Month: February 2019

THE UK

CARA KERR, PRINCIPAL IGAMING CONSULTANT

London is still clearly the hub of gaming activity, although here consolidation has caused some talent displacement, with talent forced to look elsewhere if committed to utilising their industry specialism. London however is still a good place to be – a key technology hub with lots of activity within the largest market. We have seen a rise in companies heading north or outside of London, and often even outside the UK’s other tech hubs. It is challenging to find talent there but often attractive for senior candidates looking for a lifestyle change and long-term benefits. We have seen some big customer service and other departments leave London as consolidation can result in duplication of such functions.

GIBRALTAR

CARA KERR

The Brexit effect has not been noticeably evident, although clearly the effects of the coming few months could be significant. Salaries are still growing, and while the rate of new companies setting up has slowed and others are relocating, this is offset by growth with no major closures and large companies still moving teams out there. It is a small market for talent and not for everyone, but can be an attractive option, particularly as the mid-level talent shortage can provide a good career path towards senior roles.

Source: Pentasia

SCANDINAVIA

HENRY PETERSEN, PRINCIPAL CONSULTANT, SCANDINAVIA

Relatively steady in terms of salary levels, and whilst entry level salaries may have fallen, the pay-off for those with a minimum of 2-3 years’ industry experience continues to be appealing. Scandinavian operators are still basing as many roles as possible in Malta, and want to continue doing so.

The effects of Swedish regulation from 2019 remain to be seen, but considering regulators’ close partnership with the major operators is unlikely to bring any major surprises, although licence requirements could upset the balance. Marketing teams’ workload will likely increase, as much of the Swedish regulation will affect their campaigns and CRM output. The key shortages for Scandinavian operators at present are within affiliate and CRM, with the responsibility for compliance falling on the whole business.

Source: Pentasia NB: Datasets for Africa, Asia, Caribbean/LatAm and remote too small for reliable reading

SPAIN

GIULIANO LAFIRENZA, HEAD OF SPAIN AND LATAM

Spain remains an attractive region not only for its market but also for the quality and size of its gaming talent pool. New tech teams continue to set up in Barcelona – Londonbased firms hiring in Spain generally find a good range of strong candidates, sourced either within region or from further afield as expat candidates look to bring their experience back home. Barcelona and Madrid remain the top locations for gaming operations with talent clustered around these areas. The gaming sector largely employs specialist leadership talent, marketing functions, operations and customer service, whilst locating more substantial teams – such as tech – elsewhere in Europe. The main challenges are the sector’s own expansion due to the issue of more licences and of closely related industries such as ecommerce, fintech and payments. The growth of Spain’s wider tech sector is good for gaming, but employers need to remain aware of new out-of-sector jobs which may attract valuable staff. As for the recent tax changes, operators looking to benefifrom a Ceuta or Melilla location will need to base senior leadership talent in the North African cities, a potential opportunity for many candidates, but unlikely to appeal to all.

NORTH AMERICA

MARWA MITCHELL, VP RECRUITER FOR NORTH AMERICA

The opening of the US sportsbook market has primarily affected the top of the chain, with senior salaries the first to be raised in order to attract suitable candidates. US incumbents and European entrants urgently need experienced senior execs on the ground and are willing to pay. Although with financial returns as yet unproven, there’s a limit to the purse strings. Now the initial excitement is over, employers are cautious not to over-value candidates. Visa restrictions are also severely limiting the inflow of talent from elsewhere in the world. Those with existing citizenship or the potential to work are in short supply, even potential supply from more the supposedly more favourable Australian visa is not proving fruitful.

Mid-levels can be attained locally and out-of industry, with the right senior leadership to provide guidance and industry expertise. The local talent pool is now increasingly open to moving inter-state. Even those with long-held roles realise the huge potential and are more open to the trend towards training people.

Source: Pentasia

MALTA

ANTHONY HENNESSY, HEAD OF PENTASIA MALTA

The island still has a major talent shortage exacerbated by the influx of new operators. Malta has a clearly established ecosystem for the island’s big operators, while more exciting startups provide an often-attractive shot at more immediate success, with accompanying risk.

The biggest salary increases are in businesscritical operational leadership – areas where compromise or out-of-industry hires are not an option – such as compliance, senior tech roles, finance and operational management.

The shortages are particularly painful at the mid-management level and include affiliate, account and customer service managers – where it really slows business pace – but employers are still not always willing, or able, to increase salaries to attract these. Affiliate specialists are particularly in demand because it takes time to build a B2B network. The senior roles get filled by experienced people, but it leaves openings for managers and executives. Some companies are training people up, but this is rare despite most having a pressing need in this area.

The main in-demand languages are Swedish and German, although it remains difficult attracting these people in competition with their home country.

The cost of living is increasing – candidates now tell us €23k is the minimum to achieve the most basic lifestyle – with junior staff often prepared to move abroad to get this. This is causing some customer service operations to flow away from Malta.

Welcome to the first-ever iGaming Business industry salary survey in partnership with the sector’s leading recruitment agency Pentasia. Their data experts have segmented the advertised salary data from its global network by job, grade and location to give the industry’s most comprehensive and detailed insight into sector recruitment trends to date.

With the analysis starting in 2016-17, enabling benchmarking of the data from this point, it is understandably tempting to look for patterns or evidence in the data of the forces that have reshaped and buffeted the sector in recent years, from consolidation, to CSR and compliance pressures, impending Brexit and, of course, regulation and tax changes.

Turning first to the headline findings, the sector as a whole saw 2.7% increase in average salaries in 2017-18 compared to the prior year, broadly consistent with wider trends, the UK jobs market for instance experiencing 2.8% growth in the period.

