Pithy headline aside, the amount of money Amazon is paying for Twitch.tv is ginormous - like to the tune of $970 million IN CASH. Definitely a high score! The site is a live streaming site, where users can watch uploaded videos of people playing video games. Users can upload their game videos, to include commentary, as well as create "programming" in the form of scheduled live podcasts and/or content.
A huge score for Twitch and again shows indirectly the value of eSports as well as documenting the shift from traditional broadcast content toward user-generated, web- and mobile-delivered content. The Business Insider story reports that in February, Twitch was fourth in peak internet traffic, behind Netflix, Google and Apple.
For more on this story, see the Business Insider article here.
Showing posts with label industry. Show all posts
Showing posts with label industry. Show all posts
Friday, August 29, 2014
Tuesday, August 12, 2014
Atlantic City "Bust" For Revel Casino
You know your property isn't that attractive when you can't attract buyers at fire sale prices. That's what happened last week when Atlantic City's Revel Casino didn't attract any qualified bidders at its bankruptcy auction. Bad bad news. According to Caesars Entertainment's CEO, not attracting a bidder, "suggests that even at a de minimis price, people are finding it hard to imaging they can make money operating the Revel." That about sums it up for the Revel and likely for a good portion of the current crop of Atlantic City casinos. As stated in previous posts, here and here, Atlantic City is in big trouble.
As a result, the Revel is scheduled to shut its doors on September 10th. Stories on this topic can be found here and here. RIP Revel, it was nice to know you...
As a result, the Revel is scheduled to shut its doors on September 10th. Stories on this topic can be found here and here. RIP Revel, it was nice to know you...
Sunday, July 13, 2014
Atlantic City Casinos Biting the Dust
It appears the Atlantic City gambling establishment is reacting to Governor Christie's warning to shape up quickly. As was predicted in an earlier post, how Atlantic City will deal with this warning is to retrench and close up some properties. That is now happening. The Atlantic Club casino closed in January and the Showboat casino will close in August. It is reported that the Trump Plaza casino will close in September. If the Revel casino can't find a buyer to rescue it and it closes, that would leave Atlantic City with just two-thirds of the major casino properties it started the year with. Losing one-third in two-thirds of a year is a huge hit to the Atlantic City economy.
To save Atlantic City, a game changer is needed immediately. Sports betting may be that game changer. Now the raw revenues from sports betting will not be sufficient, but the fact that something new and unique to Atlantic City is in play will help draw casino patrons from competing jurisdictions like New York, Massachusetts and Pennsylvania. It also helps New Jersey compete with sports betting that is currently underway in Delaware.
Can casino gaming in Atlantic City survive? Time will tell.
To save Atlantic City, a game changer is needed immediately. Sports betting may be that game changer. Now the raw revenues from sports betting will not be sufficient, but the fact that something new and unique to Atlantic City is in play will help draw casino patrons from competing jurisdictions like New York, Massachusetts and Pennsylvania. It also helps New Jersey compete with sports betting that is currently underway in Delaware.
Can casino gaming in Atlantic City survive? Time will tell.
Sunday, May 11, 2014
eSports Taking Next Step Into the Mainstream
Continuing with the eSports topic, Major League Gaming and ESPN have partnered to present an eSports tournament at the upcoming X Games in June. The tournament will be based on the Call of Duty game and will have a total of eight teams participating. For the first time, X Games medals will be awarded to MLG professional gamers. This is just the next step for eSports as they move further up in popularity and further move into the mainstream. The MLG/ESPN story on this can be found here.
That's not all the recent good news for eSports. Bloomberg Business Week has a news item discussing the construction of a 15,000 seat eSports stadium near Macau in China. According to the article, "Hong Kong developer Lai Fung Holdings plans to build a 15,000-seat stadium so fans can watch gamers play one another in front of them." The stadium will be a part of a much larger, $2.8 billion gaming theme park planned for Hengquin Island, near to Macau. Macau rapidly grew into one of the largest gaming destinations in the world in just a few years. It appears China is looking to be a world leader in this form of gaming as well. According to Bloomberg, more than 500 million people in China play video games. Contrast that to the total population of the US, which is barely above 300 million and you get a perspective on just how big gaming is in China.
Quoting further from the Business Week article, they note that the Activision Call of Duty tournament in March had a $1 million prize purse. It is apparent eSports is getting big and getting big fast. Again, keep an eye on eSports.
That's not all the recent good news for eSports. Bloomberg Business Week has a news item discussing the construction of a 15,000 seat eSports stadium near Macau in China. According to the article, "Hong Kong developer Lai Fung Holdings plans to build a 15,000-seat stadium so fans can watch gamers play one another in front of them." The stadium will be a part of a much larger, $2.8 billion gaming theme park planned for Hengquin Island, near to Macau. Macau rapidly grew into one of the largest gaming destinations in the world in just a few years. It appears China is looking to be a world leader in this form of gaming as well. According to Bloomberg, more than 500 million people in China play video games. Contrast that to the total population of the US, which is barely above 300 million and you get a perspective on just how big gaming is in China.
Quoting further from the Business Week article, they note that the Activision Call of Duty tournament in March had a $1 million prize purse. It is apparent eSports is getting big and getting big fast. Again, keep an eye on eSports.
Wednesday, April 30, 2014
Intrade Technology Revived as Fantasy Sports Website
A co-founder of the shuttered prediction market website Intrade has licensed that technology and has opened a fantasy sports website. The New York Times story discloses how the site, Tradesports.com, is now open for public testing.
Intrade was closed a couple of years back after US regulators accused the site of offering contracts without regulatory approval, forcing the site to withdraw from the US. Subsequent to that, following an accounting review found irregularities in internal accounts, the site ceased operation and froze customer accounts. This new site will leverage the trading technology utilized by the prior site.
To attempt to stay within fantasy sports skill game safe harbors, the new site will require players to trade sufficient shares across three or more different contract propositions. The company will make money by having more money come in via entry fees than what is paid out in prizes, similar to other pay-to-play fantasy sports websites.
Intrade was closed a couple of years back after US regulators accused the site of offering contracts without regulatory approval, forcing the site to withdraw from the US. Subsequent to that, following an accounting review found irregularities in internal accounts, the site ceased operation and froze customer accounts. This new site will leverage the trading technology utilized by the prior site.
To attempt to stay within fantasy sports skill game safe harbors, the new site will require players to trade sufficient shares across three or more different contract propositions. The company will make money by having more money come in via entry fees than what is paid out in prizes, similar to other pay-to-play fantasy sports websites.
Saturday, April 26, 2014
Free Market Research Info on eSports Available
I saw this item a couple of months back, but just getting around to commenting on it now. There is a new sport gaining popularity. It's not horse racing, auto racing, skateboarding or extreme skiing (although all are nice sports). What is getting more popular is eSports. What is eSports? These are sports where the participants play games on electronic devices, like consoles and computers. These gamers play games like Call of Duty, StarCraft, etc. competitively. There are actual leagues for eSports like Major League Gaming and online video sites dedicated to broadcasting eSports content, like Twitch. I do spend time on both sites, and find both sites entertaining and engaging.
Here's the item. NEWZOO marketing research has some good info on the eSports market that they're making available for free. You can find this article at this link. I won't steal NEWZOO's thunder and repeat the information, but I'll highlight just a couple of data points.
The first is that there are currently over 47 million eSports players and viewers in the US and Western Europe. For the US alone, it is approximately 28 million. If you compare that to the current estimate of fantasy sports players in the US of over 33 million, eSports is generally comparable in size. Fantasy sports is a multi-billion dollar industry, so eSports' popularity is worth noting.
