Over the past few years, industry trade shows have been flooded with virtual sports betting products, whose presence seemed almost outsized relative to their real-world footprint in global gaming.
But things have changed.
The worldwide lockdown on mass gatherings this spring put professional sports on ice for two solid months, with one result was sports bettors were exposed to virtual alternatives. In some cases, most notably the virtual Grand National, the platform racked up stunning successes. And while nobody sees virtual sports supplanting the real thing when “normal” returns, the segment seems poised for a higher profile going forward—including in the U.S., where it has to date barely made a ripple.
This was the one of the general conclusions of a webinar entitled “Virtual Sports: An Established Product With a New Dawn and Fresh Opportunity,” presented last month by Eventus International. Serving as moderator was, Keith McDonnell, CEO, KMiGaming, and the panelists were Jason Pretorious, Co-CEO, head of product and technology, Kiron Interactive; Keith O’Loughlin, senior vice president, sportsbook and platforms, SG Digital; and Matthew Clarke, virtual sports and lotto product manager, Betfred. Some key excerpts of their conversation follow:
Virtual sports has been around for quite a long time; this is not a new product. How has the recent crisis impacted your business and, in some ways, the opportunities it presents?
PRETORIOUS: We’ve seen the effect of the lockdown in two ways. A lot more operators are realizing the potential of virtual and we’ve seen existing clients have been able to utilize what they’ve invested in and grow business, we’ve seen anything from 30 percent growth to somewhat greater than 10X turnover growth. Some operators have been able to recapture a lot of the business they’ve lost in the retail space in the online space.
As a sportsbook and platform provider, SG Digital is able to offer a comparison between virtual and other product verticals. What has been your experience—are you seeing a clamor for integrating virtual sports from your existing partners and/or potential new partners?
O’LOUGHLIN: It’s a combination of both. To your point, a lot of people were skeptical about virtual products. But having said that, if you look at ICE and G2E over the last three or four years, the number of virtual providers has been madly increasing and there have been many times over that period where one could think that virtual would become mainstream. I’ve been a believer in virtual product for quite a while.
The best statistic I can come up with is we have six or seven big operators in the digital space in the UK and a number of them had the same peak volume on the Virtual Grand National as they had on the real Grand National two years ago. We saw some customers with 20,000 bets-per-minute on the Virtual Grand national, which is staggering. That says a few things—customers want to have a flutter; the virtual Grand National is in some respects fabulous entertainment because a high-quality stream allows you to bet beforehand and gives you a result pretty quickly. You don’t have to wait hours for it. Also, there was no other racing on that day, no other soccer or any sport of interest. So people wanted to bet on something.
It showed people wanted to have some fun, to bet on something and, across the general population, people were quite happy with the virtual product because they know what it is. Our customer base has been leaning into any product that they can have. E-sports, virtual sports and then anything else, be it table tennis or Belorussian football. In Asia and Australia/New Zealand, some of our customers have seen 70 to 80 percent of their previous revenue. In Europe, it’s 30 to 50 percent of previous revenue for digital operators. In the U.S., it has been much less, mainly because, in most cases, most markets are only a couple of years into development so they don’t quite have the full product volume.
Matt, as the operator on the panel, I imagine you’re quite surprised to hear some operators capturing 80 percent of their revenue on the virtual Grand National. I would say that’s far from the case for Betfred because it’s got thousands of retail shops in the UK. Is virtual sports a stopgap for Betfred or do you see it competing when sports fully return?
CLARKE: I think, as Keith said, it has had its day in the sun and has gotten some great exposure. The difficulties we have had with virtual sports is getting the customer to come online and try it in the first place. With the lack of sports availability in the last two months, a lot of customers have given it that shot and, as sports start to come back, yes, we might see less of them returning. But overall I think there will be a larger percentage of the customer base who are now familiar with virtual sports and during that downtime, between fixtures or races, there will more customers aware that virtual sports are available for them to go over and play. So, yes, virtual sports play will come down but it will never go back to what it was. It’s now a much more familiar product with a much larger customer base.
