been game over for any state wishing to regulate the activity. Now, the likes of New York, Pennsylvania and other states have a model to replicate. Rebuck says he would have loved to be the director of the next state to regulate. “If I was a regulator in, say, Missouri, and Missouri wanted to be in online gaming, I would come to New Jersey in a heartbeat and say ‘I want everything you do, let’s go’.” He points to the regulatory system in Nevada and Delaware as other examples that will make it far easier for a Pennsylvania to get up and running. He says the operational system and regulations in New Jersey have been institutionalised to such an extent that it makes them easily replicable. “Easily,” he says for emphasis. “Easily.” Beyond the regulations, New Jersey has created an online gaming market that has brought the state 3,374 jobs, $218.9m in wages to employees involved in the sector, and $124.4m in taxes, according to figures from a report by the Internet Development and Economic Association. And these figures are rising every year. Net gaming revenue was up 27 per cent in 2016 to $188.1m. One failing is poker, which has been boosted by the arrival of PokerStars, but is struggling to make much impact in a state with a population of just nine million. In July 2017, online poker brought in $2.01m across its three operators. At the time of going to press, PokerStars NJ and 888/WSOP each had about 100 concurrent players while PartyPoker/Borgata had about 70, according to PokerScout. By way of comparison, PokerStars has 400 concurrent players on average in Portugal,
which has a similar population to New Jersey, with 10 million people living there. This has been deemed a success for PokerStars but it has a monopoly in Portugal, and no other operator thinks it is economically viable to launch in the country. However, this is likely to change. Since Portugal signed a liquidity sharing agreement with France, Spain and Italy, other operators such as Winamax and 888 have indicated they are more likely to enter the market. New Jersey needs a similar initiative. It has tried. In mid-2016, Rebuck met his counterparts in the UK Gambling Commission to discuss the possibility of sharing liquidity in poker. The agreement foundered on the New Jersey law’s insistence that all games are hosted on servers based in New Jersey. “I tried to get around that standard and come up with creative technological ways to safeguard our law with the UK – and they were great – but we just couldn’t overcome that final hurdle,” says Rebuck. For the first time in our conversation, Rebuck sounds slightly weary. He is disappointed that he has not managed to make it work thus far. Delaware and Nevada have a compact that allows them to share poker liquidity. It only benefits 888, which is the sole operator present in both jurisdictions, but Rebuck is keen to make it work on a larger scale. He says he will speak to Nevada and Delaware about modifying their compact or joining their compact, but he admits that will take time. “At some point in time, another jurisdiction in the US will jump into this online gaming world. We will have a dialogue with that jurisdiction or jurisdictions to talk about sharing liquidity,” he continues. “Delaware and Nevada have proved it can work technologically. It appears to me it works really well for them. Let’s see if we can expand it. It’s an important goal for New Jersey but it will be limited, for now, to US jurisdictions.” Rebuck has laid down a template to follow. Given the size of the market relative to Delaware and Nevada, he has also taken regulatory oversight to a new high. There have been casualties along the way. Regulators in the US are handed the role of judge, jury and executioner in a manner that is alien to foreign observers. But for the most part, he has regulated the industry without restricting it unnecessarily. Now, he is just waiting for the Supreme Court and other states to complete the job. n 45
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Keeping the lights Faced with an ageing demographic, casinos need to rethink their approach to attracting younger visitors. Luckily, there are new forms of entertainment that could see millennials flock to Las Vegas – and get them gambling. By Kio Dawson and Robin Harrison
GAMBLERS ARE GETTING older, and the younger generations are not replacing them on the casino floor. This is having an effect across the US casino industry, but even more so in Las Vegas. Las Vegas casinos need to attract younger visitors and get them playing. In 2015, 73 per cent of Las Vegas visitors gambled, according to the Las Vegas Convention and Visitors Authority. This fell to 69 per cent in 2016. The average age of a Las Vegas tourist was 47.7 years old in 2015, down from 49 years old in 2011, but up from 44.8 in 2012. In total, the Authority said, 65 per cent of all visitors were over 40 years old. Casinos are springing up across the US and gambling is more readily available outside the resort cities of Las Vegas and Atlantic City than ever before. As a result,
efforts have been made to boost revenue through other means. Casinos have aggressively expanded and diversified the range of entertainment options they offer. Visitors come to eat, drink, dance and shop, as well as shoot craps or play hands of blackjack. This is exemplified by Las Vegas. Celine Dion and Britney Spears draw in crowds with hugely lucrative residencies. Chefs including Wolfgang Puck and Gordon Ramsay have extended their restaurant empires to Sin City. DJs such as Calvin Harris and Steve Aoki play to seas of revellers. Boutiques selling the sort of designer goods found on Rodeo Drive or Fifth Avenue are found in just about every venue. This focus on entertainment and attractions – and subsequent revenue growth –
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on in Las Vegas seems to have come at the cost of the casino floor. Gaming, as a percentage of these venues’ overall revenue, is shrinking. Figures compiled by the University of Nevada, Las Vegas’ Center for Gaming Research, show that by 2016 gaming had fallen to 34.1 per cent of casinos’ total revenue – down from 38.7 per cent in 2010. It remains the highest generator of revenue, but room sales are catching up, accounting for 28 per cent of total revenue in Las Vegas last year. People are going to Las Vegas but not gambling. They are spending money, but when gambling is removed from the equation the casino ecosystem is harmed. After all, the attractions that complement the core casino offering are widely available across the US. Musicians tour. Chefs are constantly expanding their restaurant empires.