The second is the percentage of female participation. For fantasy sports participants, approximately 20% are women. For eSports, over 30% are women. This is a big difference and a big positive for eSports. That larger female participation directly impacts the industry size upside.
Keep an eye on the growth of eSports.
Here's the item. NEWZOO marketing research has some good info on the eSports market that they're making available for free. You can find this article at this link. I won't steal NEWZOO's thunder and repeat the information, but I'll highlight just a couple of data points.
The first is that there are currently over 47 million eSports players and viewers in the US and Western Europe. For the US alone, it is approximately 28 million. If you compare that to the current estimate of fantasy sports players in the US of over 33 million, eSports is generally comparable in size. Fantasy sports is a multi-billion dollar industry, so eSports' popularity is worth noting.
The second is the percentage of female participation. For fantasy sports participants, approximately 20% are women. For eSports, over 30% are women. This is a big difference and a big positive for eSports. That larger female participation directly impacts the industry size upside.
Keep an eye on the growth of eSports.
Saturday, February 22, 2014
Nevada Gambling Hypocrisy On Parade
Here are a couple of recent stories that highlight the hypocrisy that arises when you deal with an industry that has a strong regulatory component. These stories are in addition to my recent post regarding casino heavy hitters fighting each other over expanded gambling, which you can see here.
The first story details the news that Nevada's senators (one Democrat, one Republican) are teaming up to introduce a bill to outlaw all online gambling in the US except for poker. Why? Because they are trying to stop the "wild West" of gambling. You see, yes they are doing this to protect their Nevada casinos, but you shouldn't only think of their more noble motives of protecting YOU from evil gambling. As you of course may realize, Nevada only offers good and pure gambling...so that's OK and should be protected.
This bill is going to be bi-partisan because, let's be clear, the Democrat, Harry Reid, isn't very popular among Republicans, which is probably an understatement. He needs his fellow Nevada senator, a Republican, to help weasel this bill through. Of course, the bill would also have to get through the House of Representatives, but one step at a time.
My view is that this bill shouldn't get through the Senate, but it indeed may. When? After the November elections during Congress' lame duck session. This bill will be inserted into another bill that due to its content would be deemed a "must pass" bill. Think of something like a bill to authorize the budget for the armed forces, or removing a tax impediment for disabled elderly people. No one will stop those bills, so Harry Reid as Senate Majority Leader will add this bill to that one and force people to vote for this or they will be viewed as hating old people, the military, etc. Watch for the news on this bill to go very quiet until after the election, then watch these lame duck bills come up in November and December. The article on this bill can be found here.
Now, where's the hypocrisy? Well the Nevada view that their gambling is good and everyone else's is bad is hypocritical, but let's add in the other story to buttress the hypocrisy. This story discusses how Nevada regulators are allowing slot players to use prepaid access cards. Now similar means are used for sportsbook and poker players, but doing this with slots isn't exactly the same. It would take some time for a sportsbook player to place their wagers, similar with a player in a poker game. Slot machines are fast. You can get a new spin about every 6 seconds if you're fast enough. Also, sports betting and poker have a skill component, where a slot machine does not.
Here's a quote from the article:
"Here’s how it would work: A player who wants to use an access card in a slot machine would first have to register at a casino with identification that verifies a player’s address and date of birth. Registration would also tie a player to a casino’s loyalty card. Players could then load the cards at their banks by transferring funds from a checking or savings account. Harry Hagerty, president and chief financial officer of Sightline, said his company’s agreement with banks puts limitations on the amount of money that a player could load to an access card — a maximum of $2,000 a day, $4,500 a week and $10,000 a month, and the most a player could put on a card at any time is $25,000. Regulators also said a player wouldn’t be able to use the card for at least 15 minutes after transferring the funds."
Wow, very responsible of Nevada to make sure the maximum on a card is $25,000 and they have a whole FIFTEEN MINUTE cooling off period. (sarcasm alert)
Here's the Nevada hypocrisy. One the one hand, they want to make it easier for people to spend their money on slot machines, ahem, THEIR slot machines, which they must think is a good thing. On the other hand, they are seeking to pass a federal law to outlaw online slot machines, because those are generally not Nevada slot machines, which of course must be assumed to be bad.
So, in essence, NO NO NO don't put your money in those non-Nevada slot machines because they are bad and evil because they are electronic and online and you could go through your money very fast. Put your money in our slot machines because we're pure and decent and we limit the money you have on your prepaid card to $25,000 dollars! Right, I stand corrected thinking about this...no hypocrisy here! (sarcasm alert)
The first story details the news that Nevada's senators (one Democrat, one Republican) are teaming up to introduce a bill to outlaw all online gambling in the US except for poker. Why? Because they are trying to stop the "wild West" of gambling. You see, yes they are doing this to protect their Nevada casinos, but you shouldn't only think of their more noble motives of protecting YOU from evil gambling. As you of course may realize, Nevada only offers good and pure gambling...so that's OK and should be protected.
This bill is going to be bi-partisan because, let's be clear, the Democrat, Harry Reid, isn't very popular among Republicans, which is probably an understatement. He needs his fellow Nevada senator, a Republican, to help weasel this bill through. Of course, the bill would also have to get through the House of Representatives, but one step at a time.
My view is that this bill shouldn't get through the Senate, but it indeed may. When? After the November elections during Congress' lame duck session. This bill will be inserted into another bill that due to its content would be deemed a "must pass" bill. Think of something like a bill to authorize the budget for the armed forces, or removing a tax impediment for disabled elderly people. No one will stop those bills, so Harry Reid as Senate Majority Leader will add this bill to that one and force people to vote for this or they will be viewed as hating old people, the military, etc. Watch for the news on this bill to go very quiet until after the election, then watch these lame duck bills come up in November and December. The article on this bill can be found here.
Now, where's the hypocrisy? Well the Nevada view that their gambling is good and everyone else's is bad is hypocritical, but let's add in the other story to buttress the hypocrisy. This story discusses how Nevada regulators are allowing slot players to use prepaid access cards. Now similar means are used for sportsbook and poker players, but doing this with slots isn't exactly the same. It would take some time for a sportsbook player to place their wagers, similar with a player in a poker game. Slot machines are fast. You can get a new spin about every 6 seconds if you're fast enough. Also, sports betting and poker have a skill component, where a slot machine does not.
Here's a quote from the article:
"Here’s how it would work: A player who wants to use an access card in a slot machine would first have to register at a casino with identification that verifies a player’s address and date of birth. Registration would also tie a player to a casino’s loyalty card. Players could then load the cards at their banks by transferring funds from a checking or savings account. Harry Hagerty, president and chief financial officer of Sightline, said his company’s agreement with banks puts limitations on the amount of money that a player could load to an access card — a maximum of $2,000 a day, $4,500 a week and $10,000 a month, and the most a player could put on a card at any time is $25,000. Regulators also said a player wouldn’t be able to use the card for at least 15 minutes after transferring the funds."
Wow, very responsible of Nevada to make sure the maximum on a card is $25,000 and they have a whole FIFTEEN MINUTE cooling off period. (sarcasm alert)
Here's the Nevada hypocrisy. One the one hand, they want to make it easier for people to spend their money on slot machines, ahem, THEIR slot machines, which they must think is a good thing. On the other hand, they are seeking to pass a federal law to outlaw online slot machines, because those are generally not Nevada slot machines, which of course must be assumed to be bad.
