Month: April 2021

By Kenneth Williams

When it comes to joint ventures, and I’m speaking from the perspective of the esports partner here, there are three things to be considered. The first thing is picking the right partner. The second thing is sharing the risk, so structuring the joint venture so that risks, as well as rewards, are appropriately shared between the parties based on their respective contributions and respective obligations. This is true in any joint venture, not just in esports. Then finally, we would say to the esports partner that it’s important to think beyond just the audience growth benefits that you may perceive could come from the joint venture. There’s a number of other reasons to pursue a joint venture and a number of other potential ways to benefit from it.

Picking the right partner

Picking the right partner starts with the basic question of whether the partner is appropriate for you or not. For example, if you’re an esports organisation, partnering with a betting platform is not going to be appropriate and they probably wouldn’t approach you in the first place. If the JV or your JV partner is going to be running the book of matches that your organisation is competing in, that isn’t going to look good and might even violate some laws. Also, in that area of appropriateness, as an esports team – and this depends on your positioning and branding – then given that esports players tend to be on the young side, you want to choose a partner that coexists well with your branding and anticipated positioning over the period of the joint venture. 

Does that include a beer company? It might and it might not. There are some esports organisations that have chosen to take more of a family-friendly approach and others that are a bit more edgy. 

Also, in terms of an appropriate partner, it’s important to think of potential points of competition that exist or may exist in the future. The most successful esports organisations achieved success not just by winning matches and having great personalities, but by having interesting and attractive branding that translates well into merchandising, clothing, etc. If that’s a principal part of your business as an esports organisation, it wouldn’t make sense to do a joint venture with a clothing or lifestyle brand that may have some points of competition with you.

More broadly, start by determining your goals, for example expanding your reach, adding marketing management expertise or getting financial support, and then consider which of those goals you could successfully pursue using your own resources or engaging contractors and other sources, beyond taking this step of entering a joint venture. I’ve done a lot of joint ventures in my career and they do not enjoy a very good track record in terms of successful outcomes. There are a lot of challenges. There are cultural challenges and challenges in terms of obligations going forward to support the joint venture, whether it’s financial or marketing resources or other types of inputs from both parties. Markets change and company strategies change. It’s very often the case that, in five-year joint ventures, by year two or three, the incentives have realigned so significantly that one of the partners feels like this joint venture isn’t something they really want to invest in – or even that the joint venture is now a liability.

Sharing the risk and the rewards of the joint venture

The second factor that we advise our clients on is to make sure that risks and rewards are appropriately allocated. This can be a challenge when you have lopsided bargaining power, which is quite often the case in a joint venture, particularly where one partner contributes the financing and the other party is contributing the know-how or branding or market sector expertise. Maybe you have a huge international brand that wants to get into esports because it’s cool and they want to reach a younger demographic. They’re going to come into this feeling that they ought to be calling the shots in terms of the decision points that go to a joint venture, formation and operation. The smaller party, let’s say it’s an esports organisation, is probably not going to be given much of an opportunity in terms of approving what the joint venture is going to do. 

Let’s say the anticipated revenue is delayed for a year or two for whatever reason, hopefully not because of another pandemic but maybe there are some unexpected changes in the market or some other challenges. In a scenario like that, the smaller partner is going to feel the financing partner needs to step up and cover the cost of operations before the JV starts to generate revenue in meaningful amounts – but the larger partner might not feel that way. Ideally, these things are all spelled out in the joint venture agreement.

I think this is an important point. You can’t go into the negotiation feeling like you have to get the deal or you’ll probably end up giving up more than you should. This is a critical part of negotiating and decision-making in any sector. Once you feel like you need to have this deal, it’s easy for lots of things to get through that you may, later on, regret very much. If this is a scenario with a large partner that’s contributing all the money and the esports company that’s looking for this joint venture to bring them to the next level, the esports company could lose.

A typical joint venture agreement wouldn’t be for less than three years unless it’s a really lightweight arrangement. Five years is quite common but in some industries you can see ten-year terms. These terms are typically renewable if both parties agree, or maybe they are automatically renewing if the venture has reached certain performance titles. In a faster-moving space like esports, it’d be very surprising for parties to commit to a ten-year cooperative arrangement.

Think beyond the audience growth benefits

Our last factor is to think beyond audience growth. It’s pretty common for an early-stage company to be really focused on that single metric of how big the user base and audience are. In a situation where you’re talking about a joint venture, that party may view that arrangement as the value that comes from expanding their audience.