As Pentasia MD Alastair Cleland comments, this underpins igaming’s status as “a thriving and growing market, with a talent shortage that continues to favour candidates”.

The headline figure however masks some huge variances within the data, most significantly with regards to seniority.

As shown in the bar chart opposite, growth has been far more pronounced at the uppermost levels, widening the gap between senior and managerial pay. Cleland provides analysis of this on the opposite page.

There are also vast differences in the annual salaries paid by companies to candidates for doing the same job at the same grade. Thus while the average annual MD/C-suite salary was £128k across the two-year period from 2016-2018, the top 10% earned an average of £235k. Similarly, in senior marketing roles, the average earned was £101,500, while the top tier took home £176,000.

It’s also fair to assume that this upper 10% has a distorting effect on the overall average for each job category, meaning that many reading this survey who consider themselves to be earning the norm may not necessarily see their pay measuring up to this.

Viewed from a regional/jurisdictional perspective, the hike in senior level salaries was most prominent in Gibraltar, up 42% year-on-year.

Principal igaming consultant Cara Kerr told iGB: “The ‘Brexit effect’ has not been noticeably evident – though clearly the effects of the coming few months could be significant.”

In Malta, set to receive the biggest post-Brexit boost from the Crown Dependency licences losing EU (grey) market access when the UK leaves in 2019, average salaries were up 3.4%, above the overall industry growth rate but behind the UK and Ireland with 5.84%.

Head of Malta Pentasia Anthony Hennessy says the island is suffering “a major talent shortage exacerbated by influx of new operators”. The gaps are “particularly painful at the mid-management level…where it really slows the pace of business” and include affiliate, account and customer service managers.

A robust compliance function is of course becoming increasingly pivotal to building a sustainable business in the igaming sector, driven by recent reputation-damaging regulatory interventions and fines levied on operators for KYC, money-laundering, social responsibility and advertising failings in the UK. This has attached a growing premium to “senior compliance talent who can identify and make recommendations based on imminent and changing regulation”, says Cleland.

As for the impacts of the consolidation dance which has seen most of the major listed players combine in recent years, Cleland says the effects have been gradual as businesses have been careful to retain their most talented staff. “Displacement caused by merging teams has created some areas where candidate availability outstrips vacancies – such as London, where candidates are finding they must either travel for work or transfer to new sectors”, he adds.

Emerging and potentially disruptive tech is also attracting those with entrepreneurial tendencies away from the big igaming firms to smaller, more agile startups, with those building on blockchain and AI proving particularly magnetic, according to Cleland. He points out that: “ICOs have enabled these smaller operations to become cash rich quickly and enables them to offer highly attractive salaries alongside the chance of new success.”

Last but not least, remote working is becoming number one request on the candidate wishlist, but one that that sector employers are by and large still unwilling or unable to accommodate. “As the freelance and remote economy continues to grow, likely either employers or candidates will need to adapt or compromise, says Cleland.

Source: Pentasia

Mind the gap

Pentasia MD Alastair Cleland on the growing gulf between the top- and mid-range earners

Our industry rewards those at the top, but a salary gap between the top and mid-range earners is opening up, writes Pentasia MD Alastair Cleland iGaming is renowned as an industry where the big winners win big, with a number of directors and founders having amassed billion-dollar fortunes from their work in the sector.

The packages on offer to those lower down the ladder may not match this, but the iGaming industry tends to pay handsomely at all levels. This year’s salary survey shows pay across the sector has increased 2.75% year-on-year, but it’s the senior leaders who have enjoyed the biggest pay hike in the period.

Salaries in excess of £100,000 are increasingly commonplace, not just for the C-Suite but also for specialists and heads-of-department in areas including compliance, tech development and product management.

However as senior salaries have increased, the gap between mid- and senior-level pay has widened.

Bosses earning double the salary of those directly below them are increasingly common. This has created a top-heavy remuneration culture.

There are three factors contributing to the widening gap. First, an ongoing scarcity of experienced iGaming leadership talent drives up wages. Secondly, mid-level salaries are limited by precedent or comparable hires. Finally, senior roles often require candidates to relocate, which necessitates higher salaries to make the roles more attractive. Making the jump from a mid- to senior-level position is often seen by employers as challenging. This means many can be unwilling to recruit from lower tiers of their business for the most senior roles.

Often it takes a new employer to recognise a candidate’s potential and offer them the chance to step up.

Experience remains key, both for driving up salaries and securing the top jobs.

Those with a decade or more’s industry experience have a significant advantage over candidates from other sectors when it comes to landing senior roles. Ours is a unique and nuanced industry where knowledge and experience are valued.

Certain fast-tracks are now emerging. Experience in key operational departments such as tech, compliance or marketing boosts career prospects as employers look to build these skillsets into their leadership team.

In the increasingly complex, regulated and competitive online gaming market, it’s above all strong leadership that employers look for. Career paths which include a wide range of departmental interaction and exposure to different markets are most likely to result in a seat at the top table.

Ultimately, employers who invest their trust, responsibility and top-tier salaries in ambitious candidates who are willing to prove themselves – even if they haven’t yet done so – may discover that their investment pays dividends.

For the first time, Pragmatic Solutions will be participating at one of the landmark igaming shows, Sigma. We are very excited that after years of hard work and refinement to develop our platform, we can finally showcase it to the industry.

KEITH CAMILLERI is managing director of Pragmatic Solutions, with over 14 years of experience mostly based in the online gaming and e-commerce industry. Having spent the last 7 years as a senior manager and managing director, he supported fast-growing companies by creating business strategies and continuous delivery. Leading the IT and Operation departments, he focuses on achieving the company goals in line with the company vision.

Our igaming platform has been specifically built for the current online gaming climate and is agile enough to handle regulatory compliance across multiple markets with a best-in-class blend of speed, flexibility, security, scalability and value.