So, in essence, NO NO NO don't put your money in those non-Nevada slot machines because they are bad and evil because they are electronic and online and you could go through your money very fast. Put your money in our slot machines because we're pure and decent and we limit the money you have on your prepaid card to $25,000 dollars! Right, I stand corrected thinking about this...no hypocrisy here! (sarcasm alert)
Thursday, January 16, 2014
Analyst Reports Modest I-Gaming Revenue for USA
Contrary to some of the larger estimates of I-Gaming revenue in the US, an analyst has put forward some more modest numbers. The story reported here, states that internet gaming will only generate $1.9 billion in revenue by 2020, not the $7 to $12 billion in revenue estimated by others. You can click the hyperlink above to find out who was estimating the higher numbers.
This lower estimate by Eilers Research makes some points that I personally agree with, which helps buttress the more modest projections. The main assumption for the lower estimates is the assumption that if the states do authorize online gaming, it will be poker only. Now, it is almost a certainty that the first online gaming activity authorized would be poker, with other casino games being added later. But I agree with the analyst that poker might only be the ONLY online gambling activity authorized.
If that indeed is what happens, all is not lost. Poker would be authorized online, and operators can add casino games in a social gaming/subscription mode. Social casino game play in the US can be a generator of revenue - see the activities of all the major slot vendors, particularly IGT's DoubleDown Casino on Facebook.
One assumption that is made by Eilers Research that I am not in total agreement with is that I-Gaming will not cannibalize the land-based casinos. I will agree if only poker is authorized and other casino gaming will be of the social gaming kind. Of course, online poker to an extent will cannibalize land-based card rooms. If full-blown casino gaming is allowed by a state, that will cannibalize some of the casino business.
This lower estimate by Eilers Research makes some points that I personally agree with, which helps buttress the more modest projections. The main assumption for the lower estimates is the assumption that if the states do authorize online gaming, it will be poker only. Now, it is almost a certainty that the first online gaming activity authorized would be poker, with other casino games being added later. But I agree with the analyst that poker might only be the ONLY online gambling activity authorized.
If that indeed is what happens, all is not lost. Poker would be authorized online, and operators can add casino games in a social gaming/subscription mode. Social casino game play in the US can be a generator of revenue - see the activities of all the major slot vendors, particularly IGT's DoubleDown Casino on Facebook.
One assumption that is made by Eilers Research that I am not in total agreement with is that I-Gaming will not cannibalize the land-based casinos. I will agree if only poker is authorized and other casino gaming will be of the social gaming kind. Of course, online poker to an extent will cannibalize land-based card rooms. If full-blown casino gaming is allowed by a state, that will cannibalize some of the casino business.
Tuesday, December 31, 2013
Atlantic City Gets a Warning
New Jersey governor Chris Christie is laying down the law on Atlantic City's casinos. He is giving them the year of 2014 to make strides to improve their financial health. The Press of Atlantic City story quotes Christie:
"It's obviously a critical year because we need to begin to see progress in Atlantic City or we're going to start considering alternatives," and, "It's a year when we have to show some significant results."
Can't be much clearer than that. So, what happens if results aren't obtained? Well, Atlantic City's casino gambling monopoly would be at risk. Competing interests, such as the horse racing industry, are desirous of getting casino gaming at their properties. Another lackluster year out of Atlantic City would only fuel that fire.
How Atlantic City will intend to meet this hurdle is to consolidate - reduce the number of casinos and to an extent, reduce the number of hotel rooms. The remaining casinos would hopefully be in better shape as they will make more money on a per property basis, even if the result would be less overall revenue, from both gaming and non-gaming sources. If not, the competing interests will want to move casino gambling outside of Atlantic City to make their venues more competitive with increased casino gaming in adjoining states like New York, Pennsylvania and Delaware.
Time may be running out on Atlantic City's casino monopoly.
"It's obviously a critical year because we need to begin to see progress in Atlantic City or we're going to start considering alternatives," and, "It's a year when we have to show some significant results."
Can't be much clearer than that. So, what happens if results aren't obtained? Well, Atlantic City's casino gambling monopoly would be at risk. Competing interests, such as the horse racing industry, are desirous of getting casino gaming at their properties. Another lackluster year out of Atlantic City would only fuel that fire.
How Atlantic City will intend to meet this hurdle is to consolidate - reduce the number of casinos and to an extent, reduce the number of hotel rooms. The remaining casinos would hopefully be in better shape as they will make more money on a per property basis, even if the result would be less overall revenue, from both gaming and non-gaming sources. If not, the competing interests will want to move casino gambling outside of Atlantic City to make their venues more competitive with increased casino gaming in adjoining states like New York, Pennsylvania and Delaware.
Time may be running out on Atlantic City's casino monopoly.
Wednesday, December 11, 2013
Common Sense: Casino Gaming Needs to Return to Cuba...Viva Casino!
Professor Nelson Rose, an expert on gaming law, penned a recent article entitled, "Cuba Needs Casinos." In it, he describes past and recent history and noted how when liberalization comes to Cuba (it will, just a matter of time), that casino gaming and the revenues generated therefrom, will help bring Cuba back economically.
They had gambling back before Castro, but organized crime took in the lion's share of the revenues. Now, with regulated wagering in place, all parties will benefit. Notice that governments, even authoritarian ones like Vietnam and China, have casino gambling. It is become apparent that the issue with gambling from governments is not the right or wrong with gambling; it's who is getting the money. If the government is getting enough money, in its view, gambling is fine.
That fact bodes well for Cuba. Proper regulated gambling, coupled with the great resort venue Cuba was, and will be again, makes Cuba an excellent bet for gambling reintroduction. I'm betting on Cuba reintroducing gambling within the next ten years.
Another venue that is a great opportunity for casino gambling is Hawaii. Why there aren't a casino resorts on Waikiki, Kona, Maui and Kauai is a travesty. If Macao and Singapore are enjoying great casino gambling success, just think what success a resort venue like Hawaii would enjoy? They do well now with regard to tourism, but add casino gambling and Hawaii would rival Macao and Singapore with regard to casino revenues. This similar resort locale profile is why there was interest in opening casino gambling in Miami a couple of years back. Sooner or later government will see the light and make a play for that revenue.
As gambling becomes even more mainstream, gambling will be increasingly viewed as a painless tax. If locales like Havana, Miami and Maui embrace casino gambling, Las Vegas will have even more worries.
To check out more of Professor Rose's excellent articles, go to his website.
They had gambling back before Castro, but organized crime took in the lion's share of the revenues. Now, with regulated wagering in place, all parties will benefit. Notice that governments, even authoritarian ones like Vietnam and China, have casino gambling. It is become apparent that the issue with gambling from governments is not the right or wrong with gambling; it's who is getting the money. If the government is getting enough money, in its view, gambling is fine.
That fact bodes well for Cuba. Proper regulated gambling, coupled with the great resort venue Cuba was, and will be again, makes Cuba an excellent bet for gambling reintroduction. I'm betting on Cuba reintroducing gambling within the next ten years.
Another venue that is a great opportunity for casino gambling is Hawaii. Why there aren't a casino resorts on Waikiki, Kona, Maui and Kauai is a travesty. If Macao and Singapore are enjoying great casino gambling success, just think what success a resort venue like Hawaii would enjoy? They do well now with regard to tourism, but add casino gambling and Hawaii would rival Macao and Singapore with regard to casino revenues. This similar resort locale profile is why there was interest in opening casino gambling in Miami a couple of years back. Sooner or later government will see the light and make a play for that revenue.
As gambling becomes even more mainstream, gambling will be increasingly viewed as a painless tax. If locales like Havana, Miami and Maui embrace casino gambling, Las Vegas will have even more worries.
