This much, I do know.
First published at https://egr.global/intel/insight/market-watch-forget-the-future-what-can-we-achieve-here-and-now/
It’s deliciously ironic that Churchill – of all people – is credited with the phrase Never let a good crisis go to waste. And, given that there’s little to do out there, and much to do in there, instead of prophesizing about the future. It would be more productive to show what can be done here and now, from a gaming, investment, and – crucially – personal perspective.
Let’s get this out of the way first. Contrary to popular belief, casino is not ‘safe’. Whilst this market is enjoying a spike from stymied gamblers, slots-administered endorphins are triggered and rewarded very differently to that of sportsbook. Besides the exorbitant cost to cross-sell, the seasoned sportsbook punter has a well-honed endocrine that will not get its longer-term kicks from all those Book of Ra clones out there.
A more intelligent game is needed, one wielding a longer yield curve. One that fulfils short-term thrills, but also constructs wider arcs encouraging players to embark on quests that offer longer term rewards. Content developers such as GreenJade and Kalamba (disclaimer: of which I am an investor in both) recognise this, and balance RTPs with longer, more intangible gifts that incentivise the hunter-gatherer in all of us. Casino needs to evolve to meet needs of new demographics, and just heaping rehashed content with different graphics will soon undergo high bounce rates from increasingly disincentivized casual players.
Which leads nicely to the non-solution to sportsbook. It’s disingenuous to believe that traffic flows unilaterally from Livescore to Twitch, especially not without significant conversion costs, and eyeballs won’t linger there forever. Esports has a different engagement model; one that has a contrasting sit-back / lean-forward ratio, and failing to understand this – ie: which games convert from sportsbook – is as much of a car-crash as asking sportsbook affiliates to use same techniques to promote casino.
This is why veteran card-based games like Hearthstone have higher poker player viewerships. Similarly, it makes more sense to create esports tournaments based on real-world sports tournaments. Witness the genius behind BetBazar’s 24-hr FIFA’s Virtual Leagues to understand how the revolution will develop; based on operators’ abilities to rapidly scale virtual tournaments generating highly bettable markets. Prosperous esports betting will not showcase prehistoric products such as CS:GO or DotA, but accessible games like Fifa 2020 and Formula1; sports played online depicting realistic (and highly bettable) sporting scenarios.
Let’s be honest – as with dot.coms in 2000 and sub-primes in 2008, the writing was on the wall for sportsbook long before 2020. Companies that receive most revenues from these verticals (especially football and horseracing) have failed to diversify revenues, gradually growing over-leveraged and less profitable due to lateral – against upward – expansion. This bloat has not been aided by increasing data charges, land-based expenditures and an increasing dependency on large one-off events to peg revenues.
The new sportsbooks emerging from this fracas will exhibit attributes that investors immediately recognise: (i) distributed team of traders (predominantly automated) creating differentiated, efficient markets (ii) diversified revenue distribution less reliant on popular sports and focussed acquisition on higher-yield markets such as table tennis and backgammon (iii) healthy profit margins in excess of 30% balancing human capital across management and hard-working teams (iv) efficient remote-working across homes and offices, yielding efficient distributed workforces instead of costly single-furnished offices.
Investments & M/A
Paradoxically, this is a chapter heralding a great period of productivity, both personally and professionally. There are great investment opportunities once time is taken to study the markets.
As with the virus, Asia will be first off the blocks as it is teeming with gaming money. Still basking in mostly grey sunshine, and little reason to go white anytime soon, it’s clear that money here will be made whilst the rest of the industry recovers from sportsbook deflation. Which is why most of the gaming stocks at the moment – especially in the current climate – have no qualms about broadcasting their activity in the east. Ironic that public vendors and operators that invest so much OpEx on compliance in Europe have no qualms reporting their quarterly takings from non-regulated markets. And investors are happy to take whatever dividends they can from these markets for the foreseeable future.
Elsewhere, taking a leaf from the airline industry can speculate how global gaming markets could play out. Big players will fail – some spectacularly so – others will have no choice but to merge or (begrudgingly) be acquired. Somewhat unsurprisingly, this is our most active M&A quarter yet; the number of sales processes that have begun in the last few weeks is nothing short of astounding. Make no mistake – it’s a buyer’s market, and will remain so for at least two quarters.
From a stocks/shares standpoint, exert caution on trading. We haven’t called the bottom yet. The fall from grace will continue for some time. Also watch closely how hybrid-product companies fare; their success will ultimately depend on how diversified their casino/e-sports/post-modern sportsbook products will capture newly accessible markets.
Outside of gaming, don’t hoard gold or Bitcoin. They’re 2nd-order differential trades now; meaning they ebb and fall depending on the news reporting of that day – nay, hour. Long-term prospects are generally upwards, but for broad investment horizons they will -at best – track inflation. Don’t do single stock trades either; at the moment the volatility is akin to trading on binary options (remember that gambling chestnut?). Focus on wide, balanced portfolios focussing on getting civilisation back to normal. Importantly, play the long game; don’t change stocks every day.
Use this time wisely. This is a unique opportunity to develop personally and structurally; provided you follow the rules seasoned road warriors have been practicing for years.
Develop a solid regime indoors; one composed of early rising punctuated by healthy regular breaks exercising and/or reading (audiology whilst stairwell squatting is a great use of both). This is a good time to improve skillsets and mindsets, especially if the employer’s days may be numbered. There’s great learning content out there and, worst-case, a good mixtape whilst abs-trimming.
Organise daily scrums and weekly catchups at well-broadcasted, regular slots. Change clothes when during working hours to switch mindsets. And where possible, get running outdoors for an hour. Learn how to cook – properly – instead of ordering takeouts from dubiously scrubbed kitchens.
Controversially, this is also that unique cold-turkey opportunity to finally freeze those social media accounts; the signal/noise ratio has now woefully deteriorated below the threshold of contributing any intellectual/emotional nourishment that each one of us truly needs at the moment. Face it – they stopped being feel-good dispensers years ago.
So, get off Twitter, Facebook and Instagram (and, yes – Linkedin too, it has faded with the rest of the crop). Don’t Netflix for more than an hour a day. Create dedicated, focused WhatsApp/Slack/Telegram channels; and use them for specific discussions. Get on voice calls; set aside times when to speak and when to reflect. And do not neglect the latter; mindfulness in praying/meditating/exercising keeps all of us aspiring to be better, more contemplative humans on the outside and inside.
If you’re single – resist the temptation to swipe right. In non-virus times, there was only a 0.6% chance of a well-rounded match anyway. Very few ‘Love in time of Corona’ chapters will be written, and those that will won’t make for terribly good reading. Use this time to build better personas, that way there will be higher conversion ratios when the great outdoors returns.
If you have a family; this is a once-in-a-generation opportunity to forge bonds and make memories that will long outlive the indoor hiatus. Set aside proper playtime windows, and make sure they are meaningful. Enjoy what it’s like to be a parent who’s dedicated 100% of the time in those precious hours. If you have tweens or even teens, why not – as one investment partner has done – host a shark-den to pitch new business ideas in (semi-structured) prose. That way there’s no FOMO when you get back to working/meditating.
Above all, be good citizens. Respect outdoor limits, don’t succumb to cabin fever, and especially don’t resort to populist bigotry (as the Maltese Economy Minister carelessly did recently). We all have benefited from a more globalised world – none more so than in gaming – which is why our neighbours don’t speak the same native language, but work towards same aspirations. And – become part of a new world as this chapter unfolds; one which has new gaming heroes, improved ways of working remotely, and importantly, better ways of doing business with one another.