Designer goods can be bought online. Why travel to a remote location when its key attractions are available closer to home? More needs to be done to bring these players to the casino floor: “[Traditional products] won’t convert players, as they ‘grow up into it’,” says Eric Meyerhofer, chief executive of skill games developer Gamblit Gaming. “I think that’s a very risky proposition to rely on, because if you’re wrong or only partly right, you damage your casino operations business. “The early evidence of this exists now with stagnant gaming revenues overall in the US. Growth is not being driven. Waiting around for people to change their appetite is going to be a long wait and may never happen.” Describing casino gambling revenue as stagnant may be charitable. In 2006, Nevada posted total revenue of $12.6bn. This fell to
$11.1bn in 2015. Things are worse in New Jersey, where 2006 revenue of $5.2bn declined to $2.5bn by 2015. This has seen it fall from the second- to third-biggest state for gambling, overtaken by Louisiana. Efforts need to be taken to arrest this decline. Luckily, the decline in traditional forms of casino gaming comes at a time when there are a number of new, innovative forms of gambling-related entertainment emerging. These do not solve many of Vegas’ fundamental problems, namely the rising costs of visiting the city (see page 4). But they give this fabled younger player base greater incentive to come to Sin City – and to hit the gaming floor. Over the next eight pages Gaming Intelligence looks at what Las Vegas casinos can do to draw in younger visitors. n
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A sporting chance eSports could prove to be crucial in making Las Vegas an attractive destination for a younger audience
ESPORTS IS ALREADY a huge phenomenon and it is only going to get bigger. Market intelligence specialist Newzoo estimates that the eSports economy will grow to $696m by the end of 2017, up 41.3 per cent year-on-year. It will grow to $1.5bn by 2020. By that year an estimated $1.2bn will be invested in media partnerships, advertising and sponsorship deals. Some commentators may point to wildly over-enthusiastic estimates for social casino revenue around 2012 and sound a note of caution. Yet Newzoo estimates a total audience of around 385 million this year, which it believes can grow to 589 million by 2020. These hardly seem inflated when tournaments can already sell out iconic venues such as New Yorkâ&#x20AC;&#x2122;s Madison Square Garden. The company that runs that venue even owns its own eSports team, after acquiring Counter-Logic Gaming in August this year.
There is already huge excitement around Las Vegas getting its own NFL and NHL teams. But the Raiders, poached from Oakland, will not arrive for at least two years. Granted, ice hockey expansion franchise the Golden Knights joins the league later this year, but this does not guarantee new visitors for casinos. With eSports there is a potentially huge audience waiting to flood in. With the added attraction of being able to bet on tournaments and matches, eSports seem an ideal fit for Las Vegas.
One-stop eSports shop Casinos can set up eSports lounges, or act as centres for community and larger one-off events. This is not as simple as setting up some consoles around large screens wherever there is space. Establishing an eSports betting offering is more complicated than
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“It’s commonly mistaken that all gamers are introverted nerds who prefer to play video games alone in a dark basement” Kingsley Edwards, Leet
simply offering odds on tournaments. It has to appeal to the core demographic. Setting up an eSports zone in a casino is no different. To do so, they require some expert help. This is where Leet comes in. A subsidiary of Unirkn since the eSports betting operator snapped up the business last year, it can broadly be described as an eSports events tournament organiser. Despite being owned by a betting company, Leet co-founder and CEO Kingsley Edwards stresses that his particular part of the business has pivoted away from gambling. “None of our current products can be classed as betting,” he says. “Leet started as an online skill-based platform where players could compete against each other in popular video games for Bitcoin. “That service had some popularity among the crypto gaming communities. But since working directly with casino operators, our focus has shifted to B2B by providing eSports events and technology.” What Edwards and co-founder Carson Knuth have created is a one-stop shop for everything a venue could need to launch an eSports
offering. This ranges from the equipment set-up, marketing, tournament management and equipment tear-down for lounges or oneoff events, as well as in-room gaming facilities via a curated eSports channel for casinos or sportsbooks, and Leet Bingo, a play-along game for spectators.
