Asia sports betting model needs to evolve to tap massive potential.

by Bernard Marantelli *

 

Asia’s sports betting market is booming, boosted by increasing internet penetration and the proliferation of mobile devices, but the key challenge for Asian facing operators will be how to attract new customers, rather than poaching those of competitors, to boost the current razor thin operating margins, says Bernard Marantelli.

 

The online gambling market continues to be one of the fastest growing industries. According to analysts H2 Gambling Capital, the largest online gambling product category is sports betting with 53 percent (€11.5bn) of online gambling gross win in 2012. This was followed by casino at 25.4 percent (€5.5bn), poker at 14.2 percent (€3.1bn), and bingo at 7.4 percent (€1.6bn).

 

Sports betting is huge in Asia. However in many Asian countries, it remains unregulated. Therefore online gambling is a grey area at best and would be described as illegal by the majority of the region’s governments.

 

The Philippines provides the only licensing regime for online betting in Asia through its First Cagayan licensing system. The jurisdiction is perhaps limited, but it is recognized by many gambling operators who have sought to get their license before targeting the main Asian betting territories.

 

Given that much of the sports betting market is illegal it’s difficult to give an accurate estimate of its total size. The American Journal of Foreign Policy estimated back in 2006 that the total size of the Asian gambling market was $450 billion.

 

Most analysts agree the Asian market is vast, growing and offers more opportunities than other markets, such as Europe, which has a complicated legal standpoint in regards to sovereign online gambling regulation, as well as depressed economies.

 

Sports betting tends to be more commoditized in Asia in terms of pricing (the odds offered to bettors). Therefore the growing size of the market means there is opportunity for operators who come in with the right marketing and product strategy.

 

The other trend that will help accelerate growth is the upcoming World Cup in Brazil. It will provide a major focus for the global sports betting market, with operators in both Asia and Europe seeking to increase market share through customer acquisition and boost profitability, to avoid boardroom and shareholder revolt.

 

To bring some context to the potential, Fox Sports Asia estimated the Asia region has more than 1.3 billion viewers watching football.  And according to FIFA, over 1 billion viewers watched the 2010 World Cup final between Spain and the Netherlands.

 

However, in order to win sports betting customers, operators may have to consider changing their business models. From a betting product standpoint, there are only so many ways to sell Brazil at home at 1/2 or 1.5 and -2 goals on the Asian handicap lines.

 

To break the mould and grow sports betting’s overall pie, Asian operators may need to look towards others for the introduction of higher margin products, as currently the gross margin for many is in the low single-digit range.

 

Lotteries are one example, with significant margins of up to 50% in many regions. China’s Sports Lottery for example continues to go from strength to strength.

 

According to Ministry of Finance figures, overall lottery sales gained 18.3 percent in 2013 to 309.3 billion yuan ($50.6 billion). Sports lottery sales lead the market with a 20.2 percent year-on-year gain to 132.80 billion yuan.

 

Part of the lotteries’ ongoing success is their ability to offer large jackpots, with life-changing wins that are able to catch the attention of a wider audience and betting public.

 

In the sports-betting field, the introduction of lottery-sized jackpot bets could create growth opportunities in Asia, especially with a view to the World Cup.  However, no Asian sports betting operator has seriously focused on building a $20 million prize pool on such a popular sport as football.  Many may lack the investment, or expertise, required to build-out the technology; the complex mathematics and liquidity to offer multi-leg mega jackpot bets.    

 

Introducing sports-based jackpot pools with a 30 percent take-out that can offer $10 million regular prizes may help these operators recover any ground that they are perhaps losing to mainstream lotteries and to incumbent competitors. Current operating margins could soar.

 

Outside of Asia, some sports multi-leg jackpots have proved a great success. Sweden’s V75 (Sales of about £480m annually on trotting, a horse-racing product) and Spain’s La Quiniela (at about €380m annually on Spanish football), both show that the public will embrace lottery-sized prizes on sports.

 

The potential sales and revenue from a properly marketed jackpot game with global buy-in on the World Cup or Premier league football could run into the billions. Of the top 10 biggest “western” multi-leg jackpot pools operating today, seven are football related, including the Classic Football Pools in England.

 

A new breed of football-based jackpot pools has also emerged from the U.K. Sports book Coral (with a 15 leg home draw, away game with an initial £1 million prize) and from Colossus Bets (which will offer over £100 million of prizes during the World Cup) has changed the landscape for the 2013-14 football seasons.

 

Following a multi-leg jackpot-led product and marketing strategy has already been successful for many online gaming operators in the casino and slot space, not only to differentiate themselves as a brand, but to deliver robust margins that were previously in free fall.

 

Sports betting operators in Asia should also adapt. If these products are correctly developed and marketed, there is no reason why Asian betting operators should not be able to grow the marketplace and potentially attract lottery or progressive casino jackpot slots players to their platforms, thus enlarging their current customer databases and revenue base.

 

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Bernard Marantelli is the founder of U.K.-based Colossus Bets, home of multi-million pound jackpot sports. Bernard argues that lottery-sized sports jackpot bets will deliver industry growth. When launching Colossus Bets he developed and patented fractional cash-in, a new proposition that enables the gambler to sell portions of their bets as pools progress.