New Ventures

A little peek into the big world of online gaming investment

The recent proliferation of the U.S sports betting industry has attracted a significant number of notable suitors. Existing betting firms have been quick to capitalize on the Supreme Court ruling of 2018, a judgement that liberated the sports market from its constitutional restrictions.
However, recent trends illustrate that those outside of conventional gaming streams are also eyeing up opportunities within the gambling sector; with heightened focus particularly applied to the fledgling sports betting industry. An immersive, highly lucrative, and ultra-competitive market has evolved over recent months; although style of betting offered (in-house/online etc.) is contingent on specific state law and practice. Nevertheless, the sports gambling theatre still provides substantially low-hanging fruit for investors, and its therefore unsurprising that businesses outside of the traditional gaming space have decided to take full advantage.
This article reviews the rise in external stakeholder interest in the gaming environment, and offers a viewpoint on driving factors, potential activity and the future landscape of investment.

Sega’s mega-drive

Perhaps one of the least surprising candidates is video gaming and arcade giant Sega Sammy, who, in a recent announcement of quarterly performance, referenced a desire to enter the online betting market soon.
In 2004, entertainment brand Sega merged with purveyor of Japanese slot machines, the Sammy corporation, and set about producing hybrid content which would enhance gamer experience on pachinkos and pachislots(Japanese equivalent to arcade slots). The merger has been a positive enterprise for the company, who have been able to ringfence pools of money for future investment; an $8.7M Q2 operating profit looks to be heading in to gambling ventures.
It’s anticipated that the destination for this cash lies exclusively in online betting markets (with market reports predicting an inevitable investment in U.S sports wagering) rather than in bricks and mortar, where Sega Sammy already has previous.

Political influence
Japan’s landmark decision to loosen betting regulation and open-up gaming activity created a vacuum of opportunity for some of the nation’s big firms. Specifically, the ruling Liberal Democrat Party have facilitated the passing of legislation which will permit the creation of large-scale IR’s (integrated resorts) in various prefectures across the country.
However, the process for establishing a resort location is relatively bureaucratic in process and protracted in its timeline. Furthermore, as Sega Sammy discovered to their detriment, political influence can also derail ambitions. Until recently, the entertainment conglomerate was well-positioned to implement an IR in the Japanese port city of Yokohama. Yet, the endeavour (which was undertaken in partnership with Genting Group- the more experienced gambling arm of the operation) was kiboshed by a change of personnel in the Mayorial office.
When Fumiko Hayashi, a member of the LDP, who, in alignment with the wider stance of his party, promoted growth and innovation in the gaming industry, was ousted by independent candidate Dr Takeharu Yamanaka,

the writing was on the wall for Sega Sammy and its IR partner. Yamanaka, a passionate anti-gambling commentator and protestor in the community, was ultra-transparent in his intention to shut down any deal for an integrated resort with swift efficiency. This effectively ended any positive conclusions to the project, and therefore a little over two months after making an initial statement of interest, Sega Sammy withdrew from proceedings.
Residual public outcry at the hosting of this summer’s Olympic Games in Tokyo is still a tangible dynamic in Japanese politics; where a population still feels as if its internal health & wellbeing was compromised to keep up a nation’s global appearances. Therefore, the LDP party and its various agent’s holding positions of power are stillvulnerable to similar ‘Yokohama-style’ episodes, creating a slightly more cautious tone to the potential scope of future betting markets.
Thus far, Osaka, Wakayama and Nagasaki are the only prefectures who have co-ordinated a legitimate plan to set-up IRs in their respective regions, with the deadline for any formal applications set to close at the end of April 2022. The chance still beckons for other big businesses to step into the breach.

Media coverage

Despite a spate of activity in gambling markets across a range of industries, its perhaps the recent involvement of media businesses which characterize the shift towards external investment in gaming.

News giant Yahoo has recently taken the plunge, with its parent company Verizon media sponsoring a huge play towards sports betting content and usage. By adding a new in-app section which tethers wagering odds onto relevant news stories and match previews, the company are softly positioning themselves for a wider assault on the market.
In New Jersey, these aspirations have already started to materialise. The Garden state was a major proponent for betting emancipation in the U.S, and suitably lobbied the Supreme Courts accordingly. It was unsurprising therefore to see New Jersey develop into a booming local sports market and offer punters early access to online sportsbooks. Yahoo have intelligently selected the state as a testing ground for its blueprint. NJ residents, via a Sportsbook app powered by collaborators MGM Resorts International, can now freely place bets within the Yahoo sports application; surely catalysing a seismic increase in revenue.

