Games as a service has the industry in a predicament

by Leave a Comment

Long gone are the days of penny arcade rooms and basic computer games. Multi-million dollar blockbusters have since taken hold and given way to a worldwide industry generating nearly $100 billion annually. Mobile games, retail games, free-to-play games, virtual reality, and esports are all segments of an industry that shows no signage of stopping.

When accounting for inflation, gaming has never been cheaper. A 2013 article by IGN details the high cost of gaming in the past compared to today. Cartridges for the Nintendo 64 that once cost $70 would require the equivalent of $100 at the time of writing in 2013. The Atari 2600 cost $199.99 in 1977 and with inflation that same console would cost $771.83.

Inflation aside, programs such as BestBuy’s “Gamers Club” which shaves 20% on new video games and the rise of second-hand stores such as GameStop have allowed gamers of all financial statures to participate.

As the decades have passed not only have games become theoretically cheaper, but their production values have increased as well. The 8-bit sprites of yesteryear have since moved on to high-resolution graphics that parallel real life. These graphics are often matched by movie-like stories and gameplay segments. But, as production values have increased exponentially so have the cost of creating video games.

For example: Star Wars: The Old Republic which released in 2011 had a development budget of nearly $200 million according to a story published by the Los Angeles Times. Grand Theft Auto V cost $265 million and the reboot of Tomb Raider carried a reported budget of $100 million.

How viable are such microtransactions? Very. This is why publishers ditched expansions in favor of them. In some cases publishers doubled down and now offer both.

The numbers above represent production costs and in some cases, do not reflect the amount needed to properly market the game, or the cost to keep the game alive post-launch. Many of these games carry multiplayer features which require continued maintenance and upkeep.

More so, the above games only represent a fraction of dozens of titles released annually. When looking at Game Informer’s 2017 release calendar, an average of 2-3 AAA quality videogames are released monthly. In peak months such as the summer, that number can quickly rise to over five.

With such a high cost of production and dozens of videogames on the market, video game publishers find themselves in need of generating revenue past the initial $59.99 entry point.  To generate more revenue to meet the rising costs of games, publishers have employed all sorts of tactics including, post-release content and pay-for cosmetic items, however, have since moved on to what is being deemed as predatory tactics in the form of loot boxes. These contents of these boxes are entirely random and can provide in-game boosts to lucky players. The battle between publishers, gamers, and now the governments of the world has the power to change the landscape of gaming forever.

Fifa 18 costs 59.99, but to truly be competitive, one must buy into the game. Coins and other items to get marquee players are sold at retailers and within the games themselves.

Originally video games were items that you bought once, however, publishers now see video games as a service. In the same vein that fans of Netflix original shows subscribe to the service above Hulu, avid fans will continue to pay into the game for added content. The shift in the landscape has tripled the value of the industry according to VG247.  At the same time this idea creates strife in that, if games are indeed a service, where fans buy into a game over time, then the game should not cost as much as it does upfront. It’s unreasonable to expect someone to purchase a game once and devote that same amount of money into it through microtransactions to remain competitive.

The idea of games as a service and loot boxes boiled over during the release of Star Wars Battlefront 2. The game aimed to improve on all the misgivings of its previous entry, but it was everything but that. Following the current trend, it carried loot boxes. The loot boxes would carry cards that help enhance a player’s ability. It was an entirely possible to play the game without ever buying them, but it was just as possible for people to get ahead quickly, creating an uneven playing ground. The game in short resembled mobile games and their pay-to-win aspects.

Much of the Playstation store for Madden is for coins to purchase card packs to boost in game play.

EA would remove the feature to purchase with real cash after gamers spoke out in droves, but those who had already acted in the lead up to the game were free to keep their earned items. It is still possible to purchase said boxes, only with in-game currency earned from playing.

As a result, it has been reported by CNBC that EA’s stock has been wiped of 3.1 billion. Still, even with such a high magnitude loss, the company is still up 39% year to date because Star Wars is only one of its many franchises and is not the only game to feature such transactions that boost revenue.

In the time since, many governments have been attempting to deal with how to tackle the issue. Loot boxes by nature tread the line of gambling. Much like a slot machine, a player pays for the box and through RNG, three or more items appear in the same vein that numbers would in casinos. And just like a casino, the odds of winning the big one, or in this case the best perks are never disclosed. More so, unlike casinos there is no oversight.

In China, the Commerce Government requires that the odds of loot boxes are disclosed to gamers. Where games such as StarCraft and League of Legends are most popular, players found that the odds of getting rare items were slim. In Dota 2, it was revealed that an epic skin, had a 2% chance of dropping. Unfortunately, publishers have found a loophole as only the Chinese version is required to do so and it is possible for such drop rates to be boosted.

Other governments have also hopped on board including Belgium where the Gaming Commission announced it has opened a case regarding the boxes and their gambling nature. Companies involved with gambling are required to have a license to operate. More so, minors and those suffering from addiction are forbidden to play or purchase

How did loot boxes come about? It wasn’t overnight. Honest post-release content became an unreliable source of income in the wake of multiple AAA titles being released monthly.

.

No ruling has been met, however, a transcription from Belgian news site RTBF and a concurrent report states that the country recognizes the difficulty in regulation utilizing current laws. It calls for “closer cooperation between governments, software developers, and rating agencies.” It also states that “with the right rules and consistent enforcement,” it should be possible to “protect players from the harmful effects of gambling without compromising,” the games.