Not all gamers The benefits of casinos moving into eSports are twofold. First, it can help attract that fabled younger audience. Second, events and tournaments can be streamed online, tapping into a much broader market. “It’s commonly mistaken that all gamers are introverted nerds who prefer to play video games alone in a dark basement,” Edwards says. “In contrast, most gamers are like any other normal person. We are social creatures who like to gather around events that cater to our interests in settings that are authentic to gaming culture.” This covers a wide range of ages. Leet considers its average participant to be around 27 years old, though tournament participants range from between 18 and 54 years old.
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GIQ US SPECIAL 2017 CASINOS
“There is more cross-selling opportunity than we initially thought. It’s not uncommon to have to pull a player off a table game or slot machine to come back to participate in our tournaments” Kingsley Edwards, Leet 52
“We support all types of popular video games that each bring in a different group of gamers. Tournaments are held for sports games, fighting games, multiplayer online battles and first-person shooters. One of our most popular events is Classic Gaming Night, which usually brings in a slightly older crowd.” There are certain similarities between the services Leet offers, and the ways casinos use free-to-play products to better engage with customers. “We typically have players and spectators signing up for the casino’s loyalty programme during the registration progress,” Edwards explains. “Our tournament platform was developed for casinos, so it allows clients to keep player data and view behavioural analytics.” He argues that the competitions Leet organises are little different from slot tournaments – players pay an entry fee when they register,
and can win a share of a prize pool for the best performers. The venues are charged a monthly fee for these services, which raise additional income through food and beverage sales, or through sponsorships and higher entry fees for larger events. The spectator numbers are hard to ignore: “Our frequent community events attract crowds that range from 20 to more than 120 participants,” Edwards says. “Players typically bring friends and significant others to watch and cheer them on as they make their way through the bracket. Larger tournaments with higher prize pools can draw in crowds in the thousands or tens of thousands.” With a potential audience of tens of thousands, there is huge potential for incremental revenue, through food and drink sales, or even having these patrons hit the casino floor. With Leet collecting key information to help
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Left: an eSports event
operators engage with and retain these customers, they may even turn into regular visitors.
Crossover potential Edwards claims to have seen a degree of interest among players already: “There is more cross-selling opportunity than we initially thought when we started working directly with casino operators. “It’s not uncommon for us to have to pull a player off a table game or slot machine to come back to participate in our tournaments,” he explains. “We even built a ‘ping’ function in our tournament platform so we can text or email players when they wander off into the casino in the middle of an event.” Steps have also been taken to monetise the eSports tournament’s captive audience with Leet Bingo. Leet Bingo is described as “a nextgeneration spectating experience” – basically US SPECIAL REPORT
an in-venue secondscreen gaming product. Players aim to fill five squares in a row on a five-by-five bingo grid. Each square represents an in-game event, so for a shoot ’em up such as CS:GO, it could be a headshot or a grenade throw. Points and prizes are then awarded for those that call bingo. This solution is similar to in-stadium raffles offered by Sportech’s Bounce 50:50 subsidiary, for example. In the context of eSports, such products will likely be new to players. What venues have, however, is a way to enhance the spectator experience. Bingo tends to be seen as a softer form of gambling in the US, making it a simple and effective way to get people playing. It offers spectators added entertainment and introduces them to the second-screen
experience. These events are growing rapidly in popularity. Venues such as GameWorks, Press Start Gaming and Power Up Gaming host regular events in Las Vegas. The Downtown Grand Hotel and Casino describes itself as “the home of eSports” in Sin City. The newly-opened Caesars Entertainment Studios is looking to take things a step further. Its new studio in Las Vegas has already been used to host eSports events, with the inaugural Gears Pro Circuit Las Vegas Open taking place there in June this year. “Projects and events, such as eSports, are historically non-traditional ventures for the gaming and hospitality space but they are thematically important for the company as we think about changing demographics and evolving preferences,” says Michael Daly, Caesars head of strategy and M&A. “With eSports, the interactive platforms will have a strong social aspect and will continue to grow in scope and relevance. We want to be out front developing new ideas.” William Hill US is also trying eSports as a new way of attracting a different type of bettor. It remains the only Nevada bookmaker to be approved by the Nevada Gaming Control Board to offer wagers on two eSports events – the DreamHack Masters Las Vegas and IEM Oakland League of Legends – with a third in the pipeline. “The appetite for betting on eSports in the US and how big a betting activity it will be is still up for debate,” says Joe Asher, William Hill US CEO. “But I’m a big believer in eSports generally, and the people watching it.” eSports looks destined for a bright future, and it is up to land-based operators to take advantage of this. It can bring in younger visitors to cities such as Las Vegas, and it can help introduce these visitors to the casino floor. How much wagering will take place on eSports is a big unknown, but the value of eSports to Las Vegas casinos seems indisputable. n 53
