12 minute read
Payments
from SBC Leaders Issue 18
by SBC Global
TRUIST SECURITIES: ASSESSING US MARKET DEVELOPMENTS
BARRY JONAS, MANAGING DIRECTOR AT TRUIST
SECURITIES, delves into the US market’s evolution and the underappreciated risks of the post-PASPA market
BY ERIN GALLAGHER
The US sports betting industry has boomed in recent years, with operators all over the world looking for a slice of the action as more states begin to open up.
In the three years since sports betting was legalised, the market has entered a period of hyper growth - something which Barry Jonas, Managing Director at Truist Securities, believes is showing no signs of slowing down.
Jonas began by shedding some
light on Truist Securities’ role within the gaming industry. He said: “Truist Securities is the investment banking arm of Truist Financial Corporation. Truist was formed in 2019 with the merger of SunTrust and BB&T.
“Today we are the seventh largest commercial bank in the United States. The bank is deeply committed to the gaming industry, having a longstanding relationship lending and advising the wider sector - mostly with a North American focus.
“My group focuses almost exclusively on US-listed gaming companies, which aligns with the bank’s current focus. While we provide our clients detailed quantitative and qualitative analysis into the many companies we follow, we also seek to stay on top of worldwide gaming industry trends - drawing on our deep industry rolodex.”
Having first started out in the gaming space back in 2003, Jonas has become well-versed in the challenges and opportunities that face operators and suppliers. But while many of us are excited to see what the future holds, Jonas disclosed that there are still many risks within the industry which are not appreciated.
One of these, he explained, is the consolidation of the market as more companies flood into the US betting space. He highlighted that too many companies could have unintended social responsibility consequences - a risk which he considers to be well worth watching.
“The market is in hyper growth mode now with little focus on nearterm profitability as companies seek out new customers with strong bonuses. There’s a view that first mover advantage is everything and the market will settle on a few winners with the bulk of market share followed by second tier players fighting for scraps.
“I personally think it’s too soon to say how the US will evolve - namely how concentrated market shares will be in the long-run, and how easy and quick it will be for companies to pivot to profitability. There are limited switching costs today and I expect the time to set up a new account on a new app will continue to dwindle, as will any differences between the quality of offerings.
“But even if the market will ultimately settle with a limited number of winners - perhaps driven by M&A, a large factor we think some investors don’t fully appreciate is the regulatory oversight seen across gaming on a state-by-state basis.
“It’s a unique industry where too much accessibility, too much success can have unintended social consequences which ultimately drives more regulation that can impede market growth. Ultimately gaming is a privilege, not a right.
“While there’s real momentum for sports betting now (and to a lesser extent iGaming), tax revenues that states are currently seeing are less meaningful than many would think. I think the smarter operators understand the dynamics here and are committed to responsible gaming, but it’s a real risk worth watching.”
Discussions soon turned towards the current trends that have emerged since the repeal of PASPA and how this has led to an explosion of both sports betting and iGaming.
He highlighted a shift in the approach towards sports betting, particularly from land-based operators, as the introduction of legislation has led to “direct profitability” for physical casinos.
“Land-based operator views on sports betting have shifted dramatically since PASPA's repeal,” Jonas shared. “It wasn’t too long ago that CEOs were highlighting the marginal business sports betting did in Nevada, while they thought the benefits of further state legalisation would mostly be a visitation driver to physical casinos. Little if anything was expected for direct profitability.
“I think you could trace the shifting view to DraftKings' successful SPAC merger with a valuation multiple not seen in the more mature US gaming industry. This was driven by a new type of investor to the space - the internet/growth investor.
“At the same time historical barriers from media and leagues shifted to support wagering, with the need for additional revenue sources and consumer safety a catalyst for the wider development of interactive sports betting and gaming.”
“Today there’s a widely held view that the market for sports betting and iGaming will be pervasive and meaningful at maturity, while EBITDA margins will be comparable to landbased gaming.”
