Thursday, February 28, 2008

Gaming Spectrum Explained

This graphic was taken from one of's presentations. There are probably innumerable ways to segment the gaming spectrum. I organized the overall gaming spectrum into three components:
  • Entertainment
  • Skill
  • Wagering

I then mapped various types of games from the ones most commonly associated with entertainment, moving to the types of games most commonly associated with wagering. Of course, you can wager on just about anything, but some games are more commonly associated with wagering (roulette, blackjack, etc.), and some are more commonly associated with entertainment (Monopoly, checkers, etc.).

The colored ovals tried to encompass the general scope of the particular high-level segments by the types of games common to that segment. In general, there tends to be a more firm demarcation between entertainment and wagering, as you either have a wager or you don't. The skill segment tends to reach into both entertainment and wagering segments.

Overall, the graphic is fairly useful in visually depicting the gaming landscape and where various games and types of games fall into that landscape. By examing the landscape, game areas that may be underserved, or new game types potentially could be envisioned.

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Wednesday, February 20, 2008

Nevada Sportsbooks LOST Money on the Super Bowl

Traditional bookmaking can earn a profit - if you can have equal money wagered on both sides of the game. For Super Bowl XLII, unfortunately more money was wagered on the Giants - and the Giants won. This outcome cost Nevada sportsbooks $2.6 million. Since $92.1 million was wagered on the Super Bowl, Nevada sportsbooks had looked to profit by approximately $4 million. The actual result was an almost $7 million swing in the wrong direction. The debacle is described in detail by the Las Vegas Sun .

What should happen is that once the sportsbook sets a line, if too many wagers occur on one side, the line is adjusted to incent increased action on the other side, to balance the money on each. That didn't happen to a sufficient degree. The main culprit wasn't the spread, however, but the money line. A particular sportsbook had the money line: Giants +320, New England -440. This means that you could bet $100 on the Giants to win $320 or bet $440 to win $100 on the Patriots. The books should have adjusted the odds downward on the Giants and upward on the Patriots to incent proportionally more wagers for the Patriots.

There is some general correlation between point spreads and the money line, which I won't get into here. It appears though that the money line on the Patriots was attractive compared to the point spread, but even that attractiveness to experienced bettors couldn't overcome the large casual betting interest in the Giants.

The need to balance the books is a problem with this type of wagering. The book needs to be maintained in balance and done so on a fairly continuous basis to ensure the house earns a profit. That isn't the problem with a pari-mutuel wagering method. With pari-mutuel, the house takes its profit off the top and distributes the remainder of the wagers to the winners.

For example in a pari-mutuel wagering scenario, if early wagering on the Giants was 2.5 times the amount wagered on the Patriots, the odds on the Giants would have dropped to 1:1 and the odds on the Patriots would have risen to 5:2, given a 15% takeout for the sportsbook. When bettors saw this, more wagers would have been placed on the Patriots. If this occurred to the point where the money ultimately wagered on the Giants was equal to the amount wagered on the Patriots, the final odds for each would have settled at 8:5. What is better about this method is that the house has no need to balance the book because the bettors themselves set the odds and the house earns its takeout regardless of the outcome. If $18 million had been wagered this way at a 15% takeout, Nevada sportsbooks would have earned $2.6 million.

Pari-mutuel wagering, due to the larger takeout, may not be as attractive to experienced bettors, but with sporting events with large casual interest, such as the Super Bowl, a wagering method that generates a good margin with lower risk has potential value.

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Saturday, February 16, 2008

Degree of Fantasy Game Differentiation Diminishing

The fantasy game model is a game construct where contestants select individuals, sport teams, etc., to form a virtual "team," which is then tracked for certain performance characteristics or news items, which then get converted to a point system for scoring purposes. The contestants attempt to craft a team that can generate the highest score, for either bragging rights or prizes. The fantasy model, typically applied to sports like football and baseball, is expanding to other areas such as politics, soap operas and movies, in addition to expanding to other sports such as fishing. Although this expansion captures more participants, the games themselves operate similarly to traditional fantasy sport contests.

Traditional fantasy games differentiate across these dimensions:
  • Stakes/Prizes (free to hundreds of thousands of dollars)
  • Player selection (draft, salary cap, auction)
  • Scoring methodology (statistics and weightings)
  • Competition method (head-to-head, rotisserie, playoff)
  • Timeframe (daily, monthly, season, post-season)

What passes now as new and innovative is usually no more than just a minor variant on one of the above dimensions. This is borne out by new research from the Fantasy Sports Trade Association,, that states that the number of fantasy sport consumers have only increased 7% from 2003-2007. This statistic is more weighted toward the pay-to-play fantasy consumer and is underweighting the free-play fantasy consumer, which is the majority of fantasy players. However, the fantasy consumers that play free games generally are less lucrative to the fantasy operator than those that pay entry fees.

For fantasy operators, particularly new entrants, that want to compete effectively in a relatively crowded and undifferentiated marketplace, game innovation that provides a sustainable competitve advantage is required. Even if the new entrant developed an innovative game concept that proved popular, competitors could easily copy the concept and bring it to market.

Yahoo, ESPN and CBS are the largest fantasy football sites, according to research from the Fantasy Sports Association, Fantasy football, by a large margin, is the most popular of the fantasy sports. Each of these competitors has unique users/visitors in the 1.5M to 4.5M range. It would be very difficult for a new entrant, even if the first mover with a differentiated game, to prevail against larger competitors that decided to implement that game if there were no real barrier to entry.

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