I think awareness and increased trust makes it a more viable option for players during those quiet hours as you say. That’s probably music to Jason’s ears because it’s something you’ve been trying to get across for more than a decade. What can you do to make sure that virtual sports stands the test of time and competes with and compliments a fully returning sports calendar?
PRETORIOUS: It’s what we’ve been doing all through the years, but now we’re putting pressure on ourselves as an industry to deliver even more. I think people now realize the entertainment value of virtual and the experience includes the same betting markets that they’re betting on in the sports that they love, and they can get a result in a reasonable short period of time whilst waiting for another game. We need to focus on what virtual is—a high-frequency game—and offer more variety in the game play and make it realistic. If they’re expecting a virtual reality-type of game, it’s got to be realistic.
When I was watching the virtual Grand National back in April, my 15-year-old daughter asked me, “How do they make the prices for this?” I gave an answer, but I wasn’t able to give a real thorough answer. If there are prices behind virtual sports selections, can there be ways for me to research forms so the betting will appeal more to me?
PRETORIOUS: There is a certain amount of form in the fact that we generate results, and the results are a function of underlying ability of, in this case, horses. We do use ability-based modeling to determine the relative strength of horses in the race. We actually have a skill-based racing product which is licensed in the UK, and that takes a huge amount of form factors—such as running ability of horses and track conditions—and molds them into a result.
O’LOUGHLIN: I think that’s a fair question; can you study form. But the reason you do that is to get an angle over a bookmaker. If the odds are 10:1, but by looking at the form you can determine the odds should be 8:1, and because of that, you have an edge. In virtual, you’re actually betting the true price because it’s an actual probability of what’s going to happen. There’s an argument that says it’s very, very fair. Whatever “ins” there are into virtual horse racing and virtual football pricing are the inputs that ultimately drive the probability of the outcome.
I totally get that and I have been a longtime advocate. My question is how do we get traditional sports gamblers to see the fairness of this rather than have them think that, even when they participate, they’re taking a flyer. Keith, I want to stick with you for now. You’re a global platform provider. Do you see different appetites for this by market, say between Europe and the U.S.?
O’LOUGHLIN: Virtual product, in some respects, is filler product. I don’t mean that to be negative. In my previous career as an operator, before an actual horse race started, there was a great amount of business in horse racing virtuals. Between races, virtual horse racing would go up and afterwards it would finish. When there was nothing else there, bettors would flock to it. Right now, it’s a perfect filler product.
Regionally, in the UK, horse racing is the more popular virtual product. In other markets, if all their betting is on football, then their virtual betting is on football. I think the U.S. is starting to understand the potential that virtual has. In the U.S., the biggest sports betting product is the NFL and that’s 16 weeks. So in order to keep customers interested throughout the year, they need something more and virtual is a cracking product. In tennis, IMG Arena has done a deal with the professional tours to be an official licensed product. I expect other sports to do the same because it gives them a long tail of revenues. Virtual is still in its infancy in what it can do in terms of league support. It’s not going to hold its current level of revenue but I think it has shown that it provides great entertainment and leagues and associations will see endless possibilities in terms of what it can do.
From an operator’s perspective, what is the profile of the virtual sports player now compared to what it was three months ago?
CLARKE: It’s very much the same. Obviously, we’ve seen more of the sportsbook-style customer coming over due to the lack of opportunities and events to bet on. Age-wise, it has stayed very much similar. I haven’t seen a great deal of shift in terms of the demographic; it’s moreso the volume.
Do you see levels of virtual going back to normal or do you think it will sustain at a higher level than it was pre-COVID because people trust this product more and they’re aware of it?
CLARKE: In six months, I definitely aim for the product to be at a higher level than it was three months ago. Now that we’ve got this extra exposure, we’re probably at the peak of it now, it will start to decline. But I do think the virtual sports space will be healthier on the back-end of this. To throw a figure out, maybe 25-50 percent better than it was six months ago.