With 28 states now live, and more in the pipeline to legalise in the coming year, we pressed Jonas on his views for what the biggest trends are across the industry to which he highlighted the shift towards cashless gaming, omni-channel and media convergence.
“Key themes we see today are ‘cashless gaming’, ‘omnichannel’ and ‘media convergence’ - which are somewhat interrelated,” Jonas replied.
“Of course online wagering and gaming are done cashless on your phone, we’re now seeing that concept in physical casino environments. Much like how you pay for coffee on your mobile wallet, pretty soon you’ll fund slot and table game play through your phone, as well as your meal and spa experience.
“The next phase is integrating that wallet between the physical and virtual worlds in one ecosystem. Omnichannel encapsulates this trend, but also has more content split between the physical and virtual world.
“B2B players are developing and releasing the same game content across multiple channels and mediums, while some companies are even developing their brands in new, nongaming verticals.
“Taking omni-channel one step further is the blurring of lines between sports media and gaming. Several media and gaming companies are working on integrating broadcasting with sports betting and even more broadly defined gamification, from a play-for-fun perspective.”
By sponsoring the SBC Summit North
America in New Jersey, Jonas hopes to gain further understanding into what comes next for the betting and gaming industry.
“We’re attracted to the depth of relationships SBC has across the gaming universe. This conference will be one of the first in-person conferences since COVID to have real global participation.
“As the US is shaping to take the mantle of the largest interactive gaming market in the world, we think the many perspectives at this conference are invaluable as we seek to better understand what comes next.” •
KEY THEMES WE SEE TODAY ARE ‘CASHLESS GAMING’, ‘OMNICHANNEL’ AND ‘MEDIA CONVERGENCE’ TAKING OMNICHANNEL ONE STEP FURTHER IS THE BLURRING OF LINES BETWEEN SPORTS MEDIA AND GAMING
BLOCKCHAIN AND NFTS: A NEW ERA OF FAN ENGAGEMENT IN SPORTS
CHARGED WITH CHANGING CULTURE in the new digital age, what does the future hold for NFTs? And how has the latest evolution in blockchain tech become a key part of the fan experience?
BY JOE STREETER
Throughout the pandemic, the whole fan engagement journey evolved rapidly as empty stadiums and new consumer habits shifted fandom into a new digital space. As alternative forms of fan engagement became thrust into the mainstream, the link between blockchain and sports clubs intensified and grew to be deeper than just sponsorship deals.
Blockchain and digital currency
provided a fresh avenue to exalted fan engagement expanding their online audience and maximising their link with a new younger fanbase. At the forefront of this was tokenisation and the rapid expansion of non-fungible tokens, otherwise known as NFTs.
As they have become a more mainstream offering within the sporting sector, clarity has also increased, with it now relatively common knowledge that they are a digital asset that can be owned by a fan or consumer.
Marking the next evolution of blockchain technology, NFTs digitally immortalise legendary sporting moments, matches, or even athletes, enabling a new generation of sporting followers to celebrate sporting moments in a modernised way.
For supporters, NFTs went from an unknown quantity to an essential affirmation of their loyalty to their club - as Paris Saint Germain, Barcelona, Arsenal and Inter Milan were among an abundance of footballing giants that embraced the new opportunity.
In terms of club collaborations, the Nerazzurri was perhaps the most significant as the platform became the front-of-shirt partner for the Italian champions, in a link that also led to the formation of the Inter fan token.
It underlined that clubs embracing NFTs and digital currency partnerships aren’t merely entering into fruitful sponsorships but are enabling their entrance to a whole new sector for fan engagement, ushering their fans into a space that is growing and providing a new space.
Following the announcement of the Inter Milan link with Chiliz, the trend was perhaps exemplified by CEO Alexandre Dreyfus, remarking: “This is a special event. It’s the first time in more than a quarter of a century that the name on the front of the club’s shirt has changed. We’re very proud to be taking that privileged space to promote the launch of the $INTER Fan Token.
