How are sports betting companies coping with the disaster?
The 'black swan' of COVID-19 hit sports betting harder than most other industries. As all major sports championships were cancelled or postponed, bookmakers are unable to offer their main product. Revenue in the US is down 58% in March and even bigger losses are expected in April. How are sports betting companies coping with the disaster?
While governments are pledging billions in support of businesses, gambling companies are hardly at the top of the list. Sports betting may be a $100+ billion market that creates hundreds of thousands of jobs, but it isn't essential in the same sense as factories and transportation are. Therefore, betting companies are finding their own ways out of the pandemic emergency.
Survival strategy #1: Find new events to bet on
As the old saying goes, better a small fish than an empty dish. In the absence of the Champions League or NBA, betting fans are happy to bet on just about anything.
Betting companies realise this – and keep scraping the bottom of the barrel to find suitable events. These unusual offerings fall into 3 types:
1) The rare offline survivors. Who would have thought that the premier league of Belarus would become the largest ongoing soccer event on the planet? But with just a handful of soccer championships still playing, these very minor teams now top the popularity lists on betting sites:
Another exception are horse and greyhound races, which are still happening in Australia behind closed doors. Table tennis is another survivor.
2) Virtual sports. Sports leagues are also experimenting with the online format: recent examples include the F1 Virtual GP and the virtual Grand National. Apart from these offline-to-online events, betting companies are rushing to offer bets on major online team games like League of Legends and DOTA 2.
3) Politics . It's not all about sports. While bookmakers in the US aren't allowed to take bets on the presidential election (at least for now), you can bet on when a COVID-19 vaccine will be released or even what the weather will be.
Survival strategy #2: Reduce payment processing costs
Cutting costs is another way to get through the crisis. Card acquiring fees are one of the major items on the cost list of any online gambling business. Banks charge a much higher fee for processing card transactions that are considered high-risk, such as gambling and e-commerce.
A good solution is to integrate cheaper payment options – first and foremost cryptocurrency. Max Krupyshev, CEO of Cryptoprocessing.com and CoinsPaid, explains:
"When you accept crypto on your site, you don't need an acquiring bank anymore. Your only counterpart is the crypto payment provider, which charges a small flat fee on every payment. And since we don't charge any one-time setup or integration fees, our clients end up saving up to 70% in processing costs compared to card payments."
Accepting crypto can also help with customer acquisition. In those countries where bettors can't pay with a credit card, Bitcoin and other digital currencies are the only option. A good example is the UK, where card gambling transactions are now banned.
Survival strategy #3: Reach out to new audiences
In the first weeks of the emergency it seemed like Africa and Latin America could dodge the worst of the gambling and betting collapse.
However, the hopes were soon dashed. In the last week of March, most betting parlours in large countries like South Africa, Kenya and Tanzania had to close. The same happened in Latin American betting hotspots like Argentina and Panama.
At the same time, major African sports events – such as the famous South African horse races – were also halted.
Traditionally around 70% of betting in Africa happens offline. But while customers are understandably cautious to try online betting, they will have to do it – or renounce their hobby.
For betting companies in the West, this is a chance to expand their audience. Millions of bettors outside of Europe and North America will have to choose which online betting site to use – and it doesn't have to be a platform based in their own region. Max Krupyshev continues:
"This is a huge window of opportunity for operators who can easily accept cross-border payments, especially in crypto. A big percentage of African or South American users won't be able to use their local cards and digital wallets in international online casinos. On the other hand, the level of Bitcoin adoption in these regions is very high, because they lack Western-style financial systems."
Plotting out the future
The betting industry can't expect the same amount of help from the government as other businesses; it will have to find a way out of this crisis on its own. Yet, it's also able to pivot very fast to accommodate change. After all, betting on sports survived the fall of Ancient Rome, the Black Death, and two World Wars. It will survive the coronavirus, too.
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