Pragmatic Solutions was formed by forwardthinking entrepreneurs with extensive industry knowledge who invested wisely (and significantly!) in a team of highly skilled professionals to deliver what we believe is an igaming platform that does what it’s supposed to do. By that, I mean we want to deliver an extremely powerful yet flexible platform, which is third party agnostic and gives operators peace of mind that they can execute their business goals without any limitations on the technology. Crucially, it can cater to their needs as their business grows, changes and evolves.

Platform issues facing today’s operators

I have spent 15 years in the industry in a variety of senior positions within both B2B and B2C environments. One of my tasks in a previous role was to find a best of breed igaming platform to fit the company’s needs and growth demands. Having a technical background myself, I was critical of the products I was evaluating. I found it a real challenge to find a suitable platform, which is surprising given there is no shortage of suppliers in the market.

One of the main issues facing operators today is that many platforms are not built on current technologies, which will ultimately lead to restrictions or the inability to execute their goals. Another is that many platforms were originally built for a different purpose; they may have started off as a B2C brand or catered to very grey markets. Combining old technology and incorrect foundations impacts the available features, as well as the speed of delivery, stability and scalability of the platform. Other issues include the lack of true customisation possibilities; for example, customised UI/UX and the inability to provide truly in-depth, real-time back-office data analytics and segmentation.

Offering a tailor-made product

We have addressed these issues by building a highly modular system, using the latest technologies specifically suited to the needs of today’s gaming operators. Our setup also makes us competitive in different markets because we can cater to any specific operator and technology requirements, including licensing and compliance needs for new regulated markets.

Our advantage is that we can provide clients with the flexibility and functionality that other platforms may struggle to offer or take a very long time to deliver. Effectively, we can build a custom-made solution for each operator, something that would have been unheard of just a few years ago due to cost and time constraints.

For example, an operator can build a custom frontend using our extensive APIs according to the market they wish to operate in. This can include specific

gamification features, automatic CRM protocols and player conversion funnels to enhance customer lifetime values and player loyalty.

Multiple vertical products are also part of the solution, so if a state-of-the-art sportsbook is a focal point or the latest bingo product is needed, then the best available products for each particular jurisdiction can be easily integrated. From the beginning, our platform was designed as an integration hub; operators can offer a unique combination of thirdparty content and technologies, tailored to their target markets.

Clear, customer-centric strategy

We built our company on three pillars: technology, focus and a flexible business approach.

Put simply, we invested heavily in technology. Our strength is in the core product since it was built for the right purpose from the beginning. If you build a platform or use technology for a particular purpose and then over time the business model drastically changes, or if it is utilised for something other than what it was intended for, you end up with legacy issues because the core is simply not built for what you are trying to do now.

There are many platforms out there today that started out with a completely different purpose. Over time the businesses behind these morphed to become platform providers and this is one of the reasons why so many issues, limitations and delivery problems occur today. Platform issues can make or break an operator’s business and we take that very seriously. We want to deliver a product that allows our clients to evolve and grow their business without worrying about technology limitations.

Focus is a big part of our work ethos and is in line with our core product. As a B2B-only igaming platform, we don’t allow ourselves to get distracted by venturing into other areas — sports betting platforms, casino content or affiliate platforms, for example — already served by industry specialists. Instead, we focus on making sure our platform is the best it can be and spend all our time and energy only on developing and enhancing that.

Having a flexible business approach is important as it allows us to build trust and invest in long-term business relationships with our clients. We don’t want to build barriers or restrictions, like pushing certain products over others or constantly imposing fees for basic development needs as we understand the long-term value of flexible business-oriented partnerships. We believe that a more flexible approach will build trust with our clients, leading to more investment and growth over time.

COMPANY PROFILE

•NAME PRAGMATIC SOLUTIONS •FOUNDED 2013 •SECTOR PLATFORM PROVIDER •WEBSITE PRAGMATIC.SOLUTIONS •TWITTER@PRAGMATIC_SOLUT

According to Newzoo’s Global Esports Market Report, 2018 will see the global esports economy grow to $900m (£685m), a year-on-year increase of 37.4%. Brands will account for 77% of this spending, broken down into $165m on advertising, $353m on sponsorship and a further $176m on media rights. Consumer spending on tickets and merchandise throughout the year will amount to $92m. Another $1 14m will be invested by game publishers into the esports industry through partnership deals with white-label organisers.

Content rights take centre stage

This year has seen an accelerating shift of business models from direct advertising to indirect monetisation through media rights sales. Content rights are sold by game publishers directly or through independent event and league organisers such as GPL, ESL and Dreamhack. Buyers consist of a growing group of traditional/digital media companies interested in acquiring rights locally and on a global scale. By selling these rights, the publishers and organisers do not receive a share of direct advertising revenues from streaming their esports content.

Serious money is changing hands at the top of the esports pyramid for events and leagues. For both tournaments and leagues, most revenue growth will be driven by top-tier events. The biggest opportunities for content buyers could now lie in the second- and third-tier tournaments and leagues, as these events have local power or serve a more niche audience.

Adding to buyers’ interest in esports content is the fact that content for almost every major traditional sports league (from soccer to baseball) is tied up in contracts for the next few years. Esports, on the other hand, has contracts aplenty that broadcasters (endemic and non-endemic) are now vying to get hold of.

What’s more, new direct monetisation options for content have started to appear across the industry, including premium features and content passes. The Overwatch League All-Access Pass, for instance, gives viewers access to exclusive shoulder content, additional camera angles and a personalised viewing experience. This more direct ROI will further justify an increase in content rights spending, but this depends on whether consumer monetisation is included in media rights deals.