Let’s say there’s this big consumer brand that’s doing a joint venture on the side, and the esports organisation feels like it gives them access to a mainstream demographic beyond the younger esports niche. That could be a legitimate reason to enter a JV and could be a great benefit, but there’s a number of other reasons that could make a joint venture a legitimate smart choice. We recently saw news of a joint venture between two European companies. One is a betting company, the other an IT company. The benefit to the betting company was to develop the technology that their user base was going to expect, the type of interfaces, etc., that would attract users in the demographics they were interested in and keep those users. 

We’ve seen different types of benefits being sought by parties entering joint ventures beyond the basic equation of expanding the audience. Look at the joint venture between Barstool Sports and Penn National: Penn is historically a brick-and-mortar gambling operation and Barstool Sports has a very broad audience in that demographic that Penn National wishes to attract to their real-world betting business.

There are all sorts of reasons why companies might do joint ventures and our suggestion is to be creative and consider what those benefits might be – beyond simply growing the user base.

Feitt, who had the highest ATP singles ranking of 920, was found to have breached Section D.1.b of the 2018 Tennis Anti-Corruption Program (TACP) five times. This states that no player should attempt to manipulate the outcome of an event.

He was also found to have breached Section D.1.e three times. This rule states that no player should ask another to not play at their best.

Feitt’s final charge was for breaching Section D.2.a.i, which demands that players report all instances of attempted match-fixing to the ITIA.

Anti-corruption hearing officer Raj Parker ruled to ban Feitt on April 12, specifying that he will not be allowed to play in or attend any tennis events sanctioned by the tennis governing bodies.

In addition, Feitt was fined $25,000.

The news comes as the ITIA handed a three-year ban to Slovakian tennis player Barbora Palcatova for match-fixing. Palcatova was the tenth player to receive a ban from the ITIA this year.

In January, the ITIA issued lifetime bans to Russian tennis players Sofia Dmitrieva and Alija Merdeeva, who had also participated in match fixing.

This month the ITIA reported a decrease in unusual betting reports.

TrustPartners said the services are designed to drive forward the maturation of the EU gambling market in the wake of the novel coronavirus (Covid-19) pandemic, as the industry shifts towards online.

It said H2 will use its position as a key information source on the sector to lead on all EU market data and country-specific intelligence, while TrustPartners will use its operating and management expertise to help operators, suppliers and regulators in key markets develop and expand.

The combined advisory services will focus on assessing the financial, operating and economic impact of regulatory changes, sizing offshore markets, and helping operators in the process of moving online.

David Henwood, director of H2 described the development as exciting, and said that now is a key point for the European gambling sector.

“It is now so important that regulators and operators work together to create the optimum trading conditions that will ensure equilibrium, drive up channelling rates and prevent a return to black market growth,” he said.

“TrustPartners is the perfect fit for H2 in the European market and brings that broader operating experience both inside and outside of gaming that will be of such great value to our industry through the 2020s,” Henwood concluded.

Gianluigi Corsetti, managing director of TrustPartners, added: “The partnership with H2 has over 10 years of history. We are living in a particularly complex phase right now – dynamic, disruptive, challenging for our personal and professional lives.”

“Our years spent together have allowed us to gather experiences, skills, approaches and relationships that we would like to make available to our customers to ensure a sustainable and well-governed development for the gambling industry.”

This handle figure represents a dramatic increase from the $22.6m from the same period last year.

Read the full story on iGB North America.

BOS agreed with the consultation’s conclusion, which found that there was no reason for the state to present any new financing model for the horse racing industry.

One of the major changes to be considered was the introduction of a mandatory levy fee for betting on horses, for example, 5% of gross sales, in order to distribute the funds raised in the horse racing industry.

The country’s Gambling Market Inquiry rejected the proposal entirely, a move BOS said it supports.

Gustaf Hoffstedt, secretary general of BOS, said the association agreed with the conclusion based on both principles and practical reasons.

“On principle, you cannot own, and consequently charge for, information that is open to everyone. This includes results that are often used in various types of betting,” Hoffstedt said.

“A practical reason is that the proposed market fee would be as large as the entire gross gaming revenue. Everything that remains after the winnings have been paid out to the winners would have to go to cover the levy fee. Few gaming companies would be interested to operate under such conditions,” he concluded.

BOS’ response also raised concerns about the channelization of the Swedish market, stating that if such a levy were introduced, unlicensed operators would gain a competitive advantage over Swedish-licensed entities.

In addition, it claimed that a mandatory market fee should mean a deduction before taxation, which would therefore lead to reduced tax revenues. BOS described it as “unthinkable” to reduce a tax revenue “that is so widely accepted and functional.”