To check out more of Professor Rose's excellent articles, go to his website.
Friday, November 15, 2013
New Tribal Casino Near San Francisco Offers Close Alternative to Nevada Casinos
Nevada casinos have been facing the threat from California tribal gaming for years. Having a large property within an hour's drive from San Francisco ups this by a couple of notches. The San Francisco area has around 11 million people. Having a large gaming property within a 60-90 minute drive can not be good news to Lake Tahoe and Reno casino properties.
The Casino Journal reports "after years of planning and 16 months of construction, Graton Resort & Casino officially opened its doors to the public earlier this week. The $800‐million facility is the closest full‐service casino to the Bay Area, and ushers in a new level of sophistication and excitement to Northern California." The property will have 3,000 slot machines and almost 150 table games, along with over a dozen restaurants. This is a big operation and will definitely draw, in my opinion.
What is new is that with this property near San Francisco, this property might draw customers that would have traveled to other Northern California tribal casinos. A previous post regarding a tribal property near a large metro area is here. Do not be surprised if more tribes will attempt to build facilities as close as possible to the major population centers. That effort might run into trouble with regard to on/off reservation regulations regarding properties, historical lands and the like, but with so much money in gambling, the trend is set. Another post regarding tribal casino economic impact can be found here and a post highlighting the strong competition California tribal gaming is to Nevada casinos is here.
I've discussed earlier what Reno and Lake Tahoe casinos could do to combat this threat. It is controversial in nature, but desperate threats could make controversial solutions more palatable. To learn about what Nevada casinos could do to differentiate themselves from California casinos, read this post.
The Casino Journal reports "after years of planning and 16 months of construction, Graton Resort & Casino officially opened its doors to the public earlier this week. The $800‐million facility is the closest full‐service casino to the Bay Area, and ushers in a new level of sophistication and excitement to Northern California." The property will have 3,000 slot machines and almost 150 table games, along with over a dozen restaurants. This is a big operation and will definitely draw, in my opinion.
What is new is that with this property near San Francisco, this property might draw customers that would have traveled to other Northern California tribal casinos. A previous post regarding a tribal property near a large metro area is here. Do not be surprised if more tribes will attempt to build facilities as close as possible to the major population centers. That effort might run into trouble with regard to on/off reservation regulations regarding properties, historical lands and the like, but with so much money in gambling, the trend is set. Another post regarding tribal casino economic impact can be found here and a post highlighting the strong competition California tribal gaming is to Nevada casinos is here.
I've discussed earlier what Reno and Lake Tahoe casinos could do to combat this threat. It is controversial in nature, but desperate threats could make controversial solutions more palatable. To learn about what Nevada casinos could do to differentiate themselves from California casinos, read this post.
Monday, October 21, 2013
Daily Fantasy Sports Contests Continue Rise in Popularity
The daily fantasy sport contest format continues to grow in both customers as well as companies providing the product. With the growth of this product also came the claims from various quarters that these games weren't legal or at the least took advantage of some "loophole." These barbs were typically provided by competitors not providing these games, or online gaming providers shut out of the US market, or typical naysayers who didn't like fantasy sports in the first place and had some other axe to grind or ulterior motive.
Regardless, the daily fantasy sports game market is growing such that revenues from this segment is on the order of one-third of the yearly $1.6 billion spent on fantasy sports - not insignificant money. An article that tries again to stir the pot and create the appearance of uncertainty of the legality of daily fantasy sports games can be found here.
Daily fantasy games have threats, but in my view they are not from the legal front, but from the competitive front. The threats come in two ways. The first is from the current large fantasy operators like CBS, Fox, ESPN, Yahoo, etc. These operators currently focus on the season-long contests but don't have any barriers to keep them from offering daily games. Once they do, the current leaders in this segment may lose significant market share and quite possibly be run out of the market. The current daily game operators should keep looking over their shoulder because the big boys could enter this market whenever they want.
The other competitive front is from new entrants with an even newer and superior short-term fantasy sports game. Current daily games generally have prize to entry fee ratios somewhat less than 2 to 1. So for a $10 entry fee game, the winner will win somewhere around $18, where the game operator keeps $2 for their expenses and profit. The new daily game contest format can offer games that have prize to entry fee ratios as high as 100 to 1, or for a $10 entry fee game, could offer a prize as high as $1,000. Since this game concept is patented, it can't be copied and the current daily game operators will have no easy counter to this superior product. If you were a customer and for $10 could play two $5 games, each game having a chance to win up to $500, what game would you think they would play? Right, a no brainer.
The daily game segment will continue to grow and is on the cusp of some very disruptive change.
Regardless, the daily fantasy sports game market is growing such that revenues from this segment is on the order of one-third of the yearly $1.6 billion spent on fantasy sports - not insignificant money. An article that tries again to stir the pot and create the appearance of uncertainty of the legality of daily fantasy sports games can be found here.
Daily fantasy games have threats, but in my view they are not from the legal front, but from the competitive front. The threats come in two ways. The first is from the current large fantasy operators like CBS, Fox, ESPN, Yahoo, etc. These operators currently focus on the season-long contests but don't have any barriers to keep them from offering daily games. Once they do, the current leaders in this segment may lose significant market share and quite possibly be run out of the market. The current daily game operators should keep looking over their shoulder because the big boys could enter this market whenever they want.
The other competitive front is from new entrants with an even newer and superior short-term fantasy sports game. Current daily games generally have prize to entry fee ratios somewhat less than 2 to 1. So for a $10 entry fee game, the winner will win somewhere around $18, where the game operator keeps $2 for their expenses and profit. The new daily game contest format can offer games that have prize to entry fee ratios as high as 100 to 1, or for a $10 entry fee game, could offer a prize as high as $1,000. Since this game concept is patented, it can't be copied and the current daily game operators will have no easy counter to this superior product. If you were a customer and for $10 could play two $5 games, each game having a chance to win up to $500, what game would you think they would play? Right, a no brainer.
The daily game segment will continue to grow and is on the cusp of some very disruptive change.
Tuesday, July 30, 2013
Zynga Avoiding US Gambling Market
MarketWatch.com has a story commending Zynga for not pursuing the US gambling business, but instead focusing on its core social game business. I agree. Zynga (acutally any non-big US gambling company) is going to have a tough time competing against the big incumbent US gambling firms like Caesar's, Wynn, Las Vegas Sands, etc. Zynga's core business has plateaued and is declining, so Zynga's push to rehabilitate that business makes more sense than trying to compete against savvy veteran US gambling operators on their turf.
That doesn't mean that Zynga can't look at social gambling or other legal variants of casino games or other gambling games in the US, just that it's probably better to avoid bona fide wagering opportunities in the US, that will require high licensing fees and defeating well financed competition for licenses that will be granted on a state by state basis.
What Zynga can do is look at unique social gambling concepts preferably protected by intellectual property that can be scaled across the US. That would be a much cheaper alternative that would give Zynga new social gaming/social gambling revenue streams, a national go-to-market path, without having to compete for licenses against very well financed and experienced gambling operators.
That doesn't mean that Zynga can't look at social gambling or other legal variants of casino games or other gambling games in the US, just that it's probably better to avoid bona fide wagering opportunities in the US, that will require high licensing fees and defeating well financed competition for licenses that will be granted on a state by state basis.
What Zynga can do is look at unique social gambling concepts preferably protected by intellectual property that can be scaled across the US. That would be a much cheaper alternative that would give Zynga new social gaming/social gambling revenue streams, a national go-to-market path, without having to compete for licenses against very well financed and experienced gambling operators.