In the United States, Representative Chris Lee (D) of Hawaii held a press conference days after the release of Battlefront 2. In it he denounced the predatory tactics utilized by EA and hoped to introduce legislation to combat of boxes found not only in Star Wars, but other games as well.

Lee, an avid gamer, said in an interview, “There’s a huge portion of the population outside what we might consider the die-hard gaming community.” Citing large discounts on video games during the holidays Lee continued, “…They’re looking for good deals on Christmas gifts not knowing what kind of mechanisms are built into games and ultimately systems their unaware of. It’s that large market space that continues to drive revenue.”

In a video published on YouTube, Lee outlined his proposed legislation, which includes prohibiting videogame sales containing “gambling mechanisms” to anyone under the age of 21. It would cover titles that carry a “percentage chance” of obtaining an item, rather than the item itself. He’s also seeking an “accountability piece” to ensure that drop rate changes do not occur, almost ensuring that such rates be revealed like in China.  Lee hopes that other states can join in to help drive change.

Grand Theft Auto’s “Shark Card” currency is utilized to buy new clothes for characters and vehicles. It has no impact on the game whatsoever, but is a cash cow. Now imagine if such cash did have an impact on play.

Currently, the Entertainment and Software Rating Board does not label games with such features as gambling. The ESRB which assigns ratings to games from E for Everyone to M for Mature with descriptors has categories for both Real and Simulated Gambling. The criteria for them to be utilized would necessitate that real cash be involved or that players can wager without real cash. Any game with either would receive an Adults Only rating which prohibits anyone under the age of 18 from purchasing. Just as major movie theatres shy away from showcasing NC-17 films, major retailers refuse to sell AO rated games.

While many are questioning the legitimacy of the ratings due to the nature of the boxes, a spokesperson said in a statement to Kotaku: “While there’s an element of chance in these mechanics, the player is always guaranteed to receive in-game content (even if the player unfortunately receives something they don’t want). We think of it as a similar principle to collectible card games.”

However, unlike collectible card games, the items received in such boxes do not have much, if any resale value. EA’s Ultimate Team mode allows the resale of lesser tier cards for values less than the initial purchase, while other games do not.

A few lucky players received cards that made the Boba Fett character nearly invincible. Other players who rolled loot boxes received emotes which do not boost the in-game abilities of players. RNG mechanics help determine the winners and losers.

What’s most concerning about videogame ratings is that the ESRB is an organization part of the larger Entertainment Software Agency. The ESA is a trade industry that carries members from the top publishers and developers in the world.

While the governments of the world work towards outlawing such predatory tactics, gamers across the globe currently find themselves stuck in the middle. While it would appear easy enough to not purchase a game like Star Wars Battlefront 2, it is difficult for avid fans to stay away.

Joseph Mellinger, a student at Penn State University and Star Wars fanatic has staved off buying the latest release in response to the loot box controversy. Still, he admits to having participated in the practice before, particularly in EA’s “Madden” series of titles. “That rush of possibly pulling something great grabbed me.”

That risk-reward nature is what grabs players and what governments are trying to combat. The hope of getting something good after receiving less than stellar items is what drives them to continue buying. It’s what drove players such as Reddit user, Kensgold to dump over $10,000 into microtransactions. Players like him are classified as ‘whales’ and according to Venture Beat make up less than 2 percent of gamers, but drive more than half the revenue through microtransaction purchases.

Kensgold posted an open letter on Reddit denouncing the loot boxes in Battlefront 2, citing his own experiences as cause for concern. In an interview he said, “At that point I had already set the precedent that dropping 100 bucks was not all that big a deal…I was in high school with almost no bills to speak of.”

Kensgold receipts for purchases on items

He hopes that publishers can take note of stories like his and help push the industry forward positively. “I would love to see publishers as a whole take a step back and look at what methods and strategies they are using to make money, how those strategies work, and what positive or negative effects they can have on their consumer base.”

The next few weeks and months of gaming will prove to be highly interesting. While EA has stated on record that they will bring back the microtransactions present in Star Wars Battlefront 2, it has yet to be seen when they will do so. It can be inferred that they are waiting for the theatrical release of the Last Jedi to boil over before doing so.

It will be equally as interesting to see what occurs in next year’s slate of titles. EA will once again be releasing its annual slate of sports titles, all of which will continue the trend. Likewise, games such as Call of Duty, which recently incorporated such boxes will also be released.

Finally, as we head to the future, should such practices be outlawed, it remains to be seen how games will be priced or developed to generate profit. It is entirely plausible that games become more expensive to make up for money lost. Likewise, it is equally as plausible that production values of games drop.

For an industry that shows no signs of stopping it has quite the dilemma on its hands.