Global esports viewers will total 395 million

The global esports audience will reach 395 million this year, made up of 173 million esports enthusiasts (those who watch esports content once a month or more) and 222 million occasional viewers (watch esports content less than once a month). In traditional sports, total revenue per fan is a key indicator of how well a sport is monetised. This includes all revenue streams, including media rights, sponsorships and consumer spending. Based on Newzoo’s audience and revenue expectations for 2018, the average revenue per esports enthusiast in 2018 will be $5.20, up 14% from 2017. As the esports industry matures and the number of local events, leagues and media rights deals increases, Newzoo anticipates the average revenue per fan to grow to $6.30 by 2021. This is still significantly lower than popular traditional sports such as basketball or football.

Local initiatives thrive in western Europe

North America will remain the largest esports market in 2018 with revenues of $335m and will show impressive growth to reach $639m by 2021. Most of these revenues will come from sponsorships, which will grow from $100m in 2017 to $155m in 2018. This figure is boosted by the number of North American teams that have welcomed new non-endemic sponsorships and the region hosting several of the world’s largest leagues and tournaments. Western Europe is the second-largest region in terms of revenues with $172m in 2018. China is also a booming esports economy with estimated revenues of $169m in 2018 and a total esports audience of 134 million. The country is notable for the growing popularity of mobile esports, including casual titles.

The future of esports

With the number of viewers that esports attracts, there is no doubt it will grow to a multi-billion-dollar industry in the coming years. The only question is at what pace this will occur. After an initial growth phase, the overall structure of the esports industry has become clear. However, business models aimed at increasing revenues per entertained consumer are still being tested. Esports has now moved into its adolescence and there are some key factors that will influence the speed of its growth. On its current trajectory, Newzoo estimates the esports industry will reach $1.7bn by 2021.

Jurre Pannekeet is head of sports for Newzoo, having joined as a senior market analyst two years ago. An avid esports enthusiast, Jurre’s focus is on modelling the esports economy, nding and dissecting key trends and assisting brands in shaping their esports strategies.

OSKAR FRÖBERG is founder and CEO of Abios, a B2B data provider in esports. Abios is the one source for all esports data, with the most detailed data and broadest coverage of matches. The intuitive Abios API and unmatched level of updates creates the foundation for success.

Esports betting continues to evolve and as a data provider we are experiencing a continued increase in interest from sportsbooks and other related betting companies. The consensus in the industry is that those betting operators looking to grow and capture the new generation of bettors need to include esports in their offering. However, operators do not necessarily need to replace the small sports with esports – the best course of action is to simply add epsorts to their offering.

The most cost efficient and effective way to do this is to find the right supplier, preferably one that has been around for several years as esports betting is quite knowledge and experience-intensive, with lots of edge cases and particular situations to take into account. Many, if not most, operators within regular sports betting have already made the transition from having their own in-house traders to buying feeds from suppliers. Other than the really minor and geographically concentrated sports located in only one or two countries, it seems everyone is using providers of data and odds – in fact, operators often use several to ensure the broadest and best coverage. We believe that esports betting operators will naturally take this step right away and do away with hiring and educating their own traders.

The challenge facing suppliers is finding people with both trading experience and a deep understanding of esports. Bear in mind that often an individual only has a deep knowledge of one or two games. The skill is in using different data points and metrics in different games to gauge what is of importance, while at the same time maintaining simplicity and not overfitting your models. The takeaway here is that it is crucial for suppliers and operators to consider each game on a standalone basis and not to simply clump all of the games under the esports label.

Furthermore, operators should exercise caution when selecting a supplier. Make sure that data feeds are good and precise; there are a lot of delayed and unreliable feeds out there and you don’t want to construct an entire organisation or a vital part of a new offering on them.

The interesting part about esports is that it fits a new type of timeframe for watching and betting. While a horse race is over in a couple of minutes, a game of football, ice hockey or tennis can last anywhere from 90 minutes to several hours. Esports comes somewhere in between, with matches generally lasting 20-45 minutes. Moreover, even though these matches are often played in a series, it still makes for a natural opportunity to bet on just one match or make several bets with intervals of less than an hour.

COMPANY PROFILE

•NAME ABIOS •FOUNDED 2013•SECTOR PLATFORM PROVIDER •WEBSITEABIOSGAMING.COM•TWITTER@ABIOSGAMING

There was a significant increase in suspicious betting alerts in DOTA2 and Warcraft 3 in the early part of 2018, which indicates that the industry may not be prepared for the rapid increase in betting activity around the gaming phenomena.

JONATHAN AIWAZIAN has been US regional director at BetConstruct for a year, having joined from FNY Capital Management, where he was a trader. BetConstruct develop and provide online and landbased gaming solutions with development, sales and service centres all around the globe.

What should it be doing better or differently to get the appropriate safeguards in place to protect the integrity of esports? How should operators be working alongside publishers and other stakeholders to ensure a joined-up approach?

With the rise of any new market, there will inevitably be people and entities who try to take advantage of it before it becomes fully regulated and has protections in place. This has proven to be no different in the esports world, where several incidents have been discovered (and most likely more undiscovered) that involved match-fixing.

In some cases, players bet against themselves and throw the match to earn money from their loss, and in other cases, players have been bribed by gambling syndicates. Both situations hurt the industry by affecting the perception of the audience with regard to the outcome of the matches.

The industry depends on the fanbase to be engaged in the matches to generate advertising revenue and ticket sales, so if the audience loses interest, the industry itself will be in danger.

As with other sports, the most prestigious and lucrative contests are less susceptible to match-fixing because the prizes and glory are more enticing to players than the risk of being banned for a small payday. Lower level matches are ripe for integrity issues because there is not a lot riding on the outcome.