Saturday, July 20, 2013
Bally Buys SHFL Entertainment for Big Bucks
Bloomberg reports that Bally Technologies, a leading slot manufacturer, is buying SHFL Entertainment (formerly known as Shuffle Master), for $1.3 billion. Bally, with this acquisition, is now a top-tier gaming vendor with a full line of offerings: slots, lottery and now table games. There are some geographic synergies as well, allowing Bally expanded market presence.
Not sure about the price, but the thinking behind the acquisition appears sound. Other slot vendors like IGT and Aristocrat should take notice.
Not sure about the price, but the thinking behind the acquisition appears sound. Other slot vendors like IGT and Aristocrat should take notice.
Saturday, June 22, 2013
US Land-based Casino Gaming Revenue Still Not Back to Pre-recession Levels
The June issue of Casino Journal magazine included a quick story derived from the recent AGA State of the States report. The main point stated was that commercial casino (brick and mortar) gross gaming revenue (GGR), the amount won from bettors, was almost back to pre-recession levels. To support that, a chart showing those revenues from 2003 to 2012 was published. At first glance, it appears correct. However, these numbers don't take into account the impact of inflation on the value of those dollars. If inflation eats away the value of currency, a greater dollar amount in the future may not be truly more money if compared to earlier years.
I took the CPI data from those years and adjusted the annual gross gaming revenue to equivalent 2003 purchasing power, to see how much of the improved revenues are due to industry growth, or just the inflation of the underlying currency. Here's the chart showing both sets of data:
So, you see that GGR is higher in either case, but when taking inflation into account, not that much higher. In the AGA published data, GGR increases at a compound annual growth rate (CAGR) of 2.96% for the period 2003-2012. That's not terrible given the recession. When inflation is factored in, GGR CAGR is a measly 0.48% - much worse. Gross gaming revenues are basically flat for the last decade. That is not a sign of a thriving, bright industry.
Wait, there's more!
Going back to the 2004 and 2013 State of the States reports, the AGA reported 443 casino facilities in 2003 and 979 in 2012. What that means is that in the last decade, the number of brick and mortar casino facilities in the US more than doubled, with overall GGR remaining flat in constant dollar terms. Now do you see why the land-based casino companies are deathly afraid of more casinos and the dreaded online gaming operators? If you have to spend tens of millions to a couple of billion dollars to construct a facility, how do you make back the money invested in an industry where profits are flat? You have to take market share from competitors, who will not allow that to happen willingly.
In my opinion, those casino operators that have facilities the closest to major population centers will be in a much more survivable position than those located farther away. I see this industry becoming extremely cutthroat in the future, particularly if online gaming becomes more established, further siphoning off revenues from the land-based casinos.
References:
AmericanGaming.org. (2004). 2004 State of the States, The AGA Survey of Casino Entertainment. Retrieved from: http://www.americangaming.org/industry-resources/research/state-states
AmericanGaming.org. (2013). 2013 State of the States, The AGA Survey of Casino Entertainment. Retrieved from: http://www.americangaming.org/industry-resources/research/state-states
Anonymous. (2013, June), Gaming industry revenues almost back to pre-recession levels, Casino Journal, p. 8.
US Department of Labor, Consumer Price Index 1913-2013, Retrieved from:
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
I took the CPI data from those years and adjusted the annual gross gaming revenue to equivalent 2003 purchasing power, to see how much of the improved revenues are due to industry growth, or just the inflation of the underlying currency. Here's the chart showing both sets of data:
Sources: American Gaming Association, Casino Journal, US Department of Labor
So, you see that GGR is higher in either case, but when taking inflation into account, not that much higher. In the AGA published data, GGR increases at a compound annual growth rate (CAGR) of 2.96% for the period 2003-2012. That's not terrible given the recession. When inflation is factored in, GGR CAGR is a measly 0.48% - much worse. Gross gaming revenues are basically flat for the last decade. That is not a sign of a thriving, bright industry.
Wait, there's more!
Going back to the 2004 and 2013 State of the States reports, the AGA reported 443 casino facilities in 2003 and 979 in 2012. What that means is that in the last decade, the number of brick and mortar casino facilities in the US more than doubled, with overall GGR remaining flat in constant dollar terms. Now do you see why the land-based casino companies are deathly afraid of more casinos and the dreaded online gaming operators? If you have to spend tens of millions to a couple of billion dollars to construct a facility, how do you make back the money invested in an industry where profits are flat? You have to take market share from competitors, who will not allow that to happen willingly.
In my opinion, those casino operators that have facilities the closest to major population centers will be in a much more survivable position than those located farther away. I see this industry becoming extremely cutthroat in the future, particularly if online gaming becomes more established, further siphoning off revenues from the land-based casinos.
References:
AmericanGaming.org. (2004). 2004 State of the States, The AGA Survey of Casino Entertainment. Retrieved from: http://www.americangaming.org/industry-resources/research/state-states
AmericanGaming.org. (2013). 2013 State of the States, The AGA Survey of Casino Entertainment. Retrieved from: http://www.americangaming.org/industry-resources/research/state-states
Anonymous. (2013, June), Gaming industry revenues almost back to pre-recession levels, Casino Journal, p. 8.
US Department of Labor, Consumer Price Index 1913-2013, Retrieved from:
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
Saturday, June 1, 2013
How to Help Horse Racing Industry Sustainability in the US and Canada (Part 3)
This will be a longer post than the previous two posts on this topic, which can be found here and here. To continue, we've determined a good demographic for new racing wagerers and identified three groups that might fit this demographic.
To recap, what would be a good demographic for racing? One that had the following characteristics:
To get to the ultimate result, people of a desirable demographic placing new pari-mutuel RACING wagers, we have to clear some hurdles with them that act as barriers. There are basically three (not in a particular order):
1. Interest in RACING
2. Ability to handicap a race
3. Knowledge of pari-mutuel wagering
If we don't get a person to a capability in all of these 3 areas, the person won't bet in any appreciable amount, if at all. You may say that we do this now with traditional marketing. No, not exactly. In the post that examined the various advertisements, which ones were the most effective? The ones that had racing and wagering secondary to the food, beverage and social experience. In other words, the party was the draw, not the racing. That's why the cheap beer, hot dogs and music works to draw people to the track, but doesn't result in large increases in handle or persistent additions of a younger racing wagering base.
Inherently racing knows this, so the three hurdles that they attempt to clear with the customers in the "party" approach appealing to the mass market are:
1. Interest in a party
2. See some pretty horses
3. Simple pari-mutuel bets where you have a chance to win something
There's a bit of a difference between how to attract a younger, cerebral, affluent, risk-taking demographic and the mass market.
So, racing needs to focus on the right demographic and move away from mass market approaches to just get people through the turnstiles at the racetracks. With regard to the groups fitting the desirable demographic, the Horseplayers Association of North America (a pro-bettor group) did a simple survey on a chat board soliciting responses to sports bettors and poker players why they didn't bet the horses. The post on that topic is here and the HANA blog post is here. The three basic reasons were:
1. Takeout is too high (remember the bets they generally make have lower vigorish)
2. Conduct that impacts the integrity of the race (they think racing is fixed, if you didn't catch that)
3. Not interested in the sport (no surprise)
So this great demographic needs to somehow get interested in racing, think they can win and learn how to handicap and bet a race. Do you see how traditional approaches haven't been effective with regard to these folks? The powers that be in the US and Canada aren't going to lower takeout by any appreciable amount anytime soon and they aren't going to do much about racing integrity issues except nibble around the edges. As a result, interest in the sport shouldn't be expected to improve. Appears racing is doomed, right? Not so fast. First a bit more background of what has to happen with regard to a successful conversion.