SOURCES:

https://kotaku.com/ea-temporarily-removes-microtransactions-from-star-wars-1820528445

https://kotaku.com/battlefront-overwatchs-loot-boxes-under-investigation-1820486239

https://kotaku.com/hawaii-wants-to-fight-the-predatory-behavior-of-loot-1820664617

http://www.pcgamer.com/belgium-says-loot-boxes-are-gambling-wants-them-banned-in-europe/

https://www.rtbf.be/info/medias/detail_non-la-belgique-n-a-pas-qualifie-star-wars-battlefront-ii-de-jeu-de-hasard?id=9769751

https://ds1.static.rtbf.be/uploader/pdf/d/d/b/rtbfinfo_5c742f9b8996afe274e39ad9b4acb453.pdf

https://www.cnbc.com/2017/11/28/eas-day-of-reckoning-is-here-after-star-wars-game-uproar.html

The Video Game Loot Box Problem Goes Deeper Than Star Wars: Battlefront II

http://www.gamesindustry.biz/articles/2016-03-02-eas-ultimate-team-earning-around-usd650-million-a-year

Battlefront II goofed, but gamers are still spending more on additional content

https://www.giantbomb.com/dlc-season-pass/3015-7186/

https://www.thedailybeast.com/an-obituary-for-the-online-pass-why-you-cant-charge-us-for-used-video-games

http://www.eurogamer.net/articles/2013-03-26-tomb-raider-has-sold-3-4-million-copies-failed-to-hit-expectations

Worldwide game industry hits $91 billion in revenues in 2016, with mobile the clear leader

https://kotaku.com/how-much-does-it-cost-to-make-a-big-video-game-1501413649

Star Wars: The Old Republic — the story behind a galactic gamble

https://www.cinemablend.com/games/Capcom-Gets-Busted-Disc-DLC-Discovered-Street-Fighter-X-Tekken-40114.html

http://www.rollingstone.com/glixel/features/loot-boxes-never-ending-games-and-always-paying-players-w511655

Videogames Can’t Afford to Cost This Much

What it means to be a ‘whale’ — and why social gamers are just gamers

 

Are video game loot boxes gambling? China and Belgium seem to think so.

by Leave a Comment

It’s no new, news that video games and their accompanying systems are cheaper than ever. A case study by IGN found that when accounting for inflation, video games in the modern era are certainly more cheaper than in the past. A $50 PS2 game in 2005 is worth $60 today and more drastically a $70 Nintendo 64 cartridge is worth approximately $100. However, while games can be seen as significantly cheaper in today’s era, the expenses for creating video games has certainly gone up.

A leaked development contract for 2014’s Destiny outlined budgetary payments of $140 million dollars.

The above represents just one game of dozens that are released throughout the year. When looking at the 2017 release calendar, at least two AAA games were released between January and December, all of them carrying comparable budgets.

While games have become undeniably cheaper when accounting for inflation, publishers still find themselves in need of money past the initial $60 entry fee.

Several years ago publishers began to offer content post-launch to increase longevity. Much of the content amounted to scrapped ideas for maps, weapons, and characters. Simply not purchasing the content carried no negative results.

In the years following publisher tactics have become more aggressive. Season passes as they are titled simply aren’t profitable given the nature of multiple releases a month. Console games have since taken on an approach seen in mobile gaming in which in-game purchases are encouraged to receive immediate benefits.

Much of these micro-transactions involve in-game currency which can be used to purchase items such as collectibles or cosmetics. Scaling from as low as a few bucks to as much as over $100 real dollars, these transactions aren’t necessary and can be completely ignored. For publishers, they are a lucrative opportunity to generate serious cash-flow. For example, Take-Two Interactive which is responsible for the Grand Theft Auto series reported in August nearly $500 million in profits from their in-game currency in just three months time.

Electronic Arts which became the exclusive publisher for Star Wars video games after Disney acquired the Star Wars IP for the paltry sum of just over $4 billion has released two titles in the years since.

In 2015 to coincide with the release of The Force Awakens, EA released Star Wars: Battlefront, a reimagining of the popular series on the Playstation 2 era of consoles. The game was reviewed well, however, sorely lacked content. Many maps and characters were held from release and were bundled part of the Season Pass which retailed at a whopping $50, nearly 90% of the cost of the base game.

Many fans at the onset of the release felt slighted. Eventually, EA discounted the base game within weeks of release to bring up the total cost to around what the base game originally was selling for. The game was reported to have sold-through 14 million copies in one year’s time.

Two year’s later and EA has released its sequel. It has more maps, more modes, and more characters. Downloadable content was even revealed to be free.

In place of a customary season pass, the game instead launched rife with mobile-esque micro-transactions transactions, however, unlike other games that offer pure cosmetics, these micro-transactions offered actual statistical advantages for players who chose to put down real money.

The problem runs much deeper than that. These in-game advantages are tied behind loot boxes. These boxes are entirely random and purchasing one does not have any guarantees. While they do carry the possibility of obtaining an in-game advantage item, it is entirely possible that a player receives purely cosmetic bonuses such as emotes.

Granted, these boxes also vary in cost with the most expensive of the bunch all but ensuring some sort of advantage. Those who wish not to participate in such practices are essentially left behind. More so, those do participate can come up empty handed much like real-life gambling.

The ensuing backlash from fans over their predatory nature and construction of an uneven playing ground forced EA to remove them for the time being, however, since then many have wondered whether such boxes should be made available at all.

In the time since then the Belgium Gaming Commission announced that it has opened a case in regards to these boxes and their slot machine like nature. Because players are unaware of what is inside, many are linking it to gambling. When spinning a slot machine, it is unknown what you’ll win if anything. In Belgium, companies involved with gambling are required to have a license in order to operate. More so, minors and those suffering from addiction are forbidden to play.

In China steps have already been taken in response to these practices. In March, developers of games featuring random loot boxes are required to reveal the odds of players receiving specific items. In one instance a rare item in free-to-play title Dota 2 has a mere 2% chance of appearing when players pay for one such box.