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The massive mobile opportunity Almost every customer that walks through a casino’s doors will have a smartphone in their pocket. These devices could prove key to getting younger visitors engaged in gaming CASINOS HAVE BEEN slow to embrace mobile, but there are increasing signs that the digitisation of venues is becoming one of the best ways to attract younger players. According to comScore’s 2017 Cross Platform Future in Focus report, 81 per cent of Americans owned a smartphone at the end of last year, with the average adult spending two hours and 51 minutes on their smartphone every day. The majority of people entering casinos will have a smartphone with them. They might be sitting at a bar, or in a restaurant with friends, or playing a slot machine, but in between these times, they will likely be checking their phone. Casinos already promote their entertainment to their clientele, so why not offer some games as well? Online poker is regulated in Nevada but there just doesn’t seem to be the demand for the product to work in a sustainable manner. A mobile poker network linking a number of casinos could be an interesting idea, and the development of bring your own device (BYOD) gaming platforms by the likes of International Game Technology (IGT) and Nektan’s Respin Gaming is bringing this possibility closer. 54
Betting on mobile Nevada is the biggest sports betting market in the US and players have been able to bet using their mobile phones for a number of years. CG Technology was one of the pioneers, bringing mobile wagering to the floors of casinos by powering the race and sportsbooks of Las Vegas properties including The Palazzo, The Venetian, and The Cosmopolitan. Offering bets on a host of professional and collegiate sports, the CG Sports app can be accessed from anywhere in the state, as can the mobile app from William Hill US. The business is a subsidiary of British bookmaker William Hill and the market leader in Nevada, operating 108 of the state’s 192 retail sportsbooks. The majority of these are outside the Las Vegas Strip and include the Downtown Grand Casino, Grand Sierra Casino, and Primm Casino. Not exactly household names, but popular venues nonetheless. William Hill US was formed in June 2012 through the acquisitions of American Wagering, and Brandywine Bookmaking and Club Cal Neva sportsbooks – which immediately gave it more than 100 betting locations across Nevada. Aside from these Nevada sportsbooks, the operator makes use of 70 mobile deposit hot-
spots, in taverns such as PT’s Pub, Sierra Gold, and Sean Patrick’s Pub and Grill, together with over 200 state-wide 7-Eleven locations, for players to fund their account. It’s a canny move that reinforces its brand across the state and has helped its mobile betting expansion. Mobile now generates 53 per cent of the operator’s total handle, while in-play betting has grown to 23 per cent of stakes. Just five years ago, the mobile channel represented 16 per cent of handle, and in-play betting wasn’t available. “We’re so much further ahead than where we started, and the team we have in place and the level of sophistication that it operates, it’s very different to how it was five years ago,” says William Hill US CEO Joe Asher. “The business has grown tremendously during that time into a profitable one.” The William Hill Mobile Sports app has been around for a few years but was relaunched last year with new user experience design (UX) and betslip features. “We’re always enhancing mobile. The minute you release a new version of your app, you’re thinking about the next version,” says Asher. “We’re looking at ways to grow the business, whether it’s mobile, retail or other states. We’re roughly 50:50 between retail and mobile, so we continue to focus on both – obviously aware and mindful of the fact that they both follow their own path.”
Back to the Strip MGM Resorts, which has a number of prime venues on the Las Vegas Strip, has been one of the more proactive operators in launching new products to cater to a younger crowd. Aside from its investment in Playstudios and its myVegas Slots app, which offers realworld rewards to players, the operator introduced new interactive gaming tables to entice players to play with their friends, launched a dedicated eSports venue at its flagship Luxor property, and plans to roll out skill-based casino games from Gamblit Gaming. With a real-money online casino and poker offerings launched in New Jersey under its playMGM moniker, the operator has also been trialling a new mobile betting platform developed by IGT. PlaySpot is described as an integrated onproperty ‘bring your own device’ solution, which allows players to deposit and withdraw cash at any of the 10 MGM Resorts race and sportsbooks along the Las Vegas Strip, including the MGM Grand and The Mirage, as well as place bets from anywhere in Nevada. The mobile platform was granted official approval from Nevada regulators in May. Surprisingly, it is IGT’s first deployment of its bet-
