Having thrived under the radar for more than a decade, virtual sports have suddenly exploded into prominence. Long-time market leader Inspired has been joined by other competitors such as Playtech, Betradar, Kiron Interactive and Vsoftco as the market heats up.
With offerings becoming more sophisticated and realistic – Inspired’s Rush Boxing features an almost photorealistic version of Mike Tyson – the vertical may see its market share grow beyond 10 per cent of stakes in its core UK market in the coming years.
A major development drive has begun, with Playtech, Betradar and Inspired investing heavily in developing games that are as realistic as possible. This has seen companies make a huge outlay, using cinema soundstages and motion capture technology to create increasingly impressive products. Playtech, for example, hired more than 128 motion capture cameras and Warner Brothers’ London studio to develop its product.
Yet it has ground to make up. Inspired, as the sector’s creator, has a stranglehold on the UK market. This dominance can be challenged – it has lost ground in Italy but still maintains a market share of around 95 per cent.
Congested industry
As the sector gets increasingly congested and investment is ramped up, Vermantia chief executive Filippos Antonopoulos believes that his business has a strong chance of fighting off the increased competition by not following the curve.
Vermantia’s story is “fairly straightforward” Antonopoulos says. The business was founded in 2007 to develop new retail content, identifying the potential of virtual sports after around five years of activity.
“We think this industry is a very good mix between sporting content while being number-driven as it fits into the lottery and sports betting businesses,” he says.
While Vermantia does develop its own products and like its peers uses motion capture technology to do so, Antonopoulos is loth to enter what he calls an “arms race” of trying to develop the widest variety of sports. To him the idea of spending millions developing products without having a single customer is hardly feasible.
“Vermantia is of a different philosophy – we believe in clientele,” he says. “Once you get the clientele you can aggregate content that they need. We don’t feel as if we are forced into building basketball, for example, based on what competitors are doing; I think that’s a redundant equation.
“What’s important is to have clients, global reach into shops, as virtual sports do a lot more business in retail than online.
“The idea is to be able to land customers, to cater to their specific needs with a mix of content, and if that content is proprietary that gives you better margins, but if it’s third-party that works as well.”
Vermantia aggregates content from Kiron and Vsoftco, and also broadcasts their virtual sports games via its multimedia solutions alongside Inspired games. It has already established a strong presence in Italy where it works with the likes of SNAI, Eurobet and Intralot Italia. It is also moving into the developing African market with Nairabet, Kings Bet and BETnSport, as well as the newly-regulated Romanian gaming market with Rombet.
Even China, a notoriously difficult market to crack for outsiders, has proved to be a fruitful hunting ground for the company. Through a partnership with the country’s Sports Lottery it has rolled out table tennis, badminton, cycling and archery products.
Customer-centric approach
Rather than look to create a stable of proprietary content, Vermantia aims to develop new products based on its customers’ needs. Antonopoulos does not believe that it needs to have the same selection of products that its competitors have, but rather aims to show clients it can develop and enhance their gaming offering by meeting their specific needs.
Hence why it has partnered Kiron, Vsoftco and Inspired in Italy, and why it has developed the table tennis product in China.
“These are just two examples of why we believe that the customer centric approach is more important than the product centric approach,” he says.
But he admits that this has been informed by negative experiences.
“We lost a client in Italy because we argued for the Vsoftco football product to be included alongside Inspired’s solution,” he explains. “If we had been more content agnostic then, we wouldn’t have jeopardised it.
“You need to meet the interests and needs of each client. We pushed for something that would have improved our margins but it wasn’t right for that customer. For Intralot Italia, on the other hand, the same [Vsoftco] football game outperforms Inspired two to one.”
He believes distribution is key for virtual sports, citing Vermantia’s experience in China. In the country the supplier works with the Ministry of Finance, provincial authorities and lottery vendors that work with both these parties.
“It’s similar to the US – if you want to go into the US lottery industry you have to work with Scientific Games, IGT and Intralot, and at the same time you need general approval from state regulators, so you have to go through probity checks and other processes.
Having this understanding of each market allows Vermantia to better understand and develop its products based on what players are likely to enjoy. Rather than create a one-size-fits-all product offering it develops distinct strategies for each territory. This allows it to develop market-by-market without the hefty outlay that its competitors are making.
Conflicting strategies
This approach brings Antonopoulos into conflict with one of his good friends, Sportradar chief executive Carsten Koerl.
“If you ask Carsten Koerl we are dead in the water because it’s a graphics race. He believes visual improvements are key to success,” Antonopoulos says, laughing.
“We are talking about a gambling product; these products are never complete – the graphics, numbers, odds are never perfect. I think heavy investment makes a marginal difference as we are all doing motion capture, and if you put this in a graph I think you would find a small difference in quality for a major difference in investment.”
He points out that smaller games such as Keno continue to grow with very little change to the product. It’s the matrix behind the statistical probabilities that help the game be successful, not how the product looks, he argues.
He says that Koerl, and Betradar, believe in central investment, central delivery and central costs, whereas he believes in local investment, local delivery and local costs.
Antonopoulos freely admits that the performance of his friend and competitors’ business suggests he has the upper hand at the moment, but he believes that Vermantia will ultimately be vindicated by its strategy.
Heading to Blighty
This year will see Vermantia undergo a major change, with the business set to re-domicile in the UK after Antonopoulos bought out a minority shareholder. This gave him the opportunity to restructure the business, which led to further restructuring and ultimately the decision to move to the UK to give the company better exposure to the industry and investors.
Yet while more investment is the target, this is unlikely to lead to a stock market listing any time soon.
“A market listing or an exit is always in a company’s mind but I don’t think Vermantia is at that point,” he says. “If this comes sooner that’s great but if it comes later that’s fine.
“The funding we have is sufficient and we are very confident with our client pipeline and roadmap.”
By taking a different approach and tweaking its strategy to suit its customers, Vermantia may be capable of fighting its way through a crowded field to establish itself in markets where others may struggle. Inspired was once the only name associated with virtual sports but Betradar and Playtech have quickly made names for themselves. Vermantia may soon be an equally well-known brand in this growing space.