It has been reported, however, that it is only required for the Chinese version of the game to release such odds and it’s entirely possible that developers could boost drop rates in China in order to save face. Still, it is the first actual step in an effort to make consumers aware of what lies inside these boxes and potentially put these practices away for good.

In the time since this fiasco, EA’s stock has dropped 2,5% as of Friday, the release date of Battlefront II. In the entire month of November, it has seen its stock dip by 7% overall.

It remains to be seen where the company goes from here. They are stuck in a terrible predicament. The development of Battlefront II required three entirely different studios to complete the game which certainly wasn’t cheap. Throw in an aggressive marketing campaign and other costs and the game rivals the financial commitment of its movie brethren.

Star Wars itself is a large IP and while it would be easy to offer pure cosmetic bonuses in place of in-game advantages, that simply cannot be allowed. Each cosmetic variation would have to be approved by Disney and Lucasfilm and because Darth Vader has already been established to look a certain way, it is almost impossible to imagine some variation being allowed. As with such to help recoup costs from such an expensive development, this is almost the only logical way to do so, however, at the expense of players.

With the game releasing so close to another mainline Star Wars film, these boxes will have to be on hold for the time being. Disney won’t allow negative press to impact the release of The Last Jedi. In the time following the release, players will move past the game and the money that could have been made will be for naught. At that point the studio finds themselves at a loss, and potentially losing a huge IP.

Not only does this tale have future implications on the Star Wars video game franchise, but on gaming as a whole. If said boxes are considered gambling, than other huge franchises such as Call of Duty will find themselves in a similar predicament. At that point will games leave behind their cheap nature in favor of a higher upfront cost? All of this will be seen in the coming months and years.

References:

http://www.gameinformer.com/b/news/archive/2016/10/10/2017-video-game-release-schedule.aspx

https://kotaku.com/how-much-does-it-cost-to-make-a-big-video-game-1501413649

http://www.ign.com/articles/2013/10/15/the-real-cost-of-gaming-inflation-time-and-purchasing-power

http://www.ign.com/articles/2016/05/10/star-wars-battlefront-sales-top-14-million

https://www.theverge.com/2015/10/12/9512397/star-wars-battlefront-dlc-season-pass

https://www.gamespot.com/articles/gta-5s-online-mode-has-generated-half-a-billion-do/1100-6438765/

https://www.engadget.com/2017/08/03/gta-online-take-two-earnings/

https://www.theverge.com/2017/5/2/15517962/china-new-law-dota-league-of-legends-odds-loot-box-random

https://www.pcgamesn.com/dota-2/dota-2-treasures-china

http://money.cnn.com/2017/11/16/technology/battlefront-ii-star-wars-game-ea-costs/index.html

https://www.gamespot.com/articles/ea-stock-price-drops-after-star-wars-battlefront-2/1100-6455080/

The war on washing machines

by Leave a Comment

Washing machines are a common figure in nearly every household. They’re bought by many, are made by an array of manufacturers and sold at a variety of retailers. While most people think about the features and prices of various washing machines, they never often think about where those machines come from. In comes the latest challenge for President Donald Trump.

In the last several years washing machines have traditionally been sold by three brands: Whirlpool, LG, and Samsung.

Whirlpool, a U.S. based company employs thousands of factory workers in areas such as Clyde, Ohio. As most manufacturing jobs have shrunk nationwide, Whirlpool has endured and in some instances thrived. They brought back factory operations from Mexico and Germany and even absorbed regional competitors such as Maytag according to the Los Angeles Times.

But, Whirlpool was not prepared for the competition that would arise from foreign competitors, LG and Samsung, both centered in South Korea. The two companies in recent years allegedly committed foul trade moves including trade dumping. This would lead Whirlpool to file a rare trade complaint against them. While LG and Samsung have been accused of dumping products at extremely low prices, the complaint targets their choice in moving plants to different countries to avoid paying duties the United States has imposed.

In early October, the United States International Trade Commission voted 4-0 to review the complaint and determine possible next steps.The Los Angeles Times reports that an independent panel will consider protectionist policies to recommend to Trump. Trump who in the past has gone on record to support protectionist policies in order to protect American businesses now must decide if such policies are necessary to protect Whirlpool.

The president has the authority to enact wide sweeping barriers in order to protect American businesses in the event that they were harmed by the activity of overseas competitors.

TraQline estimates that Whirlpool went from a 22.6 percent market share in 2008 to just 17.4 percent by mid 2017. Meanwhile, LG and Samsung have seen their market shares in the washing machine department grow. LG grew from 12.6 percent to 16.2 percent in that same time period. Samsung experienced the most drastic increase going from a mere 1.7 percent share to nearly 20 percent.

However, the issue is not black and white. Such wide sweeping tariffs if enacted, can go on to have ripple effects in the job industry, something Trump has also gone on record to promoting. “I’ll be the greatest jobs producer that God ever created,” said Trump in a January speech.

https://twitter.com/MashableNews/status/819223281207083009

Both manufacturers have announced plans to build factories in the United States. LG announced in February it would build a $250 million washing machine factory in Tennessee that would create 600 jobs. In June, Samsung announced plans for a $380 million factory in South Carolina that would be dedicated to building home appliances of which washing machines will be part of.

This would not be the first time that the United States government has had a battle between washing machine manufacturers. In 2013, under the Obama administration, the Times reported that the United States imposed duties on South Korea and Mexico for similar reasons. More so, in early 2017 similar duties were imposed on China. Whirlpool alleges that business had moved to China after 2013. Now the company is alleging that Vietnam and Thailand are home to manufacturing plants.