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ting technology in the US and the first mobile development process.” betting product for playMGM. Cohen says that in developing PlaySpot, “MGM is an exceptional partner, led IGT drew upon a decade of experience buildby smart people with big ambitions for the ing gambling apps for the European gaming playMGM brand,” says Charles Cohen, IGT’s market and applied those experiences to the vice president of mobile, PlaySpot and North product. He cites as an example IGT’s experiAmerica Sports Betting. “A significant amount ence in handling dropped connections in the of resources have been committed to the develmiddle of a bet, issues the supplier had naviopment of IGT’s PlaySpot. gated before the advent of the iPhone, back “We started development on this solution when the industry was making slot games for more than a decade ago. In that time, it has Nokia devices. evolved over several generations, adapted to a “We had to consider the physiological barrinumber markets and applications on its journey ers of such an event, and explore how to mainto becoming the world-class gaming solution tain a player’s confidence in the technology that we believe it is today.” when things within an environment do not go Cohen says that the player response to as planned,” says Cohen. the playMGM app continues to be positive, The final challenge was to gain approval with IGT planning the release of new PlaySfrom Nevada regulators, which required a pot features to help expand the scope of the coordinated effort between IGT, MGM Resorts playMGM offering. and the Nevada Gaming Control Board’s Tech“The leadership team at MGM nology Division. Cohen applauds is in sync with its customers, and the board’s commitment to gamrealises that player feedback is ing innovation, and notes the what matters the most,” he adds. newly introduced reforms that Cohen is no stranger to the are helping to bring new techiGaming industry. Prior to nologies to market quicker. joining IGT in 2014, he was the “The board’s high standards founder and CEO of Londonare important,” says Cohen. “The listed mobile specialist Prob‘New Innovation Beta’ process ability, which created one of the is particularly exciting for supfirst direct-to-mobile casinos, pliers who have something LadyLucks, in 2004. Probability new to offer.” was acquired by GTECH in May “The process 2014, becoming part of IGT in Mobile social casino of developing 2015 after the US supplier merged Aside from mobile betting technology that with GTECH. and the real-money gaming equally prioritises market in New Jersey, social Cohen says that the UScentric product took more than casino has been a useful tool user experience, three years to ensure that the for a number of US casinos to security and app delivered an unrivalled target a younger audience, not regulatory player experience, was comleast Caesars, which sold its standards pliant with local regulatory Playtika subsidiary to a conis complex” requirements, and fulfilled the sortium of Chinese investors Charles Cohen, IGT customer’s vision for a superior last year for $4.4bn. mobile sports betting solution. Connecticut’s Foxwoods Cohen explains that because Resort Casino, MinnesotaMGM Resorts is a player-focused organisation, based Treasure Island, and Oklahoma’s Chickthe user experience was paramount to them. asaw Nation have all gone social in the past “The app’s ‘trend cloud’ and the ease with year, as did Penn National with the launch of which users can create parlay bets are among Hollywood Classic Slots, utilising a brand synthe technology’s many unique, player-friendly onymous with 20 venues and allowing customfunctions,” he explains. ers to earn rewards to use across its casinos. “Quality assurance was and is a key area of These offerings currently serve to reinforce focus for IGT’s PlaySpot. The process of [develthe casino’s brand by offering social slot games oping] technology that equally prioritises user to people from the comfort of their own homes experience, security and regulatory standbut can easily be switched to real-money play, ards is complex. Because IGT was not willing either in-venue or remote. to compromise in any of those three areas, we London-listed Nektan is doing that with its had to remain nimble and creative during the Respin Games subsidiary, which has become 56
the first supplier to be approved by a tribal gaming board to launch a mobile real-money bingo game, with video slots and poker to follow. The company has already gone live with its Rapid Games/Evolve in-venue platform for an unnamed tribal casino in North California, with three more operators expected to launch this year. The platform took more than two and a half years to develop by its teams in the US and India. “Now we’ve taken our first real-money wager in the US, the hard work has paid off and the future is very bright,” says Daniel deWaal, president and CEO of Respin Gaming and Nektan America. At the time of writing, the platform is currently undergoing a limited rollout with only one Class II bingo game active until all aspects of the platform, game engine and funding mechanism have been thoroughly vetted. Once the limited trial is completed, another four bingo games will be launched along with six Class III games, which include video slots and poker. There are also deals with a number of third-party providers which will see around 20 to 30 more games added to the portfolio. deWaal explains that the regulatory land-
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The skilled route to the casino floor It is said that slot machines don’t appeal to players raised with gaming consoles. Fortunately, there is a new breed of games developer which believes it can attract a youthful audience by bringing games found on PlayStations and smartphones to the casino floor
scape in the US has been complicated to navigate, with Respin working extensively with third-party testing and certification houses, as well as with tribal gaming control boards, to develop a suitably compliant platform. “Being the first mobile provider in the Class II market required us to fit our solution into existing regulations,” he says. “However, this approach has given us an advantage as it also allowed us to help mould the regulations that other providers will need to meet in order to operate in the North American market.” Nektan won’t divulge the name of the North California tribal casino it went live with in August, but will use the casino as a central server hub for a multi-operator tribal Class II gaming network. The three remaining launches this year will either join the network or deploy proprietary branded versions of the platform. “The journey has only just begun for us,” says deWaal. “We see huge potential of our solution outside of casinos too, as the product is well suited to cruise liners and possibly airlines.” Millennials are using their mobiles more than ever before, and casinos now have a way to reach them on their devices. Time to scratch below the surface. n US SPECIAL REPORT
