Vital virtuals: how virtual sports capitalised on coronavirus

At the start of April, as the UK settled into its first fortnight of coronavirus-enforced lockdown, 4.8 million people watched Potters Corner romp home to victory in the Grand National. Except they didn’t. The pounding of hooves and the hollering of the crowds were there. The jockeys too. But this wasn’t real life.

The Virtual Grand National, developed by Inspired Entertainment, had always been a supplement; the appetiser before the main course. Last year, just 737,000 people tuned in on the eve of the race, compared to the 10 million who watched the actual Grand National. In 2020, in this ‘new normal’, the population of Birmingham five times over absorbed virtual sports betting content en masse.

Coronavirus has ripped up the rule book and now virtuals have stepped out of the shadows with gusto. Operators and bettors alike, in their scramble for sustenance in the absence of live sports, have found a welcome oasis in virtuals and those behind the vertical are riding a wave of ecstasy.

Potters Corner is the winner of the Virtual Grand National!

A Welsh winner of the Virtual National! pic.twitter.com/OUwK8pBdjK

— ITV Racing (@itvracing) April 4, 2020

Growing pains

“Substantial is the short answer”, is how Inspired Entertainment president and COO Brooks Pierce describes the uptake in his product offering since the shutdown. “The volumes have increased dramatically with all of our existing clients. The pipeline of new clients and the pace at which they want to get virtuals have significantly increased as well.”

Virtuals has truly skyrocketed since the sports shutdown, with the UK Gambling Commission reporting an 88% increase in active players from March 2019 to March 2020, with total number of bets rising 40% in the same time period. The growth shows little sign of slowing, as from March to April 2020 active players jumped a further 44% and total bets rose 37%.

Substantial growth indeed for a vertical that the Betting and Gaming Council notes accounts for around only 1% of total bets, so those increases should be put into context.

With major sporting events having been chalked off, operators have been looking to fill the gap with a product that bettors can still recognise and engage with, as opposed to offerings such as Russian table tennis or pushing casino titles.

Brooks Pierce, Inspired Entertainment

Freddie Longe, IMG Arena EVP, tells EGR Technology that his firm’s football-themed virtual product has seen “strong treble-figure percentage growth” during the last few months alone. IMG Arena develops virtual solutions via its partnership with Leap Gaming, and Longe emphasises the strategy to integrate licensed IPs from rightsholders to drastically improve the realistic and recognisable factors of the product.

He continues: “IMG Arena and Leap have a shared vision of incorporating sport rightsholder’s IP into their product suite to add further fuel to this exciting part of the sports betting and gaming ecosystem.”

IMG Arena recently secured deals with NASCAR and the ATP to produce licensed virtuals products for the stock car racing promotion and the tennis federation respectively. Longe points out that virtual products are key for sports betting and hints that further deals are in the pipeline to tap into the rise of virtuals

“Launch[ing] a virtual tennis betting product with ATP Media, with a specific focus on the ATP 1000 Series, was a very natural evolution to unlock a new revenue stream on their behalf,” Longe says. “Later this year we have a branded virtual golf product going live and we are working with another high-profile federation to release a new concept for them in the coming months.”

For South African supplier Kiron Interactive, CEO Steven Spartinos has recorded astronomical rises in interest and revenue from their virtual offerings. Spartinos says: “Kiron has seen a major uplift. We have seen uplifts of up to about 400% in revenue online. Some cases are absolutely ridiculous in terms of the percentages.”

As the uptake increases and supply deals flourish across the industry, the standout moments for virtuals have been the Grand National and Kentucky Derby. Inspired Entertainment has been running a Virtual Grand National for the last three years, but it was the enhanced exposure of the race this April that led to Churchill Downs reaching out for a Kentucky Derby version. Pierce recalls how the wheels were set in motion for the first-ever Virtual Kentucky Derby.

He says: “Churchill Downs happened to see a post about the Virtual Grand National on LinkedIn. They reached out and asked, “Is there any way you can do something like that for the Kentucky Derby? We all agreed that even though the timeframe was really short, this was a huge opportunity for Inspired to get nationwide visibility in the North American market.”

The responsibility to develop a virtual race fell on the shoulders of Steve Rogers, Inspired’s CCO of virtual sports, who describes the effort as having to “build everything from scratch”.

The Covid-19 lockdown measures meant that Inspired couldn’t visit Churchill Downs physically to capture live racing, upon which the virtual race would be based, as was the case with the Grand National at Aintree. Instead, the whole race was developed with CGI using reference material and archival footage, as well as drone images which could be taken from a safe distance.

Rogers tells EGR Technology: “The timeline was crazy – from a week after the Virtual Grand National, we had three or four weeks to put the whole thing together with 150,000 virtual characters in the stands, the twin spires and all the fanfare of the Derby.”

The Virtual Kentucky Derby pitted past race winners against each other, with Inspired tapping into historical data and software algorithms to determine a credible result. Rogers adds: “The Kentucky Derby event featuring the 13 Triple Crown winners presented a different challenge. We were looking at their respective skills, how they ran in certain environments and weather conditions, and what their individual strengths were.”

“Deeper thinking went into the probabilities for the Kentucky Derby than for the Grand National. [Those] winners would be more evenly matched than a random field of 13 virtual horses, so it’s a different challenge when we’re trying to replicate real life.”

Sports or slots?

While virtuals are viewed as a supplement to sports, there is a line of thinking that the vertical is more suited to the casino world than the sportsbook. Results are created by an RNG, there is no form guide or past results, and ultimately, luck is the means by which winning and losing is determined.

