Fantasy Sports Betting in the United Kingdom

US is expected to become the biggest regulated betting market in the world touching $5.0B in 2023 from $200.0M in 2017. Echelon Wealth Partners believe that this will create opportunity for traditional casino operators, technology companies, betting aggregators, online sports-content providers etc. Bob Goff, Head of Research, Telecom Services & New Media at Echelon Wealth Partners, discussed with Dennis Tsalikis, founder and CEO of Fantasy Sports Interactive (FSI) about fantasy sports betting in the UK in contrast to the North American market.

Rob Goff: Dennis, can you put forward a timeline of key milestones for FSI since 2012 when the platform was first developed? For example, key proof-of-concept trials, market launches, partnerships and marquee clients?

Dennis Tsalikis: In 2012, driven by our passion for fantasy sports – we found that it was the easiest way to socialize with coworkers in a diverse business environment and were amazed by the appeal it had to participants based on the number of hours spent each week just for bragging rights – and seeing that a similar product was not yet launched, we recruited a number of software engineers to develop our fantasy sports betting prototype. Following beta testing, our platform was the first fantasy sports offering to be reviewed and licensed by two of the strictest European gaming regulators, the Malta Gaming Authority and the UK Gambling Commission.

The offering was launched as a proof of concept in 2015 to the UK market under the ‘Bet4theBest’ brand, accompanied by a small-scale marketing campaign. In 2017, we signed our first B2B contracts, the most important one being with Cashpoint, the sports betting arm of Gauselmann Group and one of the major betting operators in Central Europe. At that point, we decided to discontinue our B2C operation to avoid conflict of interest with our clients.

Based on operators’ feedback, we started developing a fixed-odds fantasy sports offering that would enable the product to be offered to smaller and more fragmented markets and without the requirement for guaranteed awards by the operator. The first instance of odds-based fantasy sports was launched in September 2019 with OPAP (Greek Organisation of Football Prognostics S.A.), through their retail stores’ network.

OPAP is the Greek Lottery with exclusivity in the Greek retail market, featuring over 4,000 retail stores. The offering is available both through Self-Service Betting Terminals and as a pen and paper option and is the only fantasy sports product worldwide to be available in a retail store environment. Our product was ‘silently’ launched in all retail stores within OPAP’s network so to test its appeal to users and following a positive initial period, a marketing campaign is scheduled for the soccer EURO 2020 this summer to make it widely known to its clients.

We offer a comprehensive product portfolio which enables us to serve diverse clientele, irrespective of any jurisdiction or regulatory environment. We are the only fantasy sports provider to feature a betting odds fantasy service and to be able to serve both online and retail shop clients through dedicated product offerings and feeds.

RG: What has been the initial user traction and experience to date in your most developed market, following the September 2019 launch?

DT: The main driver for OPAP to introduce fantasy sports to retail stores is that it attracts a younger audience. Getting young people into retail has been an issue that the industry has been trying to remedy for a long time and fantasy sports may be a solution to that. Unfortunately, due to bet slips in OPAP being anonymous, it is difficult to accurately track such KPIs, but such is the feedback we receive by OPAP’s retail shop agents.

Results have so far been very positive. We have observed a 300% increase in stakes between October and December. A testament to the success of the launch is that OPAP has decided to expand the existing offering by adding more betting markets for the next sports season including EURO 2020 and the Greek League for soccer as well as NBA and EuroLeague for basketball. This will be accompanied by a marketing campaign to educate the Greek audience about fantasy sports betting. The campaign is being designed and will be run by OPAP’s team; however, we advise on the strategy, approach and delivery methods, based on B2C proof of concept experience.

We have seen that, in a retail shop environment, stakes are driven by a small number of bets on single-events and there are also numerous accumulators bet slips that require smaller investments but bigger payouts. Circa 75% of the bet slips are between €5-8. FSI receives a percentage of the revenues of the operator on top of a fees charged for 24/7 support, thus the interests of both parties align to form a true partnership. Fantasy sports, similar to traditional sportsbook, are strongly aligned to the sports calendar - Derbies, international matches, qualifier games and knockout games - being the main driver both in amounts wagered and a number of entries.

RG: What are the KPIs that you monitor most closely? Metrics used?