FACING AN AGEING player base, casinos are turning to skill-based gaming to bring in younger players with the sort of titles once only found on home consoles. Nevada and New Jersey have turned to skill games in a bid to boost dwindling gambling revenue. Nevada was ready to accept skill games licence application as far back as 2014, while New Jersey passed temporary skill games regulations in January 2016. Since then, interest in skill games has piqued, with Gamblit Gaming joined by New York-based GameCo in its quest to establish a leadership position in this emerging segment. They offer the sort of games traditionally found on consoles or smartphones, with the added attraction of winning money depending on a user’s aptitude. The next-generation casino games developed by these companies are based around gameplay that appeals to a younger generation, with console gaming being a huge industry. The Entertainment Software Association’s 2016 state-of-the-industry report says that 63 per cent of US households include at least one frequent gamer. It found that 65 per cent of households owned a game-playing device, and 48 per cent a ‘dedicated game console’. In 2015, a total of $23.5bn was spent on the gaming industry in the US alone, with $16.5bn of this spent on gaming content. These players are also increasingly social in their gameplay. The ESA found that 54 per cent of console players game with others, such as friends (40 per cent) and family (21 per cent). Those that play against strangers online tend to do so for 6.5 hours a week on average. The appeal of playing against strangers online through games such as Call of Duty or Destiny has helped fuel eSports’ rapid growth. Enterprising companies such as Skillz, a mobile gaming platform provider, have experimented, allowing players to place bets on tournaments or head-to-head games. Gamblit and GameCo are bringing this set-up to land-based venues. A key tactic for casino games developers has been to develop games based around brands that appeal, in particular 57
GIQ US SPECIAL 2017 CASINOS
to the core casino demographic. Developing products using gameplay that appeal to this younger generation seems to be the next logical step, with branded games offering even greater opportunity. Players are clearly willing to spend money to play games they enjoy, and Gamblit and GameCo believe they can draw them into the venues. GameCo is in the enviable position of having secured the rights to the first ‘AAA’ console title – the iconic beat ’em up Soulcalibur II. It is worth noting though that the company has played it relatively safe with the choice of title, which will be most popular among casinos’ existing demographic. “The game you play in the casino is the same game you can play on an Xbox One or PlayStation 4 at home,” GameCo CEO Blaine Graboyes says. “We see ourselves as a sort of app store which creates the hardware and software to facilitate the gambling, and facilitate the migration to the VGM platform. “Bringing an AAA publisher such as [Soulcalibur developer] Bandai Namco to the platform signals the market opportunity, which will bring other AAA games to the GameCo platform, and therefore to the casinos.” Graboyes acknowledges t hat ski l l games are not all about millenials. “I think the most important thing for GameCo is having a variety of games for different genres, so the casinos can market and publicise their floors. “We have first-person action, which has a male, under-40 audience, to attract the nightclub bar and restaurant customers. But then there’s Secret Temple, a match 3 game, which attracts females over 40 – the same audience as Candy Crush. With a mid-core title like our basketball game, you have a decent split of male and female players aged between 30 and 45 years old.”
“There is so much great IP out there in the video games or entertainment space, so we don’t see a lack of content to bring to the casinos” Darion Lowenstein, Gamblit
Mobile market Using a similar approach, Gamblit is gunning for the $25.1bn US mobile gaming market. “We see great opportunities for both proprietary games such as the ones we launched with, as well as partner games,” Gamblit Gaming chief marketing officer Darion Lowenstein says. “In fact, most of our upcoming games we’ve announced are massive hit titles that come from the world of video games.” The company is launching Catapult King, a game downloaded more than 35 million times and Into the Dead, a zombie shooter with more than 72 million downloads. Even more impressive is a deal to launch a real-money skill variant of Jetpack Joyride, downloaded more than 500 million times, and the 250 million download title Doodle Jump. “We think gamers will love being able to play the games they know and enjoy, but for money,” Lowenstein says. There is not much risk of major games publishers muscling in on the market, due to the licensing costs and regulatory requirements. This publishing business model is a natural fit for console games developers – Gamblit and GameCo make the hardware, and the publishers make their content available for those systems. “In terms of publishers, EA makes games for other consoles, rather than making the hardware,” Graboyes says. “They want to work with platforms such as Xbox or us to bring them to the audience. This licensing scenario is very well-known to them – they’re used to licensing their IP. There is so much great IP out there in the video games or entertainment space, so we don’t see a lack of content to bring to the casinos.”