To counteract this fraudulent activity, operators should add betting limits, especially on lower level matches, to ensure that bad actors cannot easily place a large bet on one side or the other. Additionally, the penalties for players who participate in this kind of illicit activity should be more severe.

South Korea has taken a very tough stance on this issue, with players who have been caught in the act even being given jail time. By making an example out of those caught cheating, this kind of activity will be less likely to occur.

The main component that limits the ability of esports to regulate itself and maintain its integrity is a lack of resources. Even though the industry is rapidly growing in popularity, its funding pales in comparison to other professional leagues.

Even the NBA, who is a proponent of sports betting on professional sports, is requesting additional funds to maintain integrity in the form of a 1% integrity fee on all bets placed in the US on its games. If the NBA, which makes billions in revenue needs additional resources to make sure millionaire athletes are not susceptible to bribery, how can the burgeoning esports industry be expected to self-regulate?

Unfortunately, there is no way to stop all illegal betting activity but by making penalties harsher for players, adding betting limits to lower level matches or banning betting on them altogether, and setting aside a portion of each contest’s prize money for integrity investigations, the esports industry can begin to be more confident that it has a handle on match-fixing.

COMPANY PROFILE

•NAME BETCONSTRUCT •FOUNDED 2003•SECTOR SPORTS BETTING •WEBSITEBETCONSTRUCT.COM•TWITTER@BETCONSTRUCT

The challenge with any new phenomenon is the temptation to explain and describe it through simplification, often leading to broad generalisations and confusion. Samuel L. Jackson’s chat with KTLA entertainment reporter Sam Rubin in 2014 comes to mind. When Rubin mistook Jackson for Laurence Fishburne, Jackson retorted, “We may be all black and famous, but we don’t all look alike.”

Esports suffers something similar: if it’s an electronic game, if it happens in an electronic game? Then it’s esports. But is it?

Loot boxes

Loot boxes have attracted the attention of many governments across the globe for one particular reason: they’re often portrayed as a dangerous gateway to gambling for children. Belgium’s Gaming Commission has certainly made that point clear.

So what exactly are loot boxes? Well, as the term implies, they’re boxes with stuff in them. In this case, the boxes appear in-game and the virtual stuff inside can range from cosmetic items (elements that do not provide any boosts to the player’s in-game abilities) to things that will help make you more powerful in the game. Gamers call the latter “pay-to-win”.

Many popular games, several of which are esports games, are free to download and play, but many of them still gross millions a week. Part of that revenue comes from selling loot boxes in the game. In other words, loot boxes are a mechanism for monetisation in both free and paid-for games.

In some games, players are rewarded with loot boxes simply for being frequent players or for achieving goals, but boxes may also be bought by those less inclined to put in the hard graft through hours of play (what gamers call “grinding”).

Loot boxes are operated in various ways. In some games, you buy boxes; in others, you are given the boxes but you buy keys to open them; then in others still, you are given boxes but it takes time to open them (though you can speed up the process by paying); and everything in between. Almost always, payment is done through an in-game currency instead of regular iat currency.

Since players won’t know what’s in the boxes until they open them, pundits will claim, therein lies the similarity to gambling.

But wait a minute. The loot box mechanism is really no different from the prize in a pack of collector cards or in a Kinder Surprise – you buy the item but don’t know what’s inside until you open it.

Similar to loot boxes, these real-world equivalents will contain items that are pedestrian in value and items that are extremely exclusive to the appreciating collector. And the similarities don’t end there: neither the virtual nor the real publish the buyer’s odds for what they will get inside.

So why are loot boxes now considered “dangerous” and “like gambling” for children when similar real-world equivalents have been on sale for decades? That’s a discussion for another article.

No current esports game involves a player’s “skill” in opening loot boxes. No current esports game allows the content of loot boxes to affect a tournament player’s performance, even in those games where a “pay-to-win” element exists. Tournament modes exist that place all athletes on an even footing.

So, while there may be valid concerns, from gambling to consumer protection, loot boxes – not esports.

Skin betting

A hot 2017 topic, skin-betting is still something that gets associated with esports, especially when it comes to calls for regulation. A close relative to loot boxes, by virtue that loot boxes often contain “skins,” skins is a loose term to describe in-game cosmetic items that wrap around in-game objects to change their appearance.

Some games feature skins that can be traded and sold between players, with rare skins going for big sums of real cash.

While often explicitly prohibited by game developers, due to an implied value being associated with skins by the existence of a market, they can, and have been, used as a form of virtual currency. Indeed, until a crackdown in 2017, there were many unregulated online casinos that accepted skins as currency for wagering.

Skins are basically a form of virtual currency, then, but while some may use them as a currency to bet on the outcome of esports events, skins – not esports.

Skill-based slots/EGMs

Apart from the usual suspects, a new breed of game and machine developer is bringing new options to the casino floor. In an effort to draw in a younger crowd that prefers games of skill to chancebased slots, these new games from the likes of GameCo and Gamblit combine elements of skill-based electronic games with the rapid spins-per-hour revenue potential of traditional slots.

Gaming regulators in both New Jersey and Nevada have granted approvals for many of these cutting-edge machines on their respective licensed floors, and clearly the companies behind them are looking to perfect their craft and bring these machines to more jurisdictions.

Many of these games draw upon game design concepts from electronic games, but no makers currently draw or license any game that is played as an esport. However, while skill-based slots and EGMs target a similar player and audience demographic as esports, skill-based slots and EGMs – not esports.

Arcade 2.0/PvP and Tournament Gaming Lounges

These have begun appearing in Las Vegas resorts and beyond. They range from ’80s arcades on steroids to well-equipped electronic gaming lounges that offer tournaments featuring esports games with the opportunity to win prizes and money.