The committee must send their recommendations by December 4 and any type of action taken by Trump will undeniably be challenged by the World Trade Organization. The WTO in 2003 struck against steel tariffs imposed by President George W. Bush in a case that closely resembles this one.

This isn’t the only situation regarding protectionist policies that Trump is dealing with. He is also considering steel tariffs similar to Bush while also researching intellectual property protection from Chinese incursions.

Nonetheless, the president finds himself in another sticky situation. Both jobs and trade were focal points of his campaign and any one action taken on either side can have damaging effects on the other. It will be interesting to see where the war on washing machines goes from here. The silver lining is that disputes such as this are part of many that the WTO deals with and a firm answer could take years.

Sources:

http://latimes.com/business/la-na-ohio-trade-battle-20171005-story.html

http://money.cnn.com/2017/10/06/news/whirlpool-samsung-us-south-korea-trade/index.html

 

 

As PASPA repeal begins, leagues gear up for the inevitable

by Leave a Comment

After more than two decades, the Supreme Court has agreed to hear the repeal of the Professional and Amateur Sports Protection Act. PASPA, a federal law enacted in 1992, outlaws single-game sports wagering outside of Nevada. While opening arguments will commence in early December, a decision will likely not be reached until early 2018.

Still, this is the furthest that the argument for a modernized and regulated sports betting market has ever reached. A decision in favor of repealing the law, which the state of New Jersey has claimed is unconstitutional, can unlock a market worth several billion dollars.

Leagues have tried to distance themselves from gambling, however, as disruptions occur, gambling has become the newest medium for sports fans and even non-sports fans to enjoy the game.

Leagues now find themselves in unfamiliar territory and must adapt to the future while upholding the integrity of the game or be left behind. A regulated and legalized market across 50 states could prove to be the catalyst for major change and the loss or gain of billions of dollars.

Fortunately, while the Supreme Court gears up to hear opening arguments in this case, leagues across the world have begun to prepare for what is seen believed to be the inevitable. Through partnerships, changes in stances, and sponsorships, leagues have been preparing for quite some time.

PASPA was enacted to protect the sanctity of the game. Fears of point shaving and match fixing forced the public and Congress to accept a bill that would seemingly fix such problems. Prior to PASPA states such as Oregon and Delaware offered sports parlay cards through their state lottery. However, in the years since daily fantasy leagues have taken their place in American society, sports leagues have taken sponsorships from casinos, and most importantly have led way to an offshore illegal market worth $150 billion.

Take for example the popular NCAA March Madness tournament. The annual affair draws fans from across the United States to fill out tournament brackets in which they predict who will move on.

In recent years, more and more fans have turned towards wagering their picks online through various websites such as Bovada and BetUS. There can bet on individual teams, current matchups, future matchups, and the title game itself.

The American Gaming Association estimates that roughly 40 million people fill out 70 million brackets with the average bet per bracket hanging around $29. This year, the AGA estimated that Americans wagered $10.4 billion dollars on March Madness, but only 3 percent, or roughly $295 million, will have been done so legally through Nevada sportsbooks.

While the Supreme Court has agreed to hear the repeal of PASPA, it does not come on the heels of the unfounded fears against match fixing or the billions of dollars being pumped into organized crime, but rather if PASPA violated the 10th amendment and state sovereignty when it was enacted. Nonetheless, the result of this decision can lead way to ending such widespread problems.

SportRadar, a company that deals with sports data related to teams and players partnered with three of the four biggest leagues in the United States. The company provides real-time statistics for NFL, NBA, and NHL games and players. In addition to providing statistics used by broadcasters and bookies worldwide, SportRadar also monitors and reports on unusual betting trends. The company is also the parent company of BetRadar, a major player in the gambling industry.

Likewise, the MLB which represents the fourth biggest league in the United States, has a partnership with Genius Sports, which acts in the same manner as SportRadar. Its executives met with sportsbook operators in September to gain a better understanding of how the industry operates.

These partnerships with data companies provide a stark shift in stance compared to just one decade earlier, when representatives from the four major leagues filed a letter dismissing the idea of monitoring books and the data that make them up.

Apart from partnering with outside agencies, the NFL and NHL have both elected to move and create franchises in Las Vegas. The Oakland Raiders of the NFL are set to arrive in 2019, while the Las Vegas Golden Knights opened play this past month.

Attendees of Golden Knights home games will be able to readily bet within the confines of the T-Mobile Arena. The NHL had the opportunity to file a prohibition preventing sports betting from occurring as the game happens, however, elected not to.

The NFL in recent years has held games in London, where sports betting is regulated and legal. Outside of moving the Raiders to Las Vegas, the NFL has also eyed creating a franchise in London where it is set to play several games this season featuring marquee teams. Fans at these games are can bet on their phones and outside in the streets before, during, and after the game. The ability to gamble in-game without the result being compromised is a look at the potential for such a feature in the United States.

NBA commissioner Adam Silver wrote in 2014 in the New York Times, “Times have changed since PASPA was enacted,” Silver said in his piece. “I believe that sports betting should be brought out of the underground and into the sunlight where it can be appropriately monitored and regulated.”

Should PASPA be repealed, over a dozen states have already filed legislation this year that would permit wagering on sports in some way. The AGA estimates that a legal sports betting market would provide over 150,000 in jobs, a substantial estimate given that a large majority of gambling takes place online and not physically.