A potential stumbling block may be that these games are largely enjoyed at home. The days of the video arcade are long gone, and players can access new content without leaving their sofa. In 2015, 56 per cent of games sales were made digitally. Content streaming is the norm. So why would people leave their homes to play something easily accessible from their sofas? This, Graboyes says, is where the whole casino experience comes in – the ecosystem operators have painstakingly built is the key to getting these players off the couch and into bricks and mortar establishments. “What we think is great about the casino is that there’s no other place in the world that provides this level of hospitality, amenities, and VIP experience,” he says. “Players are looking for a place they can get together and be treated like a VIP”. The games alone may be interesting, perhaps more so with the prospect of winning some cash. But it is the restaurants, shops and clubs that make the package more attractive. Meyerhofer believes that this niche market can only grow, predicting that it will become “between 10 and 15 per cent” of the casino floor in the next decade. He’s unwilling to share revenue figures but says that early signs show Gamblit’s games are attracting that fabled younger audience. “We are pleased at where we are out of the gate, especially given the majority of our players are under 40, with the largest percentage being under 30,” he says. “This is the exact demographic we wanted to capture since the outset, and we’re pleased to see we’ve hit it. This picture is only going to get better moving forward.” Graboyes is more candid: “We’ve seen best single-day numbers above $600 in a single property, so the VGMs can match the topperforming slot machines. “One of the most important facts we are seeing is that a considerable amount of incremental revenue is being generated by machines,” he explains. “Between 10 and 20 per cent of VGM revenue is incremental – meaning the player was not going to gamble but changed their mind on seeing the machine – or expansionary, where they play more than originally intended.” This remains a nascent sub-sector of land-based gaming. But land-based gaming is stagnant – it needs kick-starting, and the switch to attractions only glosses over the issue. n
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GIQ US SPECIAL 2017 FINANCE
Golden Nugget leads New Jersey iGaming growth Garden State shows consistent growth since market opening four years ago. By Kio Dawson and Ashley Diem, Fantini Research FOR THE PAST few years, the US has been on the precipice of iGaming expansion as a number of states have considered legislation. The industry is still waiting for the next state to go online, with four years passing since New Jersey, Delaware and Nevada flicked the switch. New Jersey remains by far the biggest of these markets and could generate close to $250m in iGaming revenue by the end of 2017. The development of this market has been a feather in the cap for the state’s Division of Gaming Enforcement and director David Rebuck (see more on page 40). Its continued growth is testament to a successful model regulatory framework that other states could look to emulate when developing legislation. There are now 23 authorised iGaming sites in New Jersey, covering 17 different brands.
AUTHORISED IGAMING SITES IN NEW JERSEY BORGATA HOTEL CASINO & SPA
Borgatacasino.com, Borgatapoker.com NJ.Partypoker.com, palacasino.com palabingousa.com, playmgmcasino.com playmgmpoker.com, scorescasino.com CAESARS INTERACTIVE ENTERTAINMENT
CaesarsCasino.com, HarrahsCasino.com WSOP.com, us.888.com us.888poker.com, us.888casino.com GOLDEN NUGGET ATLANTIC CITY
GoldenNuggetCasino.com nj-casino.goldennuggetcasino.com betfaircasino.com, playsugarhouse.com
Two of these have recently entered the market – the GVC-powered playMGM online poker and casino sites and ScoresCasino.com, a new offering from gentleman’s club Scores, which is powered by Pala Interactive. Borgata dominated the market in the first few years after New Jersey came online in 2013, but Golden Nugget has now pushed ahead. In March, the operator became the first licensee to post monthly revenue in excess of $6m, and went even better in July. No other licensee has even come close to this yet. Tropicana and Resorts Digital are also seeing strong growth, and, alongside Golden Nugget, helped total iGaming revenue for the market increase by 18.5 per cent to $20.6m in July – just below its peak of $21.7m in May. Golden Nugget’s performance is discussed in further detail on page 32 in an exclusive interview with the operator’s iGaming chief, Thomas Winter, and its growth in the past three years has been meteoric. In July 2014, Golden Nugget generated just $0.9m in iGaming revenue. A year later this figure was $2.7m, while last July it reached $3.7m. So far this year the operator has achieved even greater heights, with its record performance in July up 69 per cent versus a year ago. For the seven-month period (Jan-Jul 2017), Golden Nugget’s revenue has grown by 75 per cent to $39.2m. It now has a 28 per cent share of the overall market, which itself grew by 27 per cent to $142m. While Golden Nugget has been getting all the plaudits, Borgata has struggled to continue
