Can Asian operators capitalize on the virtual sports opportunity?

In just under two decades, virtual sports have gone from being a niche vertical dismissed by many as cartoon betting, to one of the fastest growing areas in gaming, with operators in Asia increasingly taking notice.

Neale Deeley, managing director for gaming at Betradar, said that virtual sports now account for 12 percent of over-the-counter betting in the UK, and 20 percent of sports book profits in Italy. While in the booming Nigerian market, virtual sports bring in more than 50 percent of all betting revenue.

Inspired Gaming cites Italy as a case study, where from a standing start in 2014, its software helped to create an EUR1 billion market ($1.2 billion) in just one year, according to its website. It says operators have experienced a 25 percent increase in revenue by adding virtuals to their sportsbook.

While some claim that virtuals lack the thrill and excitement of sports betting, technology has improved to the extent that high-quality graphics - often created using the latest motion-capture technology -  can make them hard to distinguish from the real thing. A range of betting across multiple sports is now available.

The games have gained considerable traction in the land-based sector in Europe and are also seen as a key tool for reaching the key tech-savvy, sports-loving, millennial audience.

Industry experts say there is undoubtedly scope for significant expansion in Asia, where at present the products are mostly confined to lotteries. There was a strong turnout from virtuals providers, from Golden Race to Betradar, at G2E Asia this year, keen to highlight their products.

“The opportunities for operators in Asia are vast,” Betradar's Managing Director of Sales, Eduard Blonk, told AGB. While some operators have integrated virtuals as part of a diversification strategy, virtual sports are now an established segment that is proven to drive results across different channels.

The success of the product, according to Filippos Antonopoulos, CEO of virtuals supplier Vermantia, has been to create an engaging yet repeatable game. “Virtual sports have been able to offer - especially in retail – a high frequency, steady-payout game, which only existed before with the rather boring game of Keno. As such, they created strong interest and greater entertainment.”

However, replicating the success of virtuals in the Asian market will not simply be a question of rolling out the same products. Asia's appetite for sports is undeniable, but as Antonopoulos pointed out, the challenge is to properly customize Western games to meet the needs of Eastern markets.

“Delivery and mathematics will play the most important roles,” he said, adding that locally-suited games, such as badminton or table tennis, are likely to prove popular with Asian punters. Allowing for multilingual and multi-currency solutions, and conducting thorough research to determine the tastes of local customers will be key to success in Asian markets.

In contrast with Europe, Blonk added, Asian customers favour faster betting cycles. “It is a demanding market where punters expect outstanding design across the board. As a solutions provider, one has to commit to dedicating resources so that operators can integrate and distribute with greater flexibility,” he stated.

As with most gambling related products in Asia, the key hurdle to adoption is a lack of a clear regulatory framework. Though here, virtuals occupy a unique slot, being able to qualify as a VLT, RNG, lottery or fixed-odds product depending on the jurisdiction.

As a result, one of the of the key markets in Asia so far for virtual sports products has been China, where they come under the nation’s Sports Lottery. Outside of the state lottery all other forms of gambling are banned and online sales of lottery products have also been suspended.

Inspired supplies its products through AGT, a venture between Hong Kong-listed AGTech Holdings and Ladbrokes. Approved by the Ministry of Finance in 2011, Virtual Motor Racing launched in August 2011 as “Lucky Racing” in Hunan province where it is live in 1,700 venues, with 6 virtual events per hour. Its virtual soccer product Eball is live in Jiangsu province in more than 2000 venues.

The question is now is how much traction the games will be able to gain in the region’s land-based sector. Sports betting itself is not permitted in Macau's casinos, only through Macau slot, though elsewhere in Southeast Asia and Indochina it is highly popular. Big stadium-style games in particular are proving to be winners.

Macau-based LT Game, unveiled a brand new horse racing product called “LT Jockey Club,” in 2016 and said it will roll the product out to more jurisdictions after receiving interest from several operators. It had expected to launch around Q2, but the products have not yet been launched on the floors.

Inspired says it also sees opportunities in the Philippines.

At a time when the industry is looking to better engage millennials, virtual sports are a good alternative. Union Gaming analyst Grant Govertsen told AGB that “virtual sports certainly offer a great appeal given that these products can be run countless times a day in any number of formats - unlike real sports betting for which there is a finite number of games.”

Blonk however stressed that Betradar has also seen incremental revenues generated from bets that come from “traditional punters” as well. “Virtuals should be seen as an essential part of the modern bookmaker's portfolio, engaging for the full spectrum of bettors, no matter their age or location,” he added.

å“There is no doubt that virtuals are already popular in Asia. Not at the same level than in Europe for now, but that may well change in the not too distant future,” said Blonk.