Sports Illustrated, a high-brow dispenser of sporting comment and opinion pieces, have also sought access into online gaming markets. Through their partnership with reputable Gibraltarian firm 888.com, SI now have a Sportsbook provision for customers in Colorado, with further plans to operate in Iowa, Indiana, and New Jersey by early 2022.
Parent-company Authentic Brands Group have emphasized the index-link between recent developments in sporting culture, and the act of placing a bet as part of the in-game experience. And 888.com have lofty ambitions as they look to acquire a significant portion of the market. Itai Pazner, CEO of 888.com, has set bold trading targets within the new SI Sportsbook’s operational reach, setting a 5% share of the betting markets in the four states as the goal. Based on current projections, this would be a $90M opportunity for 888.com and its partners. The long-term vision is to have a presence in 15 states by 2024.

Further examples are never far Last month we referenced Penn group’s investment stake in the Barstool Sports media publishing firm to supplement its marketing & advertising drive; they have now acquired Canada’s Score Media company and its betting app the Score to further consolidate its strength. An Associated Press deal with FanDuel has provided exclusive exposure to the latter’s betting odds in its relevant articles and sports coverage.
Social media, social betting
The largest vendor in this particular cartel however is Twitter, who seem resolved to slowly but surely increase their participation in the sector over the coming months. Although, exactly what this will eventually look like remains unknown. It’s abundantly clear however that the platform, who have undertaken several recent reviews of its streaming services and general in-site infrastructure, are keen on exploiting the betting opportunity. They too make an intimate link between the evolving sporting cultural discourse, and an increased likelihood of fans & spectators to make a bet as part of their viewing/matchday routine. Indeed, their data-hungry platform provides plenty of evidence to suggest their taking the right path: September 2021 produced 22% more NFL betting tweets than the same timeframe last year.
The social media powerhouse is perfectly positioned to harness gaming market forces, even if it may not directly keep sportsbooks. The level of traffic driven towards its sports streams will certainly pique the interest of betting vendors looking to advertise, and with the added tailwind of sports leagues harbouring betting partners as sponsors, Twitter looks set to cash-in on a whirlwind explosion of online sporting opportunity.
A subtle thread that runs throughout this narrative, and indeed sub-consciously drives behaviours in this space, is the undoubted societal shift in attitudes towards the gaming industry. Nervousness around adverse brand impact is ebbing away, and there is a bourgeoning acceptance that the sector holds considerable weight as a positive economic force; providing employment, developing technologies, and boosting fiscal growth.
Disneying heights?
No better example of a business viewing the industry through a less conservative lens is Disney, who, through their ESPN subsidiary, have already made waves towards striking deals with betting partners. A colossal 90% of the most-watched broadcasts within Disney’s umbrella of TV networks last year related to sports viewing, augmented by a +66% year-on-year subscription increase to their ESPN sports channel. CEO Bob Chapek has stressed that moving into online gaming theatres will attract and retain younger audiences, a sensible stance to take given prevailing market trends. Furthermore, Chapek is adamant (and has conducted considerable research to support his convictions) that betting activity will not hamper the key branding influence of Disney, and actually serves to strengthen the perception of ESPN in the marketplace.
Bet on growth
Given the substantial number of global businesses grappling for position, its relatively safe to assume that the online gaming sector will continue to grow at an accelerating pace. The legislation to open up sportsbook practices in the U.S is still having a material halo effect on the industry, as an increasing number of states are updating their stanceon gambling as they navigate changing winds of public opinion, understand the sheer scale of commercial opportunity, and sought to preserve their own economic prosperity versus rival states. The same points are applicable to big business, as they look to leverage modernizing opinions on branding, and hope to swiftly infiltrate a market which is becoming increasingly saturated due to its attractive conditions.
In truth, there doesn’t seem a cap on size, style or resident industry of betting investments, which makes for an intriguing and rather unpredictable outlook. In fact, the only real guarantee is that the online gaming industry is set to further grow at an increasing rate of knots……