Assuming the new racing wagers have to occur at a facility (track or OTB), we have to get a person to the facility and then get them to make a pari-mutuel wager. With the current situation, it doesn't seem like we'll be able to directly get a person to the track and bet the horses. Like traditional racing marketing, can we just get them to the track? Sure, we can do the mass market party approach or perhaps set up poker rooms at racetracks. Unfortunately, we still have to clear those three aforementioned hurdles, even if those folks were playing poker at the track or OTB.
With regard to a potential path forward, I'm going to ignore poker players and sports bettors for now and focus on fantasy sports players. Since sports betting is still mostly restricted in the US and Canada, there will have to be some legal changes to make that type of wagering widely available at racing venues. Not so with fantasy sports.
The fantasy sports demographic is a great one for racing. It is an $800 million industry now, with a total economic impact of over $4 billion. There are approximately 32 million fantasy sports players in the US, 3 million in Canada. The demographic is lucrative, being affluent, educated and approximately 85% male, 45% within the 25-49 age group, 53% with household incomes greater than $75,000 and 30% with household incomes higher than $100,000. On average, they are about 15 years younger than the average horseplayer, making this demographic a fantastic one for racing. A cool infographic on the fantasy sports player is shown below:
The reason we're going to examine this demographic is that with regard to fantasy sports, there are certain legal/regulatory advantages that allow fantasy sports to be played as a skill game for money that isn't legally considered gambling, although some call it a distinction without a difference. Regardless, lots of money is risked on fantasy sports here in the US and Canada. The state of New Jersey recently adopted regulations allowing Atlantic City casinos to offer fantasy sports games in their properties. A post on that topic is here. If racing had kept their monopoly going, these people likely would be horseplayers. But they didn't grow up following racing, they grew up with professional football, baseball and basketball. And that, folks, is key.
What would be the metric bet on? It could be as simple as which quarterback has the most passing yards this week or as complex as some metric based on passing yards, touchdowns, completion percentage and interceptions. Yes this picture is a bit dated, as Carson Palmer now plays for the Arizona Cardinals and not the Oakland Raiders. Again, this would be something for a regulated wagering application, not a pay-to-play skill game. What kind of wagers? Anything that is offered now: WPS, Exacta, Trifecta, Pick 4, Pick 6, etc. Imagine a NFL Pick 6 per week (QB, RB, WR, TE, K, DEF) with a carryover. Think that wouldn't draw some betting interest?
So, what would be the difference? In the skill game variant, the player (punter, etc.) would pay the entry fee, which would give the player a certain amount of virtual currency, the same amount for each entry. The player would then have a series of races that correspond to a particular position (e.g. quarterback, running back, team defense, etc., with regard to football) wherein the player would make various pari-mutuel wagers. The pari-mutuel wagers are made with game currency, not actual currency. That's where the legal safe harbor and separation take place. At the end of the real-world games, stats are compiled, game wagers are paid and the players (punters) with the highest resulting virtual currency win prizes.
To be honest, just coming up with a new game doesn't guarantee people will play. So any games of this type will have to have some level of attractiveness over and above current fantasy sports game offerings. This one has a couple. They are:
1. Shorter timeframe
2. Higher prize-to-entry fee ratio
Many fantasy sports games are season-long. These new games can also last a season, if desired, or can just cover a slate of games or games occurring that day or week. For the NFL regular season, blocks of games start at 1pm and 4pm Eastern (approximately). So, you could have two games, each covering that block of games. Or, you could do that and have games that just dealt with the stats generated each quarter of a four quarter NFL game. You'll see that there are possibilities for quite a few games in a relatively short period of time compared to typical fantasy sports games.
With regard to prizes, prizes for fantasy sports games can vary from just bragging rights to hundreds of thousands of dollars. For daily-type games, the predominant mode is head-to-head, so the prize-to-entry fee ratio is on the order of 1.8 to 1, giving a portion to the operator as an administrative fee or takeout. Some of these games have a larger number of participants, but the general top prize-to-entry fee ratio is around 10 to 1.
For these new pari-mutuel fantasy sports games, there could be not just top prizes but prize tiers, 1st, 2nd and 3rd. The more people enter, the more entries will fall into the prize tiers. Think of this like academic studies where the professor grades on a curve. In a class with 30 students, the professor may only award 4 students an A grade, 8 B grades and 12 C grades. If there were 60 students in the class, the professor may award 8 students an A grade, etc. Same principle here. So the prize-to-entry fee ratios for these new pari-mutuel fantasy sports skill games could be on the order of 50, 20 and 2 to 1 respectively, providing up to 1 in 4 entries the ability to win a prize. This kind of game has advantages that could prove extremely attractive to fantasy sports players. They can win large sums without risking large sums. And since the entry fees may be in the $5 to $50 range, they could enter more than once in order to execute different wagering strategies.
What you may be seeing here is that racing has tried to attract new bettors with racing. What is being discussed is bringing in new bettors with something else, something that interests them. A ha!
Let's revisit. To get to the ultimate result, people of a desirable demographic placing new pari-mutuelRACING fantasy sports wagers, we have to clear some hurdles with
them that act as barriers. There are basically three (not in a
particular order):
1. Interest inRACING fantasy sports
2. Ability to handicapa race fantasy sports
3. Knowledge of pari-mutuel wagering
You see that if we want to attract fantasy sports players, provided we have an attractive game, all we need to do is teach them pari-mutuel wagering as they already have an interest in and ability to handicap fantasy sports.
Some may say that the concept of bringing in players betting on something else has been tried before, namely with slots at tracks. I agree and disagree. I agree that gambling on slots is different than gambling on horse racing. I disagree in that slot gaming does not and never did have the potential to generate new horseplayers. What is being proposed here does have that potential.
This new game concept could have utility with tracks and OTBs on a couple of levels. The first level of course is the money generated either by pari-mutuel fantasy sports wagers or entry fees for skill game fantasy sports contests. I won't discuss in depth, but the tracks might find these games attractive as the pari-mutuel takeout structure for a horse race won't be exactly the same for this game as certain takeouts that are primarily track or horsemen focused don't apply. Potentially, a greater percentage of the takeout or administrative fees could end up with the tracks and OTBs. If this was a regulated wagering game, very likely the person would have to be at the facility, so that might make the ADWs ineligible to offer a regulated wagering fantasy sports game, but could offer such a game in a pay-to-play skill game format.
Also, since tracks only have so many race days per year, there is a lot of time those tracks aren't generating lots of attendance (assuming that they are drawing well during race meets). Yes, they can still operate as an OTB during their "dark" periods, but the patronage isn't likely that staggering. But if they can attract sports fans that follow football (including college football), baseball, basketball, hockey, NASCAR, etc., improving their F&B revenues AND playing fantasy sports games for money (which is what drew them in), that may be very interesting. Even if some days are race days, will the tracks turn these sports fans away?
What is important to note that in this scenario, racing is getting more revenue even though not a single dollar has been incrementally wagered on a horse race. We've increased revenues via pari-mutuel, but in a different way, with a different game. I think this path, even though counter-intuitive, is the correct one. In theory, we got a desirable demographic to the track and got them to make pari-mutuel wagers. In addition, with that new game revenue, we're helping to sustain racing with incremental pari-mutuel based revenue.
We're not done yet. Assume we did get the above, we still need to figure out how to get some crossover racing wagering. With regard to pari-mutuel racing wagering, we still need to clear those three hurdles. That is a difficult thing to ask as some of the negatives espoused by players in the HANA post aren't going to go away. Here is where the racing marketing folks need to earn some of their salary.