its growth and revenue has fallen by five per cent to $27.3m for the year-to-date. Caesars Interactive’s growth has also slowed and this has allowed Resorts Digital and Tropicana to close the gap considerably. The fight to be the second-biggest licensee in the market is becoming fiercer month by month. PokerStars’ long-awaited New Jersey launch has boosted revenue for Resorts, but online poker revenue across the market has fallen by seven per cent this year to $14.6m. This is due to declines for both the Borgata and Caesars, down 27 per cent and 21 per cent respectively to $4.4m and $4.2m. This offset growth of 35 per cent from Resorts to $6m. Meanwhile, Delaware and Nevada are both struggling with the relatively small population within each state. Nevada no longer provides a breakdown of its interactive revenue. For Delaware, iGaming revenue for the year has dropped by more than 20 per cent to $1.5m, with only Harrington Raceway posting growth. In July, revenue for the market was down by 32 per cent to $193,000, with all three operators posting doubledigit declines. There has not been much to shout about since the opening of the market there in November 2013. Delaware’s iGaming revenue has gone from about $115,000 a month to July’s total of $193,000. In comparison, New Jersey started at $7.4m in its first full month of operation in December 2013 and hit $20.6m in July of this year. n
DELAWARE IGAMING NET REVENUE (US$) Delaware iGaming net revenue (US$)
RESORTS CASINO HOTEL
resortscasino.com mohegansuncasino.com pokerstarsnj.com TROPICANA CASINO & RESORT
Jul-17 YTD Total
GIQ US SPECIAL 2017
NEW JERSEY IGAMING NET REVENUE (US$) 7m n Borgata
n Caesars Interactive
n Golden Nugget
n Resorts Digital
n Trump Plaza
n Trump Taj Mahal
NJ ONLINE POKER (US$)
NJ ONLINE CASINO (US$)
n Borgata n Caesars n Resorts
Jan-Jul 2016 21.9m
TOTAL NJ IGAMING (US$)
n Borgata n Caesars Interactive n Golden Nugget n Tropicana n Resorts Digital
Jan-Jul 2016 21.9m 16.9m
n Borgata n Caesars Interactive n Golden Nugget n Tropicana n Resorts Digital 22.3m
Jan-Jul 2017 n Borgata n Caesars n Resorts
US SPECIAL REPORT
n Borgata n Caesars Interactive n Golden Nugget n Tropicana n Resorts Digital
Jan-Jul 2017 20.4m
n Borgata n Caesars Interactive n Golden Nugget n Tropicana n Resorts Digital
GIQ US SPECIAL 2017 COLUMN
THE FINAL WORD
Is the sport betting tide finally turning? In June, the United States Supreme Court agreed to hear New Jersey’s drive to sanction sports betting – contrary to the expectations of industry execs and Washington politicos
The question might be asked whether the leagues ever really opposed sports betting or simply wanted to ensure that they properly benefited from it? 62
FIRST, THE BACKGROUND: a series of gaming fixing scandals and the old American moralist cliché explain a prohibitive history. The road to legality is blocked by the 1992 Professional and Amateur Sports Protection Act (PASPA), which made sports betting illegal across the nation save for Nevada, Montana, Oregon and Delaware, where it is ‘grandfathered’ (already allowed to varying degrees). Several states have tried and failed to repeal PASPA and it is New Jersey – a traditionally progressive gaming state – that has led the charge. In 2011, the state passed a referendum in favour of legalisation. Governor Christie was quick to instigate the people’s mandate through regulations for state-sponsored sportsbooks. The big leagues wailed about their sports being corrupted, sued for a violation of PASPA and won. Up until now, New Jersey has lost every step of the legal assault course in its countercase that PASPA is an unconstitutional assault on state power, per the Tenth Amendment. Step away from the legalese and you will probably agree that America is in the throes of a long-term trend towards liberalisation. “Innovative gambling products” have become a byword – over 30 states now have casinos; daily fantasy sports has been regulated in 16 states and social casino gaming remains confidently outside the strictures of gambling regulation. From a tactical standpoint, DFS was successful in raising its issues to mainstream politics by galvanising a young, mainstream player base, relationships with the leagues and investment from large US media companies. An illicit market means that a mass DFS style player campaign is not viable; but sheer scale is a statement of public opinion. It is estimated that Americans bet $500 billion worldwide: $4.7 billion was bet on the last Super Bowl – $200 million was legal; $98 billion was bet on NFL and college football – $2 billion was legal.
Does America want to stigmatise all these fans as criminals, or create proper consumer protection, accompanied by fiscal boosts for states and communities? A recent study by Oxford Economics predicted that legalised sports betting will create between 125,000 and 152,000 American jobs and generate an estimated $4.8 billion to $5.3 billion in federal, state and local tax revenues. Perhaps most importantly of all, the leagues are not intransigent. NBA commissioner Adam Silver has continued to speak in favour of legal sports betting under an appropriate legal framework since his very public November 2014 New York Times op ed. The NHL, MLB and NFL are all now open to discussing the issue. Advances in technology have dampened or rendered obsolete many match-fixing fears. The question might be asked whether the leagues ever really opposed sports betting or simply wanted to ensure that they properly benefited from it? Of course, nobody can predict the outcome of the Supreme Court hearing this autumn; or where Trump – who once owned casinos – and his administration stands between liberalisation and restriction. What we can say is that businesses – not just brick and mortar – will need to think hard about how to engage with sports betting. It is with this in mind that we have formed the US Sports Integrity Alliance, so that whatever the ruling, stakeholders are ready to get behind a fair, competitive and open market for sports betting in the US. Be that next year or in the years to come. n Matthew Cullen is founder and CEO of the US Sports Integrity Alliance – a strategic advisory firm in San Francisco, Washington DC and London, focused on helping companies with their strategies for an open US sports betting market.