When Xpress Sports launched in August 2018 through the Pennsylvania Lottery, Drew Svitko expressed optimism.
The Pennsylvania Lottery executive director anticipated strong public interest in the virtual sports games, which features Xpress Football and Xpress Car Racing.
He expected the product to perform just as well as keno. Three months into its existence at the time, it was already proving valuable for the lottery.
“Following keno’s strong start,” Svitko said last year, “we expect that our Xpress Sports games will also be a big hit with our players.”
For the most part, however, virtual sports have yet to take root in Pennsylvania through the first year.
That said, the state maintains a rosy outlook. Several virtual sports providers are emphasizing patience.
“Like any new things,” said Leap Gaming CEO Yariv Lissauer, “any new type of product — especially in an industry that has experienced a kind of rebirth — we need some patience to really measure and evaluate success.”
Virtual sports popularity pales in comparison to keno
During the 2018-19 fiscal year, the Pennsylvania Lottery reported more than $4.5 billion in sales. That includes an estimated $46.7 million generated by keno and Xpress Sports, which represents a $10 million profit.
That said, there is quite a disparity between the two products. Lottery press secretary Ewa Dworakowski told the Pittsburgh Tribune-Review in June that keno totaled some $10 million in sales since the end of February.
On the flip side, Xpress Sports posted only $600,000 in sales during the same period. Xpress calls for customers to wager on simulated games, whose outcomes are determined by random number generators (RNG), which can be watched on monitors at lottery retailers.
Still, lottery officials continue to look up.
“We are excited about the future growth potential of virtual sports lottery games,” Pennsylvania Lottery spokesman Jeffrey Johnson told the newspaper. “The lottery’s mission is to grow sales and profits for older Pennsylvanians and, in order to grow sales responsibly, it is important for the lottery to continue to try new games that may appeal to new players.”
Of the more than 1,800 lottery retailers scattered throughout PA, few have reported their virtual sports games attracting strong interest. Most customers remain keen on keno.
“We’ve had more people asking about keno,” one retailer manager told the Pittsburgh Tribune-Review. “It’s what people are used to. They’re used to picking numbers. How many people are used to sports betting?”
Virtual sports ‘a complementary element’ to sports betting
Technically, not many folks are “used to sports betting.” Legally, anyway.
But the industry has certainly taken off.
In nearby New Jersey, regulated wagering has amounted to nearly $3.5 billion in handle and more than $220 million in revenue. Online sports betting has continued to grow in popularity and accounted for nearly 85% of wagers placed in July.
Pennsylvania sports betting is also trending upward.
Last month, state operators totaled more than $59 million in accepted wagers, a state record since the launch of PA sports betting late last year. Of that, nearly two-thirds of all wagers placed came via online sportsbooks.
How does virtual sports fit into all this?
According to Inspired Entertainment, which is behind Xpress Sports, “we’ve seen a surge in interest from the US” since the repeal of PASPA.
“The way we look at it,” said Lissauer, “is virtual sports is a complementary element of real sports betting.” He goes on:
“It’s traditionally the same audience. It complements real sports. It’s especially attractive when there’s no real sports available. If it is attractive, if the market endorses real sports betting, then we don’t see any reason for why it would not endorse virtual sports.”
If Europe is any indication, virtual sports will thrive in the US
Leap Gaming is making its foray into the American market. It launched in 2014 and is a provider for real-money virtual sports games in Europe. Leap is now looking to open up shop in Nevada.
“The mere effect of sports betting can be very popular in the US,” Lissauer said. “The whole stir and excitement around real sports betting in the US, by nature, implies there’s a lot of room for growth and adoption for virtual sports in the US.”
Using Europe as a gauge, he added, by accounting for factors such as market size, population, the popularity of sports, “the conclusion is inevitable” that virtual sports can be a hit.
Lissauer understands that patience is vital for such a new product. Virtual sports cannot always become a success like it did in Europe. There, “tier-one” companies offered such games, where they proved to be complementary to real sports betting just as Lissauer suggested.
Even in New Jersey, where virtual sports has lived since 2017, the niche market has been drastically overlooked compared with online casino gambling and sports betting.
This explains why he, and certainly his compatriots within the virtual gaming space, are not disconcerted with Pennsylvania’s early returns on Xpress Sports.
“In general,” he said, “the industry is still fairly young. In part, when it comes to virtual sports, there needs to be some adaptation done.”
A complementary product that pays dividends
Inspired noted that virtual sports “has proven to drive incremental revenues for customers globally” while also attracting new players. The digital format, the company pointed out, “mimics the type of entertainment that millenials already consume.”
“Empirically, operators who have added virtual sports to an existing sportsbook have experienced 15%-20% increase in revenue.”
Like Leap, Inspired has enjoyed overseas success, particularly in Greece and Italy. Now, the company said, several potential partners in the US are beginning to understand the ease of virtual sports integration, not to mention the product’s low deployment cost.
However, Lissauer said, virtual sports as an offering is not exactly a turnkey product.
“There are types of content that fit various types of territories,” he said, citing the popularity of soccer in Europe and a lack thereof in the US. “You have to customize and adapt in order to be successful. The US is not going to be any different.”
NBA Last 90 is an example of that customization
One company, Highlight Games Limited, appears to have done just that.
In collaboration with the National Basketball Players Association, Highlight developed NBA Last 90, which will become available in states with regulated sports betting.
The game, which is expected to hit the European and US markets during the 2019-20 NBA season, pieces together actual footage from multiple games involving two select teams.
As a result, millions of possible outcomes are possible. An RNG will determine these results.
Scott Kaufman-Ross, head of fantasy and gaming for the NBA, said in an email that the “driving factor” for introducing this game was to engage with fans more.
He added that the league’s research shows “global NBA fans are engaging more and more with virtual sports and virtual basketball, and so we wanted to bring those fans an authentic NBA experience rather than a generic one.”
While Lissauer could not directly comment on NBA Last 90, he said the “various trends of innovation” within virtual sports represents “a strong indication that it’s an interesting vertical.
“It’s a buzzing vertical. There’s a lot of action taking place. And that’s only good news for us who are active in this space.”
Give it time before assessing the success of virtual sports
Two years ago, Joe Asher, CEO of bookmaker William Hill US, discussed how virtual racing was integrated as a way to fill lulls between actual sporting events. He described virtual sports as “a filler product,” one that could become popular on slow sports days or during the mornings and afternoons.
The product had begun attracted new customers and it appealed to existing patrons.
“We are seeing good crossover,” Asher said, “from our regular pari-mutuel customers as well as traditional sports bettors.”
That’s the complementary factor Lissauer emphasizes with virtual sports.
Currently, there may not be an actual plan of attack that makes virtual sports more appealing to US clientele. All the product needs is an opportunity to take hold.
Certainly, there are goals that companies such as Leap and Inspired would like to achieve to help virtual sports become a hit. One of them, Lissauer said, is making games available online. That is “super key,” he said. That task is why virtual sports is a success overseas.
Another key component: Patience.
One year of virtual sports in Pennsylvania is not enough to determine if it was a success or failure, let alone if these types of games can thrive in the US as a whole. More time is needed.
“At the beginning, it might be accepted with a bit of a question mark, as with any type of innovation,” Lissauer said.
“In the case of Henry Ford, when he asked people what they wanted, they said a faster horse. Nobody asked for a car. That’s probably going to be applicable when it comes to virtual sports because it’s completely new and novel.”