Last week, New York took a step closer to regulated mobile betting after a bill for the state’s FY 2022 budget contained provisions for legal mobile sports betting, revealing a $25m (£18m/€21m) licence fee and bidding process for potential licensees.

Addabbo is a staunch supporter of mobile sports wagering in the state and has been lobbying for this to be legalised for a number of years. Consumers in New York are currently limited to land-based betting at four of the state’s casinos.

With the inclusion of mobile wagering provisions in the budget bill, Addabbo said he is hopeful this will lead to legalisation within the next year, potentially before the NFL’s showpiece Super Bowl LVI in February 2022.

The state’s Gaming Commission is set to start the creation of the mobile sports betting process and begin to accept bids from sportsbook providers this July.

“Legalising mobile sports betting will bring in the funds needed by the state that will go towards funding our education system, problem gambling awareness programs and creating jobs,” Addabbo said.

Read the full story on iGB North America.

When Zeal Network abandoned lottery betting and shifted its business model to focus on brokerage back in 2019, it signified a clear move towards a more traditional type of lottery operation.

Despite the lower margins of brokerage, the company was convinced the legal position of lottery betting had become too precarious to be sustainable. The company’s financial results since the change would seem to indicate that the decision to work as partners of rather than competitors to official lotteries is paying off.

But just because the company pivoted its main business away from the sector of the lottery industry more typically associated with start-ups doesn’t mean it has given up on novel lottery business propositions entirely.

Via its UK-based Zeal Ventures investment arm, it continues to invest in start-ups it views as having the potential to widen the audience of traditional lotteries.

According to its recent 2020 annual report: “Our objective is to learn from these companies, generate profits and/or integrate exciting business ideas into the Zeal Group.”

“We partner with our investments with learnings going both ways to find the next big thing in lottery,” explains Amit Lakhani, investment director at Zeal Ventures (pictured below left). “If we see successful products or marketing techniques, we will assess whether there is a way to bring these to Germany to expand our offering and attract new audiences.”

In search of millennials

In keeping with many other lottery companies, the new audiences being sought by Zeal are largely younger players.

“The initial hypothesis is to find new kind of players and get that new generation of people into playing prize gaming,” explains Lakhani. “It is typically younger people, though we don’t limit ourselves to that.”

Two of the companies it holds significant stakes in, operating the Daymade and Odurn websites, are focused firmly on attracting younger players.

Zeal Ventures is currently leading a new funding round for Daymade, in which it owns a 35.2% stake. The site offers prizes, holidays and ‘experiences’ of varying value in weekly draws.

On its ‘About us’ page, Daymade says it “was born of the belief that experiences are more valuable than money”. 

The message appears to be resonating with the younger demographic regularly cited as fuelling the experience economy – according to Lakhani almost 70% of Daymade customers are in the 18-34 age bracket.

But industry insiders could be forgiven for thinking the idea seems familiar. In 2018 another Zeal Network company, Lottovate, launched an ‘experience lottery’ aimed at millennials in the Netherlands.

However that lottery, Raffld, shut down after just eight months in operation. Despite this, Lakhani is much more optimistic about the UK-facing Daymade.

“The business that we had in the Netherlands not only had a massive share going to charity [50% of each ticket], but then they had additional taxes in the licence and the regime that made the margins on that business really small and not enough to build anything substantial,” he says. 

“Even if we ignore the margin, people seem to like this product better than Raffld. Raffld was a raffle and every week one person won and it was a relatively small prize, whereas with Daymade multiple people win every week. Yes, they are winning smaller prizes but lots more people are winning.”

Small is better?

Typically lotteries have looked to attract players with big prizes and indeed jackpots are frequently used as acquisition tools by all kinds of lottery businesses. The Gambling and Lotteries – Taking Part Survey 2019/20, published by the UK government last September, found that the motivation for 67% of those who had played the lottery in the past 12 months was big prizes.

But the odds of winning a huge jackpot are incredibly small and Lakhani says a growing number of players, especially younger ones, are attracted to smaller jackpots that they have a higher chance of winning.

Odurn, for example, offers a mixture of luxury prizes and cash jackpots ranging from £300 to £3,500.

“Odurn has seen a lot of these raffles really taking off. They are smaller and more regular and people feel that they are more likely to win,” says Lakhani. “People feel they have a 5% chance of winning rather than a one in a million chance of winning.”

Odurn’s users are also significantly younger than traditional lottery players, with Lakhani estimating 70% are aged between 18 and 44.

Admittedly, Daymade and Odurn are small players in the grand scheme of things and the little amount of financial information disclosed about their parent companies, Cloud Canyon Limited and TH Travel Limited, in Zeal’s annual report is not yet especially promising.