DT: We monitor all the standard metrics of the gambling industry that indicates the overall user traffic such as Total Bets Placed, Net Gaming Revenue (NGR) and Gross Gaming Revenue (GGR).

We have also developed an intuitive and comprehensive back-office tool, the FSI Control Center, providing both us and our partners with commercial data and valuable insights at all times.

We also work closely with our partners’ teams in order to understand better KPIs that we cannot capture through the activity we can record on our B2B platform, such as overall user engagement with the operator. These metrics include time spent on fantasy sports versus overall time spent online and cross-selling activity of users who are engaging with fantasy sports betting (stakes and revenues from other products for clients that signed-up for fantasy betting.

At our end, we track playing patterns and fantasy teams’ compositions, which all feedback to our odds generating and management algorithms.

RG: How do your demographics compare/contrast with traditional betting? Does fantasy expand the market or displace non-fantasy betting?

DT: We have observed that the vast majority of users engaging in fantasy sports betting are aged between 21-39 years old. This is not surprising if a number of reasons are taken into account: the popularity of ‘manager-style’ videogames the last decade, the rise of skill-gaming as a notion among “millennials”, and the appeal of betting on something that they believe they can influence the odds of winning, the focus on athletes’ statistics not just in betting but in sports, in general, that is driven by technological advancements that makes tracking of such statistics easier.

Traditional sports betting has been extremely popular with older users, either in a retail shop environment for the “Baby Boomers” generation or on online platforms with “Generation-X” which was the first to be introduced to such offerings.

The feedback we have received from operators that have introduced fantasy betting as part of their portfolio is that it brings new revenue in as it attracts new players to their offering. They see this as a competitive advantage and the goals are to be able to maximize cross-selling of traditional sportsbook products to them in order to maximize the value of each customer.

RG: Can you discuss the technology aspect of your platform and how it is different from other players in the UK?

DT: Our platform is based on AWS infrastructure, using Java for the back-end and React JS for the front-end components. It is developed to ensure security, scalability and elasticity of the offering. Our platform has undergone a security audit as part of the UK Gambling Commission licensing requirements under ISO 27001:2013 standards.

As part of our infrastructure set up, we use cutting edge technologies, including Kubernetes, which allows us to set up new environments (including clients’ testing, staging and production environments) extremely quickly and very cost efficiently.

The use of React in the front-end allows for a dynamic and high-performance user interface that is delivered seamlessly across platforms and screen sizes.

The platform is also developed to allow flexibility in terms of integration methods with clients. Based on the needs, product portfolio and preferred method of integration of each operator, the offering can be served both through iframe as well as a direct odds feed (for odds-based products). The iframe solution is fully customizable in terms of user interface to create a seamless experience to the user. The customization of the offering, including its look and feel, is a core part of the integration and testing process with clients.

We consider a major competitive advantage of our platform to be its overarching architecture. Having used best practices in terms of designs and technologies employed for the betting industry in order to be able to seamlessly handle thousands of concurrent users and bets placed and adapted them to serve a complex product like fantasysports, has enabled us not only to be able of adding new features quickly and efficiently but also to be flexible with the evolving customer needs.

We invest heavily on our technical team, not only to attract top talent from established technology providers in the betting industry but also to enable them to continuously learn new skills and technologies.

RG: In terms of the UK market (user, regulations) how does it differ from North America? What formats and sports have been the most successful – the least adopted?

DT: The North American market was closed until recently, as betting was largely prohibited. With betting being offlimits, North America has two distinctive market characteristics: a rather inexperienced sports betting audience but at the same time a thriving and sophisticated fantasy sports market. To grab the opportunity, many companies like FanDuel and DraftKings quickly introduced and monetized on the Fantasy Sports Contests (Daily Fantasy Contests/Daily Fantasy Sports – DFS), that became hugely successful with the fantasy sports-loving US audience.

In the UK , sports betting became legal nearly six decades ago and then coupled with marketing, social and cultural factors, the betting audience is far more mature than their US counterpart, however, the monetizable daily fantasy sports format (DFS) was something new to UK as well.