While the former may bring customers nostalgia in the form of Pac-Man or a pinball tournament, the latter is what is interesting.

Venues including the now rebranded Esports at the Downtown Grand and Level Up at the MGM Grand offer visitors the opportunity to enter competitive electronic game tournaments for prizes, with some of the games available being esports games.

These may evolve into something that often takes place after some esports events. Known as “Salty Suites”, the practice sees players compete against each other for a friendly wager. Side bets between audience members has also been known to occur. Integrity and security are both important factors here, and there is a strong case for these venues to have regulatory and consumer protection and oversight.

Arcade 2.0, then, while it may be cool to compete for cash and prizes on your favourite arcade game – not esports.

However, these new tournament venues have the potential to become the physical sports equivalent of putting money on your basketball game down at the courts. With that in mind, PvP and Tournament Gaming Lounges – too close to call.

So, what is esports?

Esports, at its most basic, is simply electronic sports. As with physical sports, some have more tournament structure than others; similarly, all esports games are competitive electronic games, but not all competitive electronic games are esports games.

Which games qualify for the esports moniker is a trickier question best left for another article, but basically the name is reserved for games that have a strong methodical skill component, well defined tournament rules, organisation and structure.

Oh, and while we’ve covered some ground on what isn’t esports, writing an article for this magazine – not esports.

Hai Ng is iGaming Business North America’s fantasy and esports editor. He is co-founder of Neomancer, a unique technology strategy and management firm, and has over three decades of experience in the technology sector, with a decade in igaming. He tweets on matters of igaming as @HaiOnGaming

E sports continues to be a fast-growing industry and one that is engaging millennials like never before. It has a highly developed ecosystem of organisations, players, game developers, hardware providers, media professionals and marketers. Viewership and prize pools are way above expectations. The esports industry has been growing for 15 years — but the last four have seen that growth explode.

Managing the leading esports betting websites has given Ultraplay a unique insight into the market. There are important distinctions between esports betting and regular sports betting. First, there is a completely new audience that needs to be examined further: millennials. This demographic is the primary entity in esports and requires a totally new approach in terms of communication and engagement. We rarely see cross-selling between esports and other sports — in fact, the latest data shows that many sportsbooks fail to address esports fans’ expectations, not only with coverage but also with on-site features, promotions, etc. Millennials want to experience the look and feel of esports and the classical sports betting view is not the way to go.

Second, risk management and trading is key for a successful esports betting product. In esports there are changes in the game rules and mechanics every few months. It’s vital, then, that traders have a deep understanding about the ins and outs of the game in order to stay on top. Although the entire esports betting sector is expanding, creating odds in esports is not an easy job and not everyone can claim to do it professionally. It takes a great deal of knowledge and experience to grasp the trends and transform them into a profitable business, not only because there are multiple variables (Dota 2, for example, has 500 in-game variables) but also because the dynamics are much bigger than in regular sports.

When Ultraplay first started covering esports, it took us 30-60 minutes to create a book on an event as there was so little information available. This meant we had to dig deeper in order to compile the odds. It was very challenging back then, especially since we didn’t have access to the wide range of statistical data and mathematical models we now offer. Now it only takes us about 10 minutes, including basic parameters such as probability of winning, total line and handicap. Everything else is generated through a mathematical model, just like in other sports such as football and basketball. Our esports betting solution is more than 80% automated, with the remainder carried out by UltraPlay’s experienced esports traders, who have 5,000-10,000 hours’ experience of analysing the games data and live performance.

Even though we rely heavily on automatisation and AI integration, traders are an integral part of the process for three main reasons. First, changes in the game are too common to make an adequate and fully automated esports betting model (many companies have done it and their results are rather weak).

Second, there is a lot of psychology in the game and often the end result is determined by subjective factors in players such as mistakes or tilting.

The third reason is traders’ ability to control the odds against three basic parameters: mathematically correct odds, bet settlement and market values (as opposed to when the model ignores nothing but mathematically correct odds).

Covering a broad number of games is a must. Even though the top three esports titles (CS:GO, Dota 2 and League of Legends) are responsible for more than 60% of betting volume, offering odds on a wide range of titles is vital as it creates a positive impression among potential bettors.

2018 was marked by the further expansion and improvement of UltraPlay’s esports betting product. We now offer pre-match and in-play betting and have made improvements to mobile betting to reflect players’ increasing preference for hand-held devices. By presenting our expanded portfolio of 25 game titles, including not only the golden trio of CS:GO, Dota 2 and League of Legends but many others such as King of Glory, NBA2K and Fortnite, we further increased the options available to esports fans and bettors alike.

Very much like in regular sports, live betting in esports makes up more than 60% of overall volume. Players will seek out the brands with the widest live betting offer and fastest functionalities to help them get the best in-play experience.

In the early days, in-play trading used to be an entirely manual, labour-intensive affair. It was a romantic period in live trading, one that saw the trader and his experience and knowledge tested to the full. Nowadays, live trading is almost entirely automated and thus much simpler to execute. Where once traders enjoyed top billing, these days they track irregularities and introduce certain metrics to help AI do the job better. It is a fact that, to this day, hand-held trading and esports traders’ expertise can beat every single model for live trading on esports.

Enhancements over the next few years will mostly focus on the live betting part of esports and its automation, as well as adding new markets and betting opportunities, while improving the models and their performance. With our determination to enhance the live betting model, those brands using Ultraplay’s products are definitely esports bettors’ favorites.

Last but not least comes the synergy that esports and crypto sectors are creating for the entire igaming industry where the number of bettors using bitcoin and other cryptocurrencies is increasing exponentially. The growth of bitcoin gambling has added new dimensions to betting and will continue to impact and upgrade the entire gambling industry.