However, it’s perhaps understandable that a company such as Zeal would be willing to invest in finding the winning formula that would help it attract younger players. With its main business now in Germany, where online lottery play is particularly low compared with other nations, cracking the millennial code could have big benefits for the wider business.

The Gen X, Y and Z demographics have long proved difficult to attract into traditional lotteries, much more so than other forms of gambling. 

According to the most recent pre-Covid Gambling Participation Survey from the UK’s Gambling Commission, in 2019 those aged 16-34 were more likely to have gambled in the past four weeks than other age groups.

Looking at the numbers for the previous five years, there was a clear trend of increasing participation among the younger age groups, compared with relative stagnation among older players.

But despite the increase in younger players gambling more generally, lotteries had continued to struggle to appeal to such audiences. The proportion of gamblers participating only in National Lottery draws was just 6% for those aged 16-24, 17% for 25-34 year olds and 30% for 35-44 year olds. This compared with 39% for those aged 45-54 and the 65+ and 44% for those aged 55-64%.

The Taking Part survey also reported much higher numbers of people playing the lottery in the over-45 age group, with only 21% of those aged 16-24 having played any National Lottery game in the previous 12 months.

While some lotteries have historically been complacent about the ageing nature of their player base, in recent years there has been a growing awareness that lotteries need younger players to survive long term. 

Finding a ‘niche’

However, Lakhani is clear that for its part Zeal Ventures is not only interested in businesses that appeal to younger players, and that it’s also keen on areas where there is an opportunity to carve out a niche.  

One of its other recent investments was in Furlong Gaming Limited, which operates the Racehorselotto.com website. Its main prize is ownership of a racehorse for a year, along with a cash prize, and smaller prizes are also racing themed.

Its player base is older, with the majority of players in the 40-69 age group, but Lakhani says the company also sees potential in products that cater to particular interest groups.

“In the UK racing is massive but then you go international and it is even bigger and the people who do go to races are really dedicated, they are really passionate and when they go on a racing day everyone dresses up, they spend a lot of money, they are in the mood to drop lots of money somewhere and enjoy the day so can they spend £5 on a lottery ticket?” he asks.

“The racehorse lottery is not looking for the same audience that plays the lottery and if we were trying to compete with them we would probably lose.”

Rather, the idea is to create a custom-made dream for players rather than leaving them to dream up how to spend a big lottery jackpot, as is the case with traditional lotteries. Another of Zeal Ventures’ investments, the US-facing Omaze, has recently launched in the UK with a focus on giving away luxury homes. Given the widely reported housing crisis in the UK, it’s perhaps a savvy dream to offer up. 

Whether or not any of these business models will really take off remains to be seen, but Lakhani is convinced there are enough non-lottery players out there to justify the investments. “The goal is to try and get those people who aren’t playing the lottery into the lottery by trying something different.”

By Kenneth Williams

iGB: Can you tell us a little bit about what PandaScore is?

Flavien Guillocheau: We founded the company [a little over] five years ago. When we started out, I was looking at what existed in traditional sports. It’s more mature nowadays, there are many different activities for fans to engage with esports. Five, six years ago, it was much more difficult for a fan to do anything. For example, if you were trying to place a bet, it was difficult to find a bookmaker. If you were trying to find very basic information like who’s playing tonight or the result of the match yesterday – the basic stuff that, as a fan, you want to engage with – there wasn’t much there. My idea at the time was to help businesses build this kind of basic experience. What we’re doing is providing data on esports matches to different types of businesses. We work with some professional teams, we work with the media, broadcasters and tournament organisers, fantasy, betting and so forth. Our mission is to help any business build whatever kind of experience they want for fans.

iGB: What was PandaScore’s impact on the recently upgraded esportsbook from Pixel.bet? 

Flavien Guillocheau: A year-and-a-half ago, we decided to launch a product dedicated to bookmakers because we realised that the betting companies couldn’t do much with just data, raw statistics. They don’t have the esports expertise internally; they can’t build the odds themselves. So two years ago, we decided to build our own odds feeds coming from our data that we collect in real-time, after the match, etc., and transforming this data into odds. What we do with Pixel.bet and all of our customers is we provide them the odds feed pretty much live. We provide them on many esports. We cover the big three: League of Legends, CS:GO and Dota 2, plus Rocket League, Overwatch, Call of Duty, so on and so forth. More recently we added Rainbow Six.

Our relationship and involvement with Pixel.bet is on helping them offer the most complete experience possible in sports betting. One of the few things that really stands out is the diversity of bets that we can help Pixel.bet offer to their customers. For League of Legends we would offer around 70, 80 different types of bets ranging from the basic match-winner to how many tricks, how many kills, very specific esports types of bets. At the end of the day, this is what esports fans want, to have something specific to esports and not just very generic match-winner, handicap, things that esports fans might not relate to that much compared to sports markets.

The last thing we do with them is provide them with some raw statistics through a widget. It’s basically a webpage that you can integrate into your own website. These statistics help the fans and punters bet. It helps them relate and understand what is happening. This is also increasing engagement from the punters and something we really find valuable, especially in esports. Esports is more data-driven than traditional sports. It’s the DNA of gamers to compete and score points in every game they play. They have a strong relationship with it all the time.

iGB: Why is PandaScore’s AI a game-changer for esports betting odds?

Flavien Guillocheau: Since the early days, it was very difficult to imagine doing data collection manually or with an approach that isn’t scalable or automated. Very early on, we decided to build an automated process to collect data. Six years ago, it was the early days of AI in the more mainstream startup thing. What we do is we use two different parts of AI. First is computer vision, so we analyse video feeds with AI the same way a Tesla car drives and analyses what’s happening on the street. We use the same type of technology, and this allows us to create statistics.
As for the impact of AI and how it’s a game-changer, the depth AI can bring in data collection is unique. It can create a huge amount of data very quickly. Coming back to League of Legends, we collect 300 data points in half a second. It’s a lot of data. It’s very quick, very automated and very accurate. That’s the first layer of where AI can help. If you think about it, it can also be applied to traditional sports. Not just to esports, it can be applied to anything.

On the second side of AI, it’s more traditional. It’s about how to predict what’s happening. With the mass of data we create, how can you predict who’s going to win? How many points, how many kills, how many objectives, and so on and so forth. Which player is going to perform the best? It’s a lot of machine learning, which is a bit different from AI, but it’s also applying some newer models to these kinds of predictions. On this specific aspect, I think esports and the complexity of esports rely on the amount of data you can generate. It’s much more virtual: there is much more of an economy in the game, there are more items, so many things that compose the game that are very rich. If you’re treating esports with a normal sports approach, it’s going to be very difficult to predict anything properly. It changed the quality and depth of the product that you can build and the kind of content you can create for fans who want to place bets.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the same period was in excess of $50m, and both figures represent a marked increase on the same period in 2020, when Bally’s reported $109.1 million in revenue and $22.1 million in Adjusted EBITDA.

These increases can be attributed to a relaxation of Covid-19 protocols which were in place for much of 2020, including the final weeks of Q1.

Read the full story at iGB North America.

The operator said the move builds on its recent successes, having expanded beyond Italy in recent years.

It said it has shown a “perfect record” with regards to lottery tenders, winning three out of three applications in Italy, Morocco and Turkey, and that operating the UK National Lottery is the company’s next big aspiration.

Sisal said it has invested heavily in digital and artificial intelligence technologies in order to develop its responsible gambling strategy.

This, coupled with its proprietary platform and a strong focus on product and innovation, would help it successfully operate the lottery, it added.

To further strengthen its bid, Sisal has partnered with children’s and young people’s charity, Barnardo’s, which it said is one of the most prestigious and recognised charities in the UK. This partnership would give it a stronger understanding of the UK’s charitable landscape, it said.

Barnardo’s will use its involvement in the joint venture to ensure a best practice approach to player protection, improving protections for children and ensuring the lottery draws on best practice internationally.

“We believe lottery operators have the duty to generate resources in a responsible way and should lead the industry in raising the bar for player protection,” Sisal chief executive, Francesco Durante explained.

“That’s why many years ago we voluntarily developed an approach to player protection far beyond what was required by regulation. Our focus is to make the lottery safer and an even better source of funds for good causes.”

Javed Khan, chief executive of Barnardo’s, added: “We are pleased to be working with Sisal in bidding to revitalise the UK National Lottery, which generates substantial funds for worthy causes across the UK.”

“Our involvement will strengthen the partnership’s focus on player protection and responsible play, whilst deepening understanding of the UK charity sector and how it works to make a difference in the heart of local communities.”

Sisal is the latest operator to join the race to obtain the fourth National Lottery licence in the UK.

The tender was launched by the British Gambling Commission in August 2020, at which point it was suggested the preferred applicant would be announced in September 2021, after a bidding process taking over a year to complete.

Pan-European lottery and gaming giant Sazka Group was the first company to announce its intention to compete for the licence, in October 2020.

India’s largest lottery operator, Sugal & Damani, joined the race later that month, and incumbent licensee Camelot also completed the Gambling Commission’s Selection Questionnaire in October, though it refused to commit to bidding for the tender.