If I were to break down the playing habits to the different regions, I would say that the US audience prefers to bet on statistically-driven options while players in the UK are more impulsive. US sports are regularly driven and evolved by in-depth statistical analysis. Athletes’ performance and statistics are tracked and analysed from high-school onwards very rigorously. A deep understanding of how different traits are tracked and how these inter combine to result in the athletes’ performance, is the second nature to the US audience. This is why we believe Fantasy Sports has been a great success in the US and why we expect performance driven sportsbook-like products, similar to our odds-fantasy offering, would also be extremely popular.

RG: How would the reviews by the Malta and UK Gambling Regulators differ from those in North America?

DT: Regulatory licensing for betting operators is a well-established process in Europe and depends on the product offerings (e.g. different between casino and sportsbook products) and on the role of the regulated entity (technology provider versus client facing operator versus both).+

Each jurisdiction has minor differences, but the core rules and guidelines are the same across the board with their primary focus on customer protection. The main parts of any licensing are product review, fairness within the game, software review, security of the platform, compliance review and implementation of relevant policies and regulatory reporting requirements and processes.

Having discussed in the past with the Mississippi Gaming Commission as well as having reviewed the New Jersey regulation we see that the spirit of the law, as well as the requirements are very similar. We expect that European operators who will look to obtain a US license will find the process familiar.

RG: Do you see new competitors entering the North American market for fantasy, where there is an established competitor with scale? To what extent is a fantasy betting a distinct product/user or is it part of a bundle?

DT: I believe it is very difficult and highly unlikely for a new entrant to penetrate the North American market without a differentiated product.

Traditional Daily Fantasy Sports offered, are based on pooling entry fees in order to be able to provide jackpot-like awards. DraftKings and FanDuel have already reached a critical mass of users, the barrier to entry for new companies would be very high and would mean a very high marketing budget. Being able to offer a fantasy product where users can wager any amount they want with their winnings to be based on such amount is a necessity to enter the market successfully and this is what we have tried to achieve by developing an odds-based product.

In terms of whether fantasy betting is a distinct product line to traditional betting, the answer is clearly yes for me, based on the difference in demographics between the traditional fantasy sports player and the traditional punter.

However, in my mind, it is important to be able to offer fantasy betting bundled with a complete betting platform. The reason for that is to be able to take full advantage of the cross-selling opportunities that this provides. Such an arrangement is similar to the approach used for casino products offered by online sportsbook operators.

Similarly to the fantasy users, the demographics of casino users are quite divergent when compared to the sportsbook users’ demographics, but such bundling allows: a) to maximize revenue from each user and b) avoid having your users moving part of their wallet to a different operator.

Currently, we are discussing with potential clients that have already entered or are about to enter the US market and would like to add fantasy sports to their portfolio. We believe that our differentiated offering in terms of our focus towards user flexibility is something that will be appreciated by the well-educated US audience and will enable our partners to compete with already established fantasy sports offerings.

RG: How would your product gain traction given the current market structure and user expectations?

DT: Actually, FSI’s Fixed-Odds-Fantasy Suite is tailored-made for the North American market, as it combines the familiarity of the Fantasy Sports gameplay with a fantasy-based set of fixed odds – making transition to sportsbook offerings much easier and attractive to the North American audience.

Additionally, new entrants to the US market have the opportunity to offer Fantasy Sports without directly competing with established Fantasy Sports giants DraftKings and FanDuel, through a unique and profitable offering.

RG: Who would be the most likely partner candidates for you in North America? Do you consider B2C an option?

DT: As a technology provider, our spectrum of potential clients is very wide and diverse. For example:

1. It can be traditional Daily Fantasy Sports providers like DraftKings, FanDuel, Yahoo Sports, looking to provide oddsbased fantasy betting options.
2. Casinos that are not able to provide services outside of their state and/or their premises could offer a product that feels familiar to their clients without getting into direct competition with the traditional offerings.
3. New entrants in the US market like William Hill and GVC which are looking to round-up their offering with a fantasy offering.
4. Lastly, operators exploring to enter the US market without heavy requirement for customer education.

Launching a B2C offering directly is not a part of our strategy however, we would be happy to consider participating in a joint venture with a strategic partner, with us offering our software platform, product knowledge and our experience deriving from our proof-of-concept operation in a highly regulated and competitive market.

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