Steve Doty, director of media relations, says that the company is committed to moving past PASPA in favor of a legal and regulated market. “AGA is committed to overturning this failing federal ban on sports betting; once it is removed, AGA looks forward to leading the conversation in states across the country to educate local lawmakers on sports betting.

Company Eilers & Krejcik Gaming has taken a conservative approach to estimating the potential for a legal and regulated betting environment. They estimate in a base case that by 2023, if 32 states were to legalize sports betting in some form, the market will be worth approximately $6.03 billion in annual revenue.

If every state were to legalize gambling, including online wagering, the number expands to $16 billion, which comes from $245 billion taken in. While $245 billion is estimated to be taken in keep in mind that a large portion is often paid out.

All of this comes on the heels of a Washington Post poll published in September, which sees more than half of Americans supporting a legal and regulative sports betting environment. 55 percent approve of such an environment, which serves as a considerable shift from nearly 25 years ago, when PASPA was first enacted and 56 percent of Americans disproved of legalized sports gambling.

In the decades since PASPA was enacted the landscape of gambling and sports has grown closer and as with such more people are willing to accept it as a medium. While sports and the leagues that govern them did their best to distance themselves, they can’t help, but find themselves growing closer together. One factor to this close relationship is the rise of fantasy sports.

In 1988 before the dot com boom, Fantasy Sports Trade Association details that an estimated 500,000 players were engaged in weekly/daily fantasy sports.

Between 1991 and 1994 that number grew upwards to three million and now in 2017 has reached an all-time high of 59.3 million people.

Amongst leagues themselves people began to bet on individual games and between each other’s teams. This interest would lead way to companies such as DraftKings and FanDuel to sprout up and offer daily fantasy sports with the benefit of being able to bet and win money with people from across the United States.

The act of fantasy sports gambling is not inherently illegal even though it requires users to pick players from different teams and earn points based off their real-life performances.

Eventually more sophisticated gambling involving parlays and futures among other means would find its way into sports fans lives and lead way to the multi-billion-dollar industry aforementioned.

All of this begs the question: Why are leagues finally warming up to any of this? The answer is a lot simpler than most would imagine.

It’s no secret that television is a dying medium. The age of cord-cutting is fully underway and more and more people are cutting their cable bill down or outright eliminating it altogether. In some instances, people have turned their attention to online streaming services such as Hulu or Netflix and in other instances people have left television behind altogether.

This greatly impacts sports as a large majority of league revenue comes from various deals that allow channels such as ESPN and Fox the ability to broadcast games and utilize footage across their various platforms and shows.

Take for example ESPN and the NBA. In 2014, the NBA struck a deal with ESPN and Turner Sports for nine years, $24 billion, a 180 percent increase in money for the league.

With such a large deal it can be assumed that ESPN is drawing record viewers and must keep up with the demand, however, that cannot be further from the truth. Reuters reported that ESPN is losing viewers at an alarming rate. 88.4 million households carry ESPN as of December 2016. In February 2011 that number was well over 100 million.

Not only are more and more ditching cable, but their simply not tuning in. The NBA recently faced a problem in which marquee players such as Lebron James and Stephen Curry opted not to play in throwaway matchups in favor of rest, knowing full well that their teams would make it to the postseason.

While the league has done its best to limit that issue this upcoming season by working around the schedule to limit the number of back-to-back matchups, the problem remains. The Wednesday matchup that ESPN paid millions to bring to viewers between San Antonio and Golden State is now boring by default. Less viewers equals less advertisers and less advertising dollars puts companies like ESPN in the red and eventually force them to lay off staff to cope.

When the nine-year deal between the NBA and ESPN is up and the numbers are looked at, the NBA and ESPN will strike a much lower deal if any deal at all. The NBA will now be out of billions and will need to recuperate it in some way.

As with such leagues such as the NBA must pivot now more than ever to where fans are currently flowing and that is the world of gambling. Daily fantasy sports as well as gambling parlays and futures are currently dominating fans as the newest way to enjoy the games and make some money as well.

It’s highly self-contained and does not require participants to sit down and physically watch the game. In-fact many of these websites carry with them explainers on how to get involved as well as daily articles relaying information on why (X) team is expected to win over (Y) team and why player (A) is projected to hit a homerun against pitcher (B).

Utilizing factual statistics brought to participants by the various data companies outlined above is more logical than listening to hosts and commentators rant about the intangibles of the game such as why player (C) does not historically play well at sundown in Houston in October on a Tuesday. Suddenly, now even the shows on these networks become an even bigger afterthought then the games that drive the conversation.

Leagues are now in a way forced to move towards the future for fear of being left behind. At the same time, there is a lot to fear if you are a commissioner of any one of these leagues. Because the leagues themselves will not hold individualized betting websites sponsored by them, they must think of new ways to drive revenue.

The partnerships outlined above are one such example as are sponsorships such as DraftKings owning a restaurant within the Staples Center which is home to several professional sports teams.

