Are virtual sports the new reality?

With a number of New Jersey operators set to add virtual sports to their egaming sites in the coming months, Martyn Hannah looks more closely at what opportunities the product presents 

The prognosis for widespread legal sports betting in the US is not good. Sure, there is small chance the Third Circuit Court of Appeals will rule in favor of New Jersey and allow the state’s racetracks and casinos to operate sportsbooks without fear of prosecution. But in doing so they would create a grey market in which operators would likely not participate for fear of putting their gambling licences at risk in other states. There is, of course, the argument that New Jersey will act as a catalyst for other states to start banging on the door, and by making enough noise will catch the attention of the federal government and force Congress into action.

But realistically that situation is at least five to 10 years away. And while lawmakers, lawyers and league leaders continue to mull things over, the appetite among US citizens to place wagers on sporting activities remains unsatisfied. The rise of daily fantasy sports is a case in point, with millions of fans signing up to the likes of DraftKings and FanDuel. But the recent regulatory scare has seen casino operators distance themselves from the sector. For those looking to cash in on sports betting the options are certainly limited, but not exhausted entirely, with virtual sports providing an as yet untapped opportunity.

That won’t be the case for long, however, with Golden Nugget and Resorts Casino among a number of New Jersey operators gearing up to launch virtual sports in the coming months. Thomas Winter, head of online gaming at Golden Nugget, says the operator’s strategy has always been to offer a broader and more diversified portfolio of products to its online players, and that virtual sports will be a “nice addition” to its site. “It also brings the fun and excitement only a live product can bring,” he adds.

Head of Resorts Digital, Ed Andrewes, agrees and says the operator will be doing quite a lot with virtuals in the coming months, particularly via its land-based iGaming Lounge. “We think virtuals could work really well in conjunction with our iGaming Lounge. Virtual sports is a great replacement for a lack of legal sports betting in New Jersey. It’s also a great way to train customers on how sports betting might work when it is legal and regulated.”

Across the pond

Virtual sports have been used by online gaming operators in Europe for a number of years, and allow players to place real-money wagers on contests across a variety of sports from basketball to horseracing to soccer. The outcome of the contest is determined by a random number generator (see boxout, Is it legal?), with bettors able to place wagers on markets from win/draw/lose to total points/goals or predicting the correct score. Even in markets where sports betting is legal, the number of players wagering on virtuals is on the rise.

“There are various reasons for this rapid growth,” says Yariv Lissauer, CEO of Leap Gaming. “Most importantly, operators realize that virtual sports is a serious business which empirically adds a lot of value to their revenues while not cannibalizing other verticals. Virtuals is an easy to operate vertical as it does not come with the same operational risks associated with real life sports betting, while the content is free and available 24/7, 365 days a year. Furthermore, thanks to the outstanding quality of graphic and real-life illustrations, virtuals are typically perceived as premium content which strengthens an operator’s reputation,” he adds.

In Europe, virtuals have thus far been marketed squarely at sports bettors. But there is growing consensus around the potential to expand their reach beyond the core audience and particularly towards casino and slots players. This is good news for New Jersey operators, who will not have the benefit of a sports betting database to market to. Despite this, Winter remains bullish on the potential to drive Golden Nuggets’s player base towards virtuals: “Cross-sell from sports and poker to casino is strong. We believe the uniqueness of the virtual sports product can also make it work the other way round,” he adds.

An additional longer-term benefit to offering virtuals is that operators can ready their customers for legal sports betting. Similar to those who have launched social casino and free to play sites ahead of real-money gaming regulation, virtuals can help the likes of Resorts and Golden Nugget build brand equity in the sports betting space prior to a change in the legal land-scape. They can also engage sports fans who wouldn’t ordinarily wager on the casino floor with an online gaming product that appeals to them, and then cross-sell those players into their other gaming verticals, both off and on property.

“Virtuals are often situated in the hybrid space between the sportsbook and the casino to transition sports customers into the casino and vice versa, maximizing their value,” says Kevin Reid, chief marketing officer of 1×2 Gaming. “This also gives a strong marketing opportunity for US egaming operators where the breadth of sports on offer in the real world means there are frequent and relevant communication messages for fans using virtuals, with insights obtained into player behavior and their favorite teams and sports,” he adds.

A tailored approach

The key to unlocking the true potential of virtual sports in any market is to make the product as realistic and close to real-money sports betting as possible. It’s also important to offer contests on the right sports with the right betting markets. For 1×2 Gaming that has meant rolling out additional sports such as ice hockey and basketball, and using its model of broadcasting only the results of each game so that a whole season can be played out in just a few hours. Leap Gaming, on the other hand, has focused on localization. “Language and UI should be carefully tweaked to fit the American taste as a whole, and it’s even advisable to follow this practice on a state-by-state basis,” says Lissauer.

Online gaming continues to see a shift from desktop to mobile and tablet play, and virtuals are no different. To truly capitalize on the opportunity, operators and suppliers have to offer their virtual games across all channels and devices  – land-based and online, on desktop and mobile. There are, of course, some unique challenges associated with deploying the high quality digital imagery virtuals use on mobile and tablet devices. Bandwith and streaming limitations are of particular concern, while catering for software upgrades and overcoming differences in how HTML5 and video is displayed on iOS are also causing headaches.

The passage of time has brought improvements in streaming infrastructure while the computing power of mobile and tablet devices is becoming stronger and stronger by the day. This is leading to far superior deployment on the channel. But there is still work to be done and suppliers have far from taken their feet off the gas. Leap, for example, has developed a responsive cross-platform HTML5 client, allowing operators to customize UX and UI. The supplier also says this allows operators to easily integrate its product across desktop and mobile platforms.

Cracking the code on mobile will be key for operators adopting an omni-channel approach by launching virtuals across all channels. This, says Andrewes, was part of what attracted Resorts to the vertical in the first place. “For us the focus is more on the website, but we see an opportunity to use our iGaming Lounge with its big screen to showcase virtual sports. It will look fantastic, and will be eye catching to customers on the property. We are always trying to drive people on the casino floor into the iGaming Lounge and then onto our websites, and we have been pretty successful in doing that so far. But having live virtual sports events on the screen will help drive this even further,” he adds.

Keeping pace

While New Jersey operators gear up for launch, the suppliers themselves are hard at work developing and innovating the platforms and products to ensure they keep pace with new features being rolled out on real-money sportsbooks. Reid says betting habits have evolved in recent years with the rise of new markets such as ‘draw no bet’ and ‘double chance’ which the supplier has now incorporated into its new games. 1×2 Gaming also plans to add in-play and cash-out functions in the not to distant future in a bid to replicate the RMG sportsbook experience and keep players engaged.

The New Jersey operators launching virtual sports in the coming months will undoubtedly have the jump on their rivals. Not only will they be able to bolster their game portfolios and attract new players, but they will also gain deep insight into how sports betting will be received by players in the Garden State. Sports betting will one day become legal, and like with social gaming ahead of RMG, those that have dipped their toes in the water prior to the market opening up will enjoy the first mover advantage.