PETER IVANOV is head of esports and sports trading at Ultraplay. Peter has solid expertise in setting up and developing the trading department, including pre-match and live trading, odds compilation and odds movement training. He also manages UltraPlay’s daily trading process.

COMPANY PROFILE

•NAME ULTRAPLAY •FOUNDED 2010 •SECTOR IGAMING, ESPORTS BETTING, BLOCKCHAIN •WEBSITEULTRAPLAY.CO•TWITTER@ULTRAPLAYLIVE

Just in case anyone was getting comfortable with the progress being made with regulated US sports betting, Senate Minority Leader Chuck Schumer and his Republican colleague from Utah, Orrin Hatch, sent a curveball in the direction of the nascent sector in late August.

Schumer, the senior senator for New York, cited his status as a fan of both the New York Yankees and the New York Giants as one reason to go public with his concerns over sports integrity in the wake of the Supreme Court decision regarding PASPA.

“My priority in the wake of [the striking down of PASPA] is making sure the integrity of the games we love is preserved, that young people and those suffering from gambling addiction are not taken advantage of, and that consumers that choose to engage in sports betting are appropriately protected,” he said in a statement.

There was much in the full statement that was non-controversial: the need for information sharing to root out corruption, for instance, and requirements for appropriate player protections and a betting ban on sports participants.

But these likely weren’t the reason why the American Gaming Association (AGA) opted to go immediately on the attack, suggesting that previous federal oversight of sports betting had been an “abject failure for 26 years”, with the only thing to show for it being a “thriving illegal market with no consumer protections and safeguards”.

“New federal mandates are a nonstarter,” the AGA added for good measure and it is easy to identify the more contentious issues raised by Schumer and Hatch.

For instance, Schumer suggested that there be a requirement for betting operators to share betting information with not only the regulators, but also the sports leagues and sports governing bodies. Then there were the provisions requiring all bets to be settled using “official league data” and the proposal for restrictions around which bets can be allowed, to be determined by “the league or appropriate governing body”.

Political footballs

Schumer’s interjection into the debate around sports data and sports betting highlights the simple fact that regulated sports betting remains a controversial issue, not least for the sports leagues and governing bodies, both of which remain major actors within the debate.

Not surprisingly, all the major bodies took the opportunity of the Schumer and Hatch initiative to let it be known they were fully behind the proposals.

“As legalised sports betting spreads across the states, there is a need for consistent, nationwide integrity standards to safeguard the sports millions of fans love,” said a statement from Major League Baseball (MLB), the National Basketball Association (NBA) and the Professional Golf Association (PGA). “We strongly support the legislative framework outlined by Senator Schumer and we encourage Congress to adopt it.”

Also issuing a joint statement were the National Football League (NFL) and the National College Athletic Association (NCAA). “We applaud the leadership demonstrated by Senators Hatch and Schumer in supporting federal legislation to protect the integrity of our games following the Supreme Court decision,” the two bodies said.

“Core federal standards are critical to safeguarding the sports we love, the millions of athletes across the country who play these games at all levels and our fans.”

Speaking to iGaming Business, Dan Spillane, senior vice president for league governance and policy at the NBA, is keen to emphasise that what is being talked about here is an overlay on state regulations rather than a full-blown effort to legislate for sports betting nationally.

“We regard gambling as something that has always been dealt with at state level and we don’t want to change that,” he says, before adding that the sports still “want a seat at the table” when it comes to discussions at state level.

A federal role

The official status of data is just part of the equation. “It’s important,” Spillane says, but it’s only one of many issues, including data sharing, cooperation, consumer protection, age limits and more.

None of this comes out of the blue. Andy Levinson, senior vice president for tournament administration at the PGA Tour, is keen to stress that, for nearly a year, various sports bodies and leagues have been speaking publicly about the need for betting operators, regulators and the leagues “to work together to create the best possible regulatory system”.

In this respect he namechecks the recent deal between the NBA and MGM which “demonstrates that a leading betting operator understands the importance of protecting the integrity of sports competition and ensuring that the markets they offer are based on accurate, real-time information”.

Spillane is keen to point out that the deal with MGM is important because it’s with an “established and well-respected operator”, a comment which at least points to common ground. More than that, the NBA already has an ongoing deal with sports data supplier Sportradar for distribution outside the US, and Laila Mintas, deputy president at Sportradar US, makes it clear that organisations such as the NBA are well aware of how sports betting has developed further afield.

“We have been working with the NBA for many years, addressing issues around sports data and betting integrity,” she says. “We see the task in the US as one of education and guidance. As with some of the Schumer and Hatch proposals, there is much that already forms the basis for regulated territories in Europe and elsewhere regarding the relationship between betting operators and sports bodies.”

This is a view echoed by Levinson at the PGA, who agrees that various of the leagues — including the PGA itself — have already been engaged in “public discourse” on the issues. “All domestic leagues share common interests in protecting the integrity of our competitions, safeguarding consumers from misinformation and eliminating the black market that currently exists in the US today”.

The last point is important. “This remains early days for regulated sports betting in the US,” says Mintas. “We are still in the stages of helping the leagues better understand the betting sector and also vice versa. The model for the US will be different than it is in Europe, and indeed each individual state market will vary, just as it does in Europe. But still the examples are there for how sports and betting can work together and we are confident solutions can be found that will satisfy all stakeholders.”

One such example is fan engagement, something that was touched upon by NBA commissioner Adam Silver when announcing the MGM deal. He suggested the collaboration would result in “the best possible gaming and entertainment experience for consumers through the use of accurate, real-time NBA and WNBA data, and our collective efforts to maintain and enhance the integrity of our games.”