My view is that is if current educational efforts on how to handicap could be tweaked some (or perhaps run as is), with this demographic that is at the track, you may get some crossover wagering while they are watching the games. This crossover may manifest more during race meets, but at OTBs, they won't have the advantage of the fantasy sports players having the experience of the actual venue. The advantage the racing industry will have is that they will have the right demographic at their property.
If a track/OTB has a loyalty program, perhaps they could modify the program to entice racing wagers from the fantasy sports players. For example, if a player's club member accumulated $250 in fantasy sports wagers in a month, the next month any racing wagers would accumulate loyalty points at a 5x rate. This might not only spur crossover racing wagering from the fantasy sports players but perhaps get some of the horseplayers to participate in the fantasy sports games. A win-win.
By expanding wagering utilizing pari-mutuel principles, this should help the racing industry from a political and regulatory standpoint. They could make the claim that pari-mutuel wagering is "their" gaming turf, and they have the right to expand pari-mutuel. Where casinos could balk at tracks wanting slot machines and blackjack tables, their argument is weaker when it comes to just another pari-mutuel game. In fact, there's no reason casino racebooks (de facto OTB) couldn't offer these games, so they get to participate as well.
To summarize the possible approach to help racing sustainability, the focus should be on expanding pari-mutuel wagering. Given the current attractiveness of the racing product with people not familiar with racing, the key is to attract them to the tracks/OTBs with what does interest them, provide them pari-mutuel games wrapped around what interests them and then work to generate some crossover incremental racing wagering.
This in no way is a naked claim that what is proposed here is the single solution that will save racing in the US and Canada. The title of this series is about how to help horse racing sustainability. However, the offering outlined here does at least have the potential to achieve the result outlined in the previous post:
Lamb, M. & Singer, D. (2011, August). Driving sustainable growth for thoroughbred racing
and breeding. Paper presented at the Fifty-ninth annual Round Table Conference on
Matters Pertaining to Racing, Saratoga Springs, NY. Retrieved from
http://www.jockeyclub.com/resources/selected_exhibits_1.pdf
Downes, David W., "Identifying New Pari-Mutuel iGaming Offerings in the United States" (2011). UNLV Theses/Dissertations/Professional Papers/Capstones. Paper 1145.
http://digitalscholarship.unlv.edu/thesesdissertations/1145/
To recap, what would be a good demographic for racing? One that had the following characteristics:
- Younger, naturally...
- Cerebral (handicapping is an analytical exercise)
- Affluent (you can't bet money you don't have - preferably)
- Willing to risk money (that's the ultimate desire - someone has to place a bet)
- Poker and blackjack players
- Sports bettors
- Fantasy sports players
To get to the ultimate result, people of a desirable demographic placing new pari-mutuel RACING wagers, we have to clear some hurdles with them that act as barriers. There are basically three (not in a particular order):
1. Interest in RACING
2. Ability to handicap a race
3. Knowledge of pari-mutuel wagering
If we don't get a person to a capability in all of these 3 areas, the person won't bet in any appreciable amount, if at all. You may say that we do this now with traditional marketing. No, not exactly. In the post that examined the various advertisements, which ones were the most effective? The ones that had racing and wagering secondary to the food, beverage and social experience. In other words, the party was the draw, not the racing. That's why the cheap beer, hot dogs and music works to draw people to the track, but doesn't result in large increases in handle or persistent additions of a younger racing wagering base.
Inherently racing knows this, so the three hurdles that they attempt to clear with the customers in the "party" approach appealing to the mass market are:
1. Interest in a party
2. See some pretty horses
3. Simple pari-mutuel bets where you have a chance to win something
There's a bit of a difference between how to attract a younger, cerebral, affluent, risk-taking demographic and the mass market.
So, racing needs to focus on the right demographic and move away from mass market approaches to just get people through the turnstiles at the racetracks. With regard to the groups fitting the desirable demographic, the Horseplayers Association of North America (a pro-bettor group) did a simple survey on a chat board soliciting responses to sports bettors and poker players why they didn't bet the horses. The post on that topic is here and the HANA blog post is here. The three basic reasons were:
1. Takeout is too high (remember the bets they generally make have lower vigorish)
2. Conduct that impacts the integrity of the race (they think racing is fixed, if you didn't catch that)
3. Not interested in the sport (no surprise)
So this great demographic needs to somehow get interested in racing, think they can win and learn how to handicap and bet a race. Do you see how traditional approaches haven't been effective with regard to these folks? The powers that be in the US and Canada aren't going to lower takeout by any appreciable amount anytime soon and they aren't going to do much about racing integrity issues except nibble around the edges. As a result, interest in the sport shouldn't be expected to improve. Appears racing is doomed, right? Not so fast. First a bit more background of what has to happen with regard to a successful conversion.
Assuming the new racing wagers have to occur at a facility (track or OTB), we have to get a person to the facility and then get them to make a pari-mutuel wager. With the current situation, it doesn't seem like we'll be able to directly get a person to the track and bet the horses. Like traditional racing marketing, can we just get them to the track? Sure, we can do the mass market party approach or perhaps set up poker rooms at racetracks. Unfortunately, we still have to clear those three aforementioned hurdles, even if those folks were playing poker at the track or OTB.
With regard to a potential path forward, I'm going to ignore poker players and sports bettors for now and focus on fantasy sports players. Since sports betting is still mostly restricted in the US and Canada, there will have to be some legal changes to make that type of wagering widely available at racing venues. Not so with fantasy sports.
The fantasy sports demographic is a great one for racing. It is an $800 million industry now, with a total economic impact of over $4 billion. There are approximately 32 million fantasy sports players in the US, 3 million in Canada. The demographic is lucrative, being affluent, educated and approximately 85% male, 45% within the 25-49 age group, 53% with household incomes greater than $75,000 and 30% with household incomes higher than $100,000. On average, they are about 15 years younger than the average horseplayer, making this demographic a fantastic one for racing. A cool infographic on the fantasy sports player is shown below:
Source: www.columnfivemedia.com
The reason we're going to examine this demographic is that with regard to fantasy sports, there are certain legal/regulatory advantages that allow fantasy sports to be played as a skill game for money that isn't legally considered gambling, although some call it a distinction without a difference. Regardless, lots of money is risked on fantasy sports here in the US and Canada. The state of New Jersey recently adopted regulations allowing Atlantic City casinos to offer fantasy sports games in their properties. A post on that topic is here. If racing had kept their monopoly going, these people likely would be horseplayers. But they didn't grow up following racing, they grew up with professional football, baseball and basketball. And that, folks, is key.
Let's look at something new. Let's look at providing a fantasy sports pay-to-play skill game at tracks and OTBs that is based on pari-mutuel principles. If the law allows in certain jurisdictions, we can provide outright pari-mutuel wagers with regard to professional sports. Here's what a sample tote might show:
Source: YouGaming Inc
What would be the metric bet on? It could be as simple as which quarterback has the most passing yards this week or as complex as some metric based on passing yards, touchdowns, completion percentage and interceptions. Yes this picture is a bit dated, as Carson Palmer now plays for the Arizona Cardinals and not the Oakland Raiders. Again, this would be something for a regulated wagering application, not a pay-to-play skill game. What kind of wagers? Anything that is offered now: WPS, Exacta, Trifecta, Pick 4, Pick 6, etc. Imagine a NFL Pick 6 per week (QB, RB, WR, TE, K, DEF) with a carryover. Think that wouldn't draw some betting interest?