Rogers highlights that virtuals usage lies on a spectrum, in that there are no absolutes in terms of bettor types and the vertical can stretch into both camps with ease, finding what he describes as a “sweet spot”.

He continues: “We get players from both sides of the spectrum. You’ve got sports bettors who are waiting for the next real event and like these games because they feel familiar. You’ve also got casino-type bettors who might be put off from betting on real sport because they have no intrinsic knowledge of it. We get players with deep sports knowledge all the way down to slot players.”

Elsewhere, Pierce argues that while the mechanics behind virtuals lend themselves to casino, he “looks at it as a sport” as opposed to a game of chance.

For Longe and Spartinos, the viewpoint is far more concrete. Virtuals are sporting products entirely; the technology behind them and the content included sit well beyond the realm of casino and deserves to be regarded as a respected portion of sportsbooks.

Freddie Longe, IMG Arena

Longe once again points to the use of official branding across IMG Arena’s output, arguing the authenticity places virtuals neatly in the world of sports betting. He continues: “The products are quite different to casino games, especially when incorporating the IP of real sports. While there will always be some crossover, the typical virtuals player has a much stronger affinity to sport than a casino player.”

Spartinos takes a different approach when qualifying virtuals as a sports betting product, highlighting the complexity of the mechanics behind them and the additional work needed to produce betting markets, compared to the comparative simplicity of a slot machine.

“There is a lot more that goes into a virtual game. There is a lot of complicated technology that differentiates to casino games and it is a product that offers a lot more depth,” he points out. “There is a lot of work that goes into creating betting markets, which give a true-to-life experience. It’s not just about choosing a winner, there’s a lot more to it than that.”

Timing is key

The crossover space that virtuals find themselves in also raises questions of how responsible gambling should be managed. A final whistle on real sports could bring an end to markets for a 24-hour period, whereas in virtuals new events are ready every few minutes.

Rogers highlights that virtuals are not constantly reloaded and replayed like slots and instead offer a relaxed medium between casino and sports betting. He says: “These aren’t on-demand games, and the stakes are lower than traditional sports events. It’s a softer type of product with RTP usually around 80-83%.”

Rogers also confirmed Inspired’s decision not to proactively market or advertise their products, despite the dearth of live sports and the obvious financial opportunity to capitalise. “Responsible gaming is, and always has been, part of Inspired’s DNA,” adds Pierce.

Steve Rogers, Inspired Entertainment

Spartinos concurs with Rogers in terms of virtuals’ softer place in the world of gambling, stating the vertical is a far more “milder form of gaming”. Once again, the frequency of events is pedestaled as a key component of virtuals’ more relaxed gaming approach.

Spartinos comments: “The events are high frequency in nature, but they are still scheduled events.  They are not on-demand. In a retail environment, they take place every five minutes. Online they’ll take place every two to three. It is very different to a slot where you are betting every couple of seconds.”

Like Inspired, Spartinos highlights Kiron’s membership of protection bodies such as GamCare and GAMSTOP and points towards regulators who have drawn lines in the sand between casino titles and virtuals. He continues: “We have seen with regulators internationally where there have certain restrictions on casino games and the same does not apply to virtuals.”

A virtual future

The question, similar for all other verticals that have stepped up during the sports shutdown, is what does the future hold for virtuals. Will they retain this almost steroid-induced levels of growth or is the vertical happy with its place on the peripheries?

Pierce’s hopes remain both grounded and optimistic for the future. He acknowledges that the return of live sports will usher virtuals back into the space as a “complementary product” but points towards an acceptance of its place in the ecosystem. He continues: “We happen to be replacing live sports right now because there are no live sports, but we’re not under the misconceived notion that people will play virtual sports over live sports when live sports come back.”

Rogers appears more optimistic than his colleague, arguing: “I think we will see a retained player base, as people are experiencing virtuals for the first time and enjoying them. Virtuals will be a bigger part of the ecosystem after Covid-19.”

Inspired’s post-Covid-19 plans point towards a greater role in the ecosystem. The firm is running a virtual version of the postponed European Championships and has garnered significant interest in the US following the success of the Virtual Kentucky Derby. Pierce adds: “Churchill is now even contemplating how they can make virtual races part of their core offering around the Derby experience going forward. It’s pretty exciting for us.”

Longe follows Rogers’ sentiment and points out the investment in Leap in 2018 was made with one eye on the future. He continues: “Virtual sports were important before the outbreak of Covid-19 and will be even more so in future. When IMG Arena invested in Leap two years ago, we firmly believed in the power of virtuals.”

Spartinos’ enthusiasm for the future of the industry is at times infectious. He is expecting continued growth in terms of both popularity and revenue and implores the industry to capitalise on the increased exposure.

Steven Spartinos, Kiron

“We are expecting to see a permanent, upward movement in terms of the propensity to bet on virtuals. I’m expecting to see that, in some cases, virtuals could be close to 20% of sportsbook turnover,” he claims.

“Virtual providers, on the back of what is happening now, have also got to be innovating. We have to take advantage of this new wave to bring more realism, so it reaches a point where players start to trust the product as an alternative to real sports.”

Of course, this hope is an optimistic one and something that Spartinos recognises is difficult, but the opportunity provided to virtual suppliers, given the circumstances, should empower them to take their products to the next level.

“If nothing else, it has been great PR,” Pierce says coyly. And perhaps that is all virtuals have ever needed. Existing just below the surface, the often acknowledged yet rarely praised has had its fleeting moment in the sun. Those who have championed the cause for more than two decades, will hope to feel the warmth of the glow far into the future.