The benefits are also touched upon by Levinson, who says the leagues are aware of how betting can bring further fan engagement: “The PGA Tour recognises that sports betting, if regulated properly, will introduce new audiences to our competitions and our athletes, which is part of the reason we have been publicly engaged on this issue for quite some time.”

The sports betting debate will widen out to include more states in 2019 and the position of the leagues and sports bodies will be crucial to how the various discussions progress. More than one respondent for this article suggests that it is merely the “first minute of the game” for sports betting in the US. Clearly, positions are far from being set. But still, the field is in motion and that will mean an interesting next few years for the sports and the betting sector.

Scott Longley has been a journalist since the early noughties, covering personal finance, sport and gambling. He has worked for a number of publications, including Investment week, Bloomberg Money, Football First, eGaming Review and Gambling Compliance. Scott now runs his own editorial consultancy, Clear Concise Media, and writes for a number of online and print titles.

After New Jersey’s second full month of sports betting figures were released in mid-October, some commentators posited that New Jersey Division of Gaming Enforcement director David Rebuck might have overplayed things somewhat with his teaser the previous week that the figures would be “stunning”. Yes, the market almost doubled, but the number of operators more than doubled and many would argue the market’s growth was simply in line with expectations.

But while opinion may be divided on the use of superlatives, there’s no room for debate about who’s leading the way online. It’s likely the majority of Resorts Digital’s digital sports betting revenue of $8.5m came from the DraftKings skin, and FanDuel pulled in $2.8m as a skin of Meadowlands Racetrack.

The DFS operators eclipsed the offerings from both US landbased casinos and European skins by some distance – the next best performance was Golden Nugget’s Playsugarhouse.com with $620,000. So what’s behind their early gains, and more importantly, will they continue to lead the way?

Perfectly positioned

The success of DraftKings and FanDuel doesn’t seem to have surprised anyone, given their huge databases and prominent brand advantage in the US.

“They have the biggest brands in America — although they haven’t been sports betting before there’s not a lot of difference between sports betting and fantasy sports in a lot of consumers’ minds,” says Middle Friday’s Andy Clerkson, a consultant helping firms enter the US. “I think they were always going to take the initial plunge and spend more than any new entrants into the market because they have already got their companies set up and ready to go.”

It’s also likely there’s something of a defensive element. “There are a huge number of DFS players who were only playing DFS as a proxy for sports betting,” adds Clerkson. “It is critical that DraftKings and FanDuel try to retain their audiences and try and grow them through sports betting.”

However, Benjie Cherniak, president at Don Best Sports, says while he also foresees some migration from fantasy to sports betting, he thinks fantasy will remain popular. “I think that fantasy is going to always have a place in the US market because it is so ingrained culturally in the US populace, it has been around for so long. I don’t think fantasy will disappear.”

DraftKings and FanDuel are undoubtedly concerned with keeping hold of their existing players if they transition to sports betting, but given daily fantasy itself only captured a relatively small portion of both sports bettors and fantasy players, the bigger goal will be to attract new players.

One industry veteran with experience on both sides of the Atlantic divides these new players into two groups: younger, completely new sports bettors; and sophisticated sports bettors who’ve been betting offshore or with a local bookie in spite of the legal position. He predicts the DFS sites will scoop up a lot of those in the former group thanks to their brand and trust advantage, but that they will have a more difficult time pulling in the latter.

Here comes the competition

Partly, that’s because those betting illegally will be tougher to bring into the regulated market, particularly if they do not perceive it offers the same value as the offshore market. And partly, it’s because many other operators will also be vying for these players.

While DraftKings was first off the mark in New Jersey, it has been followed by a number of US and European operators with more to follow. Thus far, none have been as aggressive in their marketing as DraftKings and FanDuel but many think this will change.

“I think it is going to be a massively competitive market,” says Clerkson. “I think DraftKings and FanDuel are doing what they need to do, which is try and press their early advantage by already being established because they are going to find they are in a whole different world very soon. They’ve had the market to themselves on fantasy sports but that is not going to be the case for sports betting.

“The history of sports betting in the UK was that the biggest brands didn’t keep the top spots once the others came in. Bet365, Paddy Power and Sky Bet obviously took enormous market share from William Hill, Ladbrokes and Coral.”

However, the industry veteran says he’s not sure this analogy holds up. “In the UK Bet365 and Sky Bet were the young upstarts that came in and chewed away at the incumbents, which were slow-moving. It’s the other way around in the US. You’ve got these fast-moving, crazy tech companies that are well funded.

The issue of whether European companies will be providing something suitable for US audiences or simply putting out versions of their existing offerings and hoping for the best has of course been debated at length, but it’s worth remembering that both DraftKings and FanDuel are running their sportsbooks largely off European platforms at the moment.

This might turn out to be a disadvantage once Europeans with more proprietary tech move into the frame. Cherniak says European providers will certainly need to bring something to the table to counteract their lack of brand positioning in the US.

“Companies that have been very successful globally are coming into the New Jersey space. The prime example would be Bet365, which has a skin and is going to be entering the market at some point, and then you also have the Kindred Group,” he says. “These companies have significant brand names in Europe as well as other parts of the world, but they are virtually unknown in the US so it will be interesting to see how they differentiate themselves in the US. Will it be via what some perceive to be superior product offerings or will it be via a unique marketing technique?”

Of course a couple of them have a head start, namely William Hill with its multiple land-based deals, and Paddy Power Betfair with its acquisition of FanDuel. Although DraftKings is in front for now, there are many who think the combination of Paddy Power Betfair’s expertise and FanDuel’s marketing will in time prove to be an unbeatable combination.

Whether the DFS operators can retain their lead in New Jersey remains to be seen, but it’s sure to be a closely watched market — particularly since many see it as indicative of how things will play out in other states.