Is that a real horse?
By Kate Bulkley
Monday December 8, 2003
No, it's the world's first virtual interactive TV horse racing programme, launched last week. So will anyone want to bet on it, asks Kate Bulkley
An early driving force in the success of digital television has been live sport, and the industry believes the next big driver will be interactive TV betting. A marriage of the two seems to have been made in heaven. But decent live sport is expensive and not easily acquired, so why not make it up?
On Sky Digital channel 431 between 9pm and midnight, a new channel called iSportsTV is now screening the world's first virtual interactive TV horse racing programme. You see the race track, and the crowd, you see the start and the finish, you hear the thundering hooves - it's like any Derby, Breeders' Cup or Arc de Triomphe. And you can gamble to your heart's content.
It seems real but it's all made-up: the horses, the stands, the race - it's all created by a fancy computer programme. You are betting real money on make-believe nags. The slickness of virtual-reality sports as seen on PlayStation consoles has moved to mass-market TV.
After successfully entertaining customers in high-street betting shops in the UK, virtual horse racing has made the transfer on to living room TVs thanks to three years of development and a £6m budget.
The creators are a Dundee-based company called I-Race which is 50% owned by Flextech, the programming unit of the cable company Telewest. Building the TV application of the race simulation software has been difficult and expensive and last Christmas the company suffered a massive setback when its offices were filled with smoke from a fire in an adjacent building, which ruined the computers and meant shelving the launch of an I-Race channel on Sky.
After a "long and hard look at the business model", Simon Grieve, the chief executive of I-Race's owner VIS iTV, decided it made more sense to provide the service to others who could market it on their own channels like iSports. "After I joined in February this year we decided to sell the product to TV channels, websites, and eventually do an SMS and a video-phone version," says Grieve. Another development will be launching the enhanced version of I-Race which acts like fantasy horse racing, where you can own and train a personal stable of runners. The software is smart enough so that the electronic DNA of each virtual horse has built-in preferences for long or short races and hard or soft ground, for example, but these can be modified through virtual "training".
A virtual horse racing product developed about 18 months ago for bookmakers across Britain has already proved that virtual racing is big business. Called Portman Park and Steeple Downs, the virtual races today run on screens in about 8,000 betting shops across the UK. Inspired Broadcast Networks, which helped to develop the races and distributes them, says that virtual horse racing creates about £300m in turnover a year for the bookmakers, with estimated profits of between £80 to £100m. The business has been so successful that Inspired Networks has also launched virtual greyhound racing, and in September went online with a virtual horse racing product for Coral's Eurobet. Now the company is developing an interactive TV virtual racing version to compete with I-Race that it hopes to have on TV early next year. "
TV is an obvious next channel," says Luke Alvarez, CEO of Inspired Broadcast Networks. "People enjoy betting, and TV is a more enjoyable betting experience for some people who are perhaps not the core better and who might find the betting shop experience quite intimidating. It's also a way to make fixed odds numbers games exciting and more real."
Avoiding the betting shop experience may be the way to broaden the audience for betting in general, but why will people bet on a virtual horse race over a real one? "In a real horse race you need an information advantage," says Alvarez of Inspired Networks. "You need to know a lot about the form of the animal or you need to have a tip from a trainer and that's what tells you how accurate the odds are that the bookie is giving you. But with virtual racing, it is a pure statistically calculated, random-number generated numbers game, where the fixed odds are exactly the odds you see on the screen minus a small margin [for the bookmaker]."
Damien Cope, the managing director of The Gaming Channel, operator of iSports, agrees. "Why would anyone bet on a spinning wheel with 36 numbers on it? It comes down to the fact that people who like a bet will bet on virtually anything."
Cope says that iSports' strategy is to take the success of the Avago Channel, a bingo-style numbers game channel that has annual revenues of nearly £50m, and adapt it for the sports enthusiast.
Avago and iSports are both owned by the founders of the Digital Interactive TV Group (DiTG), which includes John Wilkinson, the founder of Freeserve, and John Swingewood, the ex-head of new media at BSkyB.
The iSports channel will also have real sports as well as the virtual horse racing, and punters will be encouraged to bet on both. Before joining The Gaming Channel in September, Cope worked for the big leisure group Rank, where he put together the UK's first fixed-odds games site Rank.com and he also helped to launch an interactive TV gaming service called Fancy a Flutter.
"Avago has only been running for 18 months, has 125,000 registered users and is break-even but it appeals to the softer gambler," says Cope. "Having iSports on the sports menu of the Sky electronic programme guide and airing more sports-related content will bring in a totally new audience." Not only will there be the ability to bet on sports, but also a lot of the Avago games will appear when you click the red button on your remote control.
Interactive TV betting is still only a minute proportion of a massive market. The total turnover for the UK bookmaking industry is £16bn, so it is not surprising that interactive TV channels are taking every chance to test new ways to tap into this lucrative and growing business.
"Betting on iTV is still very modest in terms of the bookmaking business, but this is because it has not been an easