Virtuals becoming a reality

Words by Julian Rogers

This November marks four years since the switch was flicked on regulated online gambling in New Jersey. Yet as operators scrambled to acquire online customers and market share, one important betting vertical – namely sports betting – was conspicuous by its absence from the product suite. However, this void is set to be filled, albeit partially, very soon as a slew of operators busily gear up to roll out virtual sports after this form of gambling recently received the green light from New Jersey’s Division of Gaming Enforcement.

Governed by a RNG, which means the simulated sporting events don’t flout federal sports betting laws, virtual sports offer operators a fast-paced, around-the-clock product that has proven to be a winner for gambling brands in other regulated egaming markets around the globe.

It is also arguably the industry segment that has evolved the most dramatically over the years, with virtual sports specialists deploying motion capture technology and 3D design modelling to create cutting-edge visuals and lifelike animations. Squint your eyes in the direction of some of the latest offerings and you could be fooled into thinking you’re watching an actual sporting event – or at least a high-end video gaming title.

One leading supplier, Inspired Entertainment, is providing five virtual sports (soccer, horse and greyhound racing, and car and motorcycle racing) for more than a half-dozen egaming brands in the Garden State, including the likes of Golden Nugget, Betfair, SugarHouse, Caesars, Borgata and Resorts. Resorts will also screen virtual sports at the iGaming Lounge inside its Atlantic City Boardwalk property.

“All of our New Jersey operators have been so supportive of virtual sports and are behind what is a completely new product for the market,” says Lucy Buckley, VP of interactive at Nasdaq-listed Inspired. “Initially, we are launching with five sports as operators felt those five were strong to launch with and get players familiar with the product. But we will analyze the data, do a lot of focus group research and then start to optimize and launch new sports over time.”

To describe the introduction of virtual sports as a game-changer is probably stretching it a bit, but the number of operators keen to unleash this new product vertical clearly illustrates the industry’s eagerness to offer New Jerseyans something new and unique after four years of endless variations of slots and ‘me-too’ table games (casino accounts for 90% of the market). But like casino, RNG-based simulated sports betting is a steady, reliable earner for operators.

Horses for courses

Across the Atlantic, virtual sports (horseracing) was launched in UK betting parlors up and down the country back in the summer of 2002. Besides being a relatively cheap additional product for bookmakers to offer in between actual racing, virtual racing was also a handy substitute when meetings were abandoned in the coldest and wettest months. Yet this alien product was met by a great deal of scepticism and disdain at the time, especially from racing purists and dyed-in-the-wool bettors.

Many dismissed it as ‘cartoon racing’ with its ropey animations and contrived names for the horses running at fictional tracks like Portman Park and Steepledowns, while anyone betting on it was deemed a bit of a fool. Nevertheless, virtual sports didn’t disappear following this frosty reception; in fact, they went on to become an obligatory product for land-based and online operators across Europe and beyond.

Even the operators were pleasantly surprised at how gamblers quickly took to virtual sports, even if many sports betting aficionados still looked down their noses at it. “Virtual sports have come a long way since the ‘cartoon racing’ label,” says Keith McDonnell, an egaming industry veteran and CEO of consultancy business KM iGaming. As well as a burgeoning array of virtual sports to bet on and improvements to the graphics and technology, he says gamblers have become more trusting of the product.

“We see this through the growth of online slots, and this applies to virtual sports too. They know the content doesn’t involve betting on real events, but they trust that operators are being regulated to deliver credible and trustworthy content. Customers are far less skeptical in this regard and so that barrier has practically been eliminated. Even the most skeptical of punter – the Chinese sports bettor – has been won over by virtual sports betting.”

McDonnell goes on to say: “Virtual sports can provide 24/7, 365-days-a-year content and, therefore, act as a hugely complimentary option to live sports, which can suffer from lulls in activity.” If you’re a NFL fan, those lulls last over 200 days during the course of the protracted off-season. Gambling consultant Steve Donoughue suggests virtual sports products are akin to how online bingo customers play slots between and during games.

“It is something that they do in between the main event. The question is whether virtuals can be the main event [in New Jersey]. There is an argument that says if you are the only game in town then whatever that game is it is going to be a decent game, although the counter-argument is that there is a massive illegal sports betting market well entrenched in the US. Is someone going to get as much enjoyment and excitement from betting on what is basically roulette with moving pictures? And that’s not said in a derogatory way because the evidence is there that people like it.”

A leap of faith  

The $64,000 question is whether operators will be able to easily cross-sell virtual sports to existing online casino and poker players. Inspired claims sportsbooks usually witness a 10-20% jump in GGR after adding virtual sports to their product suites. In New Jersey, of course, operators don’t have customers betting on sports and Buckley says Inspired has been debating the cross-sell issue “a lot” with its clients.

Certainly, some non-gaming players will be inquisitive enough to give the games a spin, which means virtual sports could perform well with attracting new users disinterested in casino and poker. This partly explains why operators are understood to be embarking on marketing blitzes, including TV ads, in New Jersey as they look to use virtual sports as a vehicle for player acquisition.

Virtual sports betting also tends to skew towards a younger gambler profile, so operators will also be able to pick up some of the millennials who have grown up on video games and perhaps enjoy watching esports. The high frequency, instant gratification of virtual sports with events typically lasting no more than two minutes and essentially being a highlights reel of the action, seems to resonate with millennials in markets outside the US, particularly those betting on mobile devices. Although it varies slightly between market and operator, Inspired reports that around 80% of virtual sports wagers come from mobile devices nowadays.

Furthermore, the virtual sports products themselves mimic the mechanics of RNG-based casino gaming in many ways. “By delivering RNG-based animated betting events in 60- to 90-second intervals, virtuals offer many of the same attributes as that of traditional casino games, especially table games,” explains Steve Spartinos, CEO of virtual sports supplier Kiron Interactive. “A simpler and quicker form of sports betting does appeal to a segment of casino fans. There is no need to have a good knowledge of sports or study detailed form when betting on virtual sports; choosing your favorite number or color is all that is required to participate in the high frequency action and embrace the concept that the games offer.”

And even if it is a free-to-play version, virtual sports can still be a sticky and engaging product for casino players, as Pala Interactive discovered after teaming up with Leap Gaming to introduce virtual sports for Pala’s social casino, MyPalaCasino.com, in January.

“The biggest surprise was the depth of individual player engagement,” says Brett Calapp, chief social gaming officer for Pala Interactive. “When engaged with the virtual sports product, players tend to increase session time and social wagering by playing a greater number of games in a row.” If Pala did extend virtual sports to its real-money platform in New Jersey, Calapp is confident that the product would be a hit with users. “We expect that certain segments of our current player base would react very favorably to virtual sports for real-money. There is an insatiable demand for sports betting in the US, as illustrated by its flourishing momentum for the prospects of legalization and regulation. You can’t watch an episode of ESPN SportsCenter without discussions of the point spread, parlays, and the amount of money a wager could win. This product could help satisfy some of the demand in our current environment and should provide a nice complementary product should there be sports betting in New Jersey.”

Market forces  

Ultimately, there is no reason why virtual sports can’t make a big splash in New Jersey, particularly with the legal sports betting void that exists – for now at least. The US is a sports-mad, tech-savvy nation, which means virtual sports would arrive in a “much healthier position” than when they were first introduced to mature European egaming markets a decade ago, according to Spartinos.

Meanwhile, McDonnell says: “Virtual sports can absolutely be a hit in New Jersey as a standalone product vertical.” However, he warns: “Should online sports betting on real events open up I don’t see virtual sports coming close to the level of activity real-event betting will generate. Real sports have decades and generations of cultural advantages over virtual sports and opening them up to betting will instantly dwarf the numbers spent on virtual sports.”

Until that time comes, virtual sports look set to be a credible and welcome addition to the product suite for operators while bridging the divide between casino and sports. Of course, it won’t appeal to all existing online gamblers, while others will refuse to trust a form of gambling dictated by an opaque RNG sitting on a server – much like software-powered online casino. “It will always be distrusted by a certain percentage of people because they think it’s fixed. There will always be an integrity issue for some,” says Donoughue.

But with the tremendous strides made with the graphics and the lifelike realism of virtual sports over the past few years, only the most hard-to-please critics would still dismiss it as ‘cartoon racing’ or ‘cartoon sports’. “I don’t think there are any naysayers left now,” Buckley states emphatically.

“The success of virtual sports has been incredible and every operator now recognizes that it is becoming an essential component and product for their business. It’s a win-win situation because we know virtuals work in markets where there is no live sports betting and it also works when it is an accompaniment to live sports betting – there isn’t cannibalization between the two. So, we are excited to see what happens.”