So, what would be the difference? In the skill game variant, the player (punter, etc.) would pay the entry fee, which would give the player a certain amount of virtual currency, the same amount for each entry. The player would then have a series of races that correspond to a particular position (e.g. quarterback, running back, team defense, etc., with regard to football) wherein the player would make various pari-mutuel wagers. The pari-mutuel wagers are made with game currency, not actual currency. That's where the legal safe harbor and separation take place. At the end of the real-world games, stats are compiled, game wagers are paid and the players (punters) with the highest resulting virtual currency win prizes.
To be honest, just coming up with a new game doesn't guarantee people will play. So any games of this type will have to have some level of attractiveness over and above current fantasy sports game offerings. This one has a couple. They are:
1. Shorter timeframe
2. Higher prize-to-entry fee ratio
Many fantasy sports games are season-long. These new games can also last a season, if desired, or can just cover a slate of games or games occurring that day or week. For the NFL regular season, blocks of games start at 1pm and 4pm Eastern (approximately). So, you could have two games, each covering that block of games. Or, you could do that and have games that just dealt with the stats generated each quarter of a four quarter NFL game. You'll see that there are possibilities for quite a few games in a relatively short period of time compared to typical fantasy sports games.
With regard to prizes, prizes for fantasy sports games can vary from just bragging rights to hundreds of thousands of dollars. For daily-type games, the predominant mode is head-to-head, so the prize-to-entry fee ratio is on the order of 1.8 to 1, giving a portion to the operator as an administrative fee or takeout. Some of these games have a larger number of participants, but the general top prize-to-entry fee ratio is around 10 to 1.
For these new pari-mutuel fantasy sports games, there could be not just top prizes but prize tiers, 1st, 2nd and 3rd. The more people enter, the more entries will fall into the prize tiers. Think of this like academic studies where the professor grades on a curve. In a class with 30 students, the professor may only award 4 students an A grade, 8 B grades and 12 C grades. If there were 60 students in the class, the professor may award 8 students an A grade, etc. Same principle here. So the prize-to-entry fee ratios for these new pari-mutuel fantasy sports skill games could be on the order of 50, 20 and 2 to 1 respectively, providing up to 1 in 4 entries the ability to win a prize. This kind of game has advantages that could prove extremely attractive to fantasy sports players. They can win large sums without risking large sums. And since the entry fees may be in the $5 to $50 range, they could enter more than once in order to execute different wagering strategies.
What you may be seeing here is that racing has tried to attract new bettors with racing. What is being discussed is bringing in new bettors with something else, something that interests them. A ha!
Let's revisit. To get to the ultimate result, people of a desirable demographic placing new pari-mutuel
1. Interest in
2. Ability to handicap
3. Knowledge of pari-mutuel wagering
You see that if we want to attract fantasy sports players, provided we have an attractive game, all we need to do is teach them pari-mutuel wagering as they already have an interest in and ability to handicap fantasy sports.
Some may say that the concept of bringing in players betting on something else has been tried before, namely with slots at tracks. I agree and disagree. I agree that gambling on slots is different than gambling on horse racing. I disagree in that slot gaming does not and never did have the potential to generate new horseplayers. What is being proposed here does have that potential.
This new game concept could have utility with tracks and OTBs on a couple of levels. The first level of course is the money generated either by pari-mutuel fantasy sports wagers or entry fees for skill game fantasy sports contests. I won't discuss in depth, but the tracks might find these games attractive as the pari-mutuel takeout structure for a horse race won't be exactly the same for this game as certain takeouts that are primarily track or horsemen focused don't apply. Potentially, a greater percentage of the takeout or administrative fees could end up with the tracks and OTBs. If this was a regulated wagering game, very likely the person would have to be at the facility, so that might make the ADWs ineligible to offer a regulated wagering fantasy sports game, but could offer such a game in a pay-to-play skill game format.
Also, since tracks only have so many race days per year, there is a lot of time those tracks aren't generating lots of attendance (assuming that they are drawing well during race meets). Yes, they can still operate as an OTB during their "dark" periods, but the patronage isn't likely that staggering. But if they can attract sports fans that follow football (including college football), baseball, basketball, hockey, NASCAR, etc., improving their F&B revenues AND playing fantasy sports games for money (which is what drew them in), that may be very interesting. Even if some days are race days, will the tracks turn these sports fans away?
What is important to note that in this scenario, racing is getting more revenue even though not a single dollar has been incrementally wagered on a horse race. We've increased revenues via pari-mutuel, but in a different way, with a different game. I think this path, even though counter-intuitive, is the correct one. In theory, we got a desirable demographic to the track and got them to make pari-mutuel wagers. In addition, with that new game revenue, we're helping to sustain racing with incremental pari-mutuel based revenue.
We're not done yet. Assume we did get the above, we still need to figure out how to get some crossover racing wagering. With regard to pari-mutuel racing wagering, we still need to clear those three hurdles. That is a difficult thing to ask as some of the negatives espoused by players in the HANA post aren't going to go away. Here is where the racing marketing folks need to earn some of their salary.
My view is that is if current educational efforts on how to handicap could be tweaked some (or perhaps run as is), with this demographic that is at the track, you may get some crossover wagering while they are watching the games. This crossover may manifest more during race meets, but at OTBs, they won't have the advantage of the fantasy sports players having the experience of the actual venue. The advantage the racing industry will have is that they will have the right demographic at their property.
If a track/OTB has a loyalty program, perhaps they could modify the program to entice racing wagers from the fantasy sports players. For example, if a player's club member accumulated $250 in fantasy sports wagers in a month, the next month any racing wagers would accumulate loyalty points at a 5x rate. This might not only spur crossover racing wagering from the fantasy sports players but perhaps get some of the horseplayers to participate in the fantasy sports games. A win-win.
By expanding wagering utilizing pari-mutuel principles, this should help the racing industry from a political and regulatory standpoint. They could make the claim that pari-mutuel wagering is "their" gaming turf, and they have the right to expand pari-mutuel. Where casinos could balk at tracks wanting slot machines and blackjack tables, their argument is weaker when it comes to just another pari-mutuel game. In fact, there's no reason casino racebooks (de facto OTB) couldn't offer these games, so they get to participate as well.
To summarize the possible approach to help racing sustainability, the focus should be on expanding pari-mutuel wagering. Given the current attractiveness of the racing product with people not familiar with racing, the key is to attract them to the tracks/OTBs with what does interest them, provide them pari-mutuel games wrapped around what interests them and then work to generate some crossover incremental racing wagering.
This in no way is a naked claim that what is proposed here is the single solution that will save racing in the US and Canada. The title of this series is about how to help horse racing sustainability. However, the offering outlined here does at least have the potential to achieve the result outlined in the previous post:
- Get more people of a desirable demographic to the tracks, OTBs and ADWs
- Get those people to place pari-mutuel wagers
- Get all people to increase their pari-mutuel spend per visit
- Have that increased pari-mutuel handle help sustain the racing industry
Lamb, M. & Singer, D. (2011, August). Driving sustainable growth for thoroughbred racing
and breeding. Paper presented at the Fifty-ninth annual Round Table Conference on
Matters Pertaining to Racing, Saratoga Springs, NY. Retrieved from
http://www.jockeyclub.com/resources/selected_exhibits_1.pdf
Downes, David W., "Identifying New Pari-Mutuel iGaming Offerings in the United States" (2011). UNLV Theses/Dissertations/Professional Papers/Capstones. Paper 1145.
http://digitalscholarship.unlv.edu/thesesdissertations/1145/
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