Paul's Blog August 6, 2018

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<I'll have what she's having.>  Restaurant patron referring to Sally/Meg Ryan in When Harry Met Sally

Anticipating the changes that sports-betting is likely to bring to the games-of-chance industry, many operators and technology partners are striking deals and forging collaborations at a breakneck pace.  Read the blog here

 Like the restaurant patron who witnessed another patron deriving particular pleasure from something, and told her server <I’ll have what she’s having>, we all need to notice the actions of our peers and think about what we want to do about it, how their actions will affect the industry and what actions we might take to adapt to the future.  Maybe we should emulate their actions, but maybe we should innovate and forge our own unique path.  It would appear to me that those who figure out how to ensure their customers are receiving the very best-in-class in every single component part of the relationship are the ones who will fare best going forward.  And that likely involves creative partnerships.   

The NBA (National Basketball Association) and the NHL (National Hockey League) are taking two different approaches towards the goal of channeling economic benefit to their constituents.  The commissioner of the NHL expresses his belief that game content represents intellectual property that is owned by his constituents, that sports betting uses that game content for the conduct of its business, and therefore his constituents should be compensated for the use of that content.  I would suspect that the commissioner of the NBA feels the same way.  But the NBA commissioner is not waiting around for that issue to be litigated.  Instead, he is striking deals right now with commercial enterprises to channel economic benefit back to its constituents.  The NBA is selling the rights to league and team logos, highlights, access to the official league data feed and the tag of being the <official gaming partner of the NBA> to casino operator MGM.  And it is the high-speed data feed that is the component expected to deliver the most value to the NBA.  This high-speed data feed is an asset in need of further monetization and integrating it into a sportsbook is expected to be the killer-app that will produce the most income over time.    

Hoping for compensation for intellectual property is not much of an action-plan.  Ambitious and creative strategies and partnerships of all shapes and sizes are forming rapidly and will quickly take hold of the sports betting industry.  Sports betting is a complicated business that involves the operation of the sportsbook, and the delivery of game content through both online and land-based channels.  IGT, Scientific Games, INTRALOT, Kambi, EquiLottery and others are partnering with other commercial firms to ensure that every component part is the best-in-class solution for the lottery operator and the players.   There are even efforts to integrate sports betting into traditional lottery.  By definition, lottery is 100% random which means it will require some creative imagination to insinuate the enthusiasm for sports betting into lottery.  And it won’t really be sports “betting”.  But sports betting is exciting, and it is opening new pathways to innovate in every sector of the games-of-chance industry, including traditional lottery.

As the number and variety of gambling options increases, the challenge to regulate the industry increases.  The UK Gambling Commission is ramping up its efforts to penalize operators which violate rules.  Apple is purging gambling apps from its Apple store.  Switzerland, Norway, Sweden are implementing rigorous IP blocking to prevent unlicensed (i.e. illegal) operators from accessing their markets.  The future will include both a dramatic increase in gambling options for everyone everywhere and a stricter regulatory structure and more rigorous and effective enforcement mechanisms. Watch Lottoland’s moves, though.  They are challenging regulatory structures everywhere they operate.  Jurisdictions like the U.S. have an effective combination of IP blocking and aggressive requirements placed on merchant banks which process online financial transactions.  So at least for now, Lottoland does not operate in the U.S.   In most other jurisdictions, the merchant banks have convinced the government that it is an unwarranted intrusion into their business to require they not process transactions for i-gambling operators.  But almost all jurisdictions do have laws that can be enforced to minimize illegal operators.  For instance, Australia and the UK have liberal regulatory structures, but are fighting back against operators which are disrupting the market for no positive benefit to society.   The outlook is positive for both expansion of the market, more consumer gaming options, and stricter regulatory control for the protection of consumers and stability in the market-place.