“This announcement is the start of a new era for millions of Inter fans around the world, who will be able to join a thriving digital community on Socios.com, enjoying countless opportunities to engage with the team, influence key decisions and be rewarded by the club they love through $INTER Fan Tokens.”
Furthermore, the step into tokenisation and the adoption of a new era of fan engagement wasn’t merely taken by clubs, it was also taken by organisations and leagues as they too navigated a tricky period and adjusted to a new normal.
One of the world’s biggest football leagues, the Spanish LaLiga, emphasised through stepping into NFTs that it was ‘ready to embrace a new era of fan engagement’.
Furthermore, the slew of major partnerships which show major sporting brands embracing NFTs and blockchain highlight the new digital space is anything but temporary and marks a permanent fixture in merchandising, the matchday experience and generally how fans interact with the club they love.
In a recent interview with PaymentExpert, Pet Berisha, the new Head of Cryptomedia at COPA90, detailed his insight on how he thinks tokenisation will change the football world and bring a new audience to souvenirs.
“There’s going to be a lot of loyalty features. I wouldn’t be surprised if in two or three years time from a club card and loyalty card perspective NFTs disrupt that, and how is that going to look from a footballing perspective?
“There are a few interesting models
Pet Berisha, Head of Cryptomedia at COPA90
around ticketing, for example there are a lot of ethereum based projects – this isn’t NFT specific but it could be – where you can have a situation where you sell a ticket for say a 1,000 person event and everyone buys in ethereum, if only 900 people turn up then the money that is made from those 100 people is distributed among the 900 who turned up. “There’s a big incentive to actually turn up because otherwise you don’t get what you pay for, and if other people do turn up there is this community distribution effect, which is quite interesting.”
As a leading football media outlet, which has always sought to take a unique angle to coverage, he added his aim to immerse COPA90 in the new wave of digital sports engagement - becoming a ‘centrifugal point for what is going to be a very different future digital word that is going to encompass football’.
Although its growth has been rapid,
Berisha pointed out that it’s still in its relative infancy, and how the evolved digital space which unites sports, blockchain and tokenisation could take a completely different shape to how it is now.
As adoption accelerates and the products cement their place within the diet of sports consumption, the future for NFTs is simply fascinating. If the digital products can expand across the full demographic of sports fans they can significantly develop and enlarge the digital presence of sports clubs and organisations - something that has been a foremost priority for football clubs in modern times.
Berisha commented: “I like to look at the bigger picture. The way I like to think about NFTs is what bitcoin did to finance and the way people think about money, NFTs are going to do to everything else - they are the greatest disruptor to culture we have seen since the internet and they are like a new form of social communication.
“The one thing we have kept with us since we were humans 30,000 years ago is the ability to create culture, whether that is through art, music or through collecting stones. We are taking all that primal instinct to want to collect and create culture and taking it online and making it digital. “Now, blockchain technology is being used to allow that and to enable the ownership of digital assets. Looking at where NFTs can go and what they can do, the most interesting thing I think
is when we start to see interoperable things happen - so where you have a game where you mint NFTs on and use them on another, whether that’s owning a Ronaldo on PES and using him on FIFA and then being able to maybe use that asset to go to a game for example.”
Furthermore, the regulatory framework that encompasses NFTs will also adapt to their rapid growth, especially as they become more deeply intertwined with fantasy football and esports.
Sorare was recently pushed to detail its status as a non-gambling product, following the UK Gambling Commission stating it was evaluating the company’s fantasy football game and digital collectables platform with regards to whether the business was required to maintain a licence.
Nonetheless, the firm emphasised its position as a digital collectables offering, further thrusting it into a fan engagement market.
The group stated: “We are very confident Sorare does not offer any forms of regulated gambling. This has been confirmed by expert legal opinions at every stage since the company was founded, including during a number of fundraising rounds.
“We will always engage and have an open dialogue with authorities who reach out to us to learn more about our game. We believe this is the responsible way to grow our game and community globally.” •