However, partnerships and sponsorships alone are not nearly enough to make up the billions that will eventually be lost in television deals. In a potential future where television viewership is in the low millions and attendance continues to stagger, how can leagues and individual teams turn a profit.This is what makes the December opening arguments for PASPA interesting and most importantly, supremely significant for leagues.

https://www.huffingtonpost.com/entry/just-admit-the-nba-deal-is-screwing-you-espn_us_58d98250e4b0e6062d92300f

Industry Demographics

Poll: For first time, majority of Americans approve of legalizing sports betting – The Washington Post

Recent U.S. gambling legalization: A case study of lotteries – ScienceDirect

U.S. Sports Betting: A Sector On The Cusp Of Major Change | GamblingCompliance

Gambling – Where does sports betting legalization in the U.S. stand right now?

Sports Betting Ban Has ‘Perverse Effect,’ Says Casino Group – Poker News

NFL’s presence in UK shows how gambling can be done

March Madness Betting to Top $10 Billion | AGA

 

As PASPA repeal begins, leagues gear up for the inevitable

by Leave a Comment

After more than two decades, the Supreme Court has agreed to hear the repeal of the Professional and Amateur Sports Protection Act. PASPA, a federal law enacted in 1992 outlaws single-game sports wagering outside of Nevada. While opening arguments will commence in early December, a decision will likely not be reached until early 2018. Still, this is the furthest that the argument for a modernized and regulated sports betting market has reached. A decision in favor of repealing the law, which the state of New Jersey has claimed as unconstitutional can unlock a market worth several billion dollars.

While the Supreme Court gears up to hear opening arguments in this case, leagues across the world have begin to prepare for what is seen as the inevitable. Through partnerships, changes in stances, and sponsorships, leagues have been preparing for quite some time. In the two decades-plus since PASPA was first enacted, the world of sports has greatly changed.

PASPA was enacted in a way to protect the sanctity of the game. Fears of point shaving and match fixing forced the public and Congress to accept a bill that would seemingly fix such problems. However, in the years since daily fantasy leagues have taken their place in American society, sports leagues have taken sponsorships from casinos, and most importantly have led way to an offshore illegal market worth $150 billion dollars.

Take for example the über popular NCAA March Madness tournament. The annual affair draws fans from across the United States to fill out tournament brackets in which they predict who will move on. In recent years more and more fans have turned towards wagering their picks online.

The American Gaming Association estimates that roughly 40 million people fill out 70 million brackets with the average bet per bracket hanging around $29. This year the AGA estimated that Americans wagered $10.4 billion dollars on March Madness. Of the $10.4 billion wagered, only 3 percent or roughly $295 million will have been done so legally through Nevada sportsbooks.

What’s important to note is that while the United States Supreme Court has agreed to hear the repeal of PASPA, it does not come on the heels of the issue of the unfounded fears against match fixing or the billions of dollars being pumped into organized crime, but rather if the law violated the 10th amendment and the sovereignty of states when it was first ushered in. Still, the result of this decision can lead way to ending such widespread problems.

SportRadar a company that deals with data is partnered with three of the four biggest leagues in the United States. The company which provides real-time statistics for the NFL, NBA, and NHL. In addition to providing statistics used by broadcasters and bookies worldwide, SportRadar also monitors and reports on unusual betting trends. The company is also the parent company of BetRadar, a major figure in the gambling industry.

Likewise, the MLB which represents the fourth biggest league in the United States has a partnership with Genius Sports which acts in the same manner as SportRadar. Its executives met with sportsbook operators in September to gain a better understanding of how the industry operates.

These partnerships with data companies provide a stark shift in stance compared to just one decade earlier when representatives filed a letter dismissing the idea of monitoring books and the data that makes them up.

Outside of partnering with outside agencies, the NFL and NHL have both elected to move and create franchises in Las Vegas respectively. The Oakland Raiders of the NFL are set to arrive in 2019, while the Las Vegas Golden Knights have opened play this past week.

Attendees of Golden Knights home games will be able to readily bet within the confines of the T-Mobile Arena. The NHL had the opportunity to file a prohibition preventing sports betting from occurring as the game happens, however, elected not to.

The NFL in recent years has held games in London, England where sports betting is regulated and legal. Outside of moving the Raiders to Las Vegas, the NFL has also eyed creating a franchise in the country. The ability to bet in-game without the result being compromised is a look at the potential for such a feature in the United States.

NBA commissioner Adam Silver wrote in 2014 in the New York Times, “Times have changed since PASPA was enacted.” “I believe that sports betting should be brought out of the underground and into the sunlight where it can be appropriately monitored and regulated.”

Should PASPA be repealed, over a dozen states have already filed legislation this year that would permit wagering on sports in some way. The AGA estimates that a legal sports betting market would provide over 150,000 in jobs.

Steve Doty, Director of Media Relations, says that the AGA is committed to turning over PASPA and leading the conversation. “AGA looks forward to leading the conversation in states across the country to educate local lawmakers on sports betting.”

Company Eilers & Krejcik Gaming has taken a conservative approach to estimating the potential for a legal and regulated betting environment. They estimate in a base case that by 2023, if 32 states were to legalize sports betting in some form the market will be worth approximately $6.03 billion dollars in annual revenue.

If every state were to legalize gambling, including online wagering, the number expands to $16 billion dollars which comes from $245 billion taken in.

All of this comes on the heels of a Washington Post poll published in September which sees more than half of Americans supporting a legal and regulative sports betting environment. 55-percent approve of such an environment which serves as a drastic shift from nearly 25 years ago when PASPA was first enacted and 56-percent of Americans disproved of legalized sports gambling.

 

Poll: For first time, majority of Americans approve of legalizing sports betting – The Washington Post

Recent U.S. gambling legalization: A case study of lotteries – ScienceDirect

U.S. Sports Betting: A Sector On The Cusp Of Major Change | GamblingCompliance

Gambling – Where does sports betting legalization in the U.S. stand right now?

Sports Betting Ban Has ‘Perverse Effect,’ Says Casino Group – Poker News

NFL’s presence in UK shows how gambling can be done

March Madness Betting to Top $10 Billion | AGA

 

Big companies have Brazil addicted to junk food and its a problem

by Leave a Comment

A recent investigative report by the New York Times highlighted Brazil’s addiction to junk food and the problem it has created. Companies like Nestlé and Coca-Cola among others have seen decreased profits in wealthy countries have since moved to poorer countries spread out in Latin America, Asia, and Africa. More so, these companies have brought their products directly to consumers by hiring local workers to take and deliver orders by foot. In doing so Brazil is now facing an obesity problem and much larger problems in productivity and job security as a result.

Employees of companies such as Nestlé travel across the country taking and delivering over 800 products. Customers have until the end of the month to pay for their purchase and often find themselves overindulging as a result. While the company does highlight its many healthy products the Times article did note that many end up resorting to foods high in fats and processed ingredients while offering little to no health value despite being advertised otherwise.

The report highlighted the drastic change In the health of the Brazilian people. In 1980, 7% of Brazil was considered obese. That number has since doubled to over 18%. This is directly attributed to the availability of packaged foods. From 2011 to 2016, packaged food sales grew by 25 percent worldwide compared to only 10 in the U.S. Even scarier is the sales of soft drinks which in Latin America have doubled and have since overtaken the North American region in sales.

The problem is much larger than just obesity. Companies such as Nestlé have provided thousands of men and women with jobs that pay very well. What the Brazilian government could not do, Nestlé has. The Times article chronicled a woman who with this job was able to purchase a refrigerator, television, and stove with her earnings and has since elected to save money for a new home.

With so many people becoming obese and being diagnosed with concurrent ailments such as diabetes it doesn’t help that the Brazilian healthcare system is ‘broken.’

In a report by Al Jazeera just before the onset of the Rio Olympics it was reported that federal government experienced a budget shortfall. Hospitals in the area were literally turning people away because they could not service any more patients. Some hospitals lacked basic medical supplies such as saline. Public funds were also misappropriated with $12 million USD going to a social organization contracted to support local hospitals.

Not only are hospitals suffering, but so are farmers. Fields once strewn with vegetables and fruit that comprise a healthy diet have since been replaced by soybeans, corn, and sugar. These ingredients make up the bulk of ingredients that make up processed foods.

The website WITS tracks trade statistics for countries. In 2010, soy beans were the third most exported good by Brazil. Raw cane sugar followed suit in fourth place. Both exports had a U.S. value of $11 and $9 million respectively.

Flash forward to 2015 and soy beans in particular have overtaken the top spot as the most exported product in Brazil. In five years time what was once an $11 million dollar industry has since ballooned to nearly $21 million. Cane sugar stayed in the same spot with a loss of around $3 million.

The country of Brazil is in a very tough spot. While such large corporations have certainly hurt the health of its people as well as the productivity of the country, thousands are benefiting in ways they could not previously. It will be interesting to see where Brazil goes from here.

Sources:

http://wits.worldbank.org/CountryProfile/en/Country/BRA/Year/2010/Summarytext

http://wits.worldbank.org/CountrySnapshot/en/BRA/textview

http://www.aljazeera.com/indepth/features/2016/02/brazil-broken-healthcare-system-160204075525812.html

How Big Business Got Brazil Hooked on Junk Food – The New York …

 

 

 

 

 

California’s housing crisis: What gives?

by Leave a Comment

It’s no new news that California is experiencing a housing crisis. Just how bad the crisis is might surprise you.

The San Jose Mercury News published an in-depth investigation into the current crisis and finally answered the question: “What gives?” and most importantly “What’s next?”

Home ownership in California is at an all-time low since World War II. The average home price is 2.5 times higher than the average price nationally. With a median cost of around $437,000 more and more people are choosing to rent instead of buy.

While renting may seem like the better option it still takes a toll on residents as nearly 70 percent of poor Californians see most of their paychecks go to constantly rising rent. Couple the cost of rent with student loan debt and you have a crisis.

It can be said that while rent is infinitely more expensive in California than other places, residents are still getting paid more. This is indeed true, however, hidden within the truth is the fact that income has not kept pace with rising home costs.

This large income inequality has led many to move out of California, namely those living on the poverty line. From 2000-2015 800,000 residents have moved out of California to other states including Texas. The average income for the thousands that left in 2007 was $50,000.

Those who choose to tough it out and stay in California often become homeless. Between 2015 and 2016, California saw an uptick in homelessness of about 2,400 people. Housing data website, Zillow estimates that a 5% rent increase in Los Angeles would result in an additional 2,000 homeless people. So far rent has increased 4%.

The study found that such a crisis has large repercussions on the economy as a whole. The McKinsey Global Institute found such crisis cost the economy between $143 billion and $233 billion annually.

So how can California fix its problem before the bubble bursts? The state will once again tackle its long-awaited housing package again this month. While help may be on the way it won’t fix the problem entirely. According to the Legislative Analysts Office, helping the 1.7 million poorest residents would cost around $15 billion at the very least. The Los Angeles times estimates that of the three bills being considered only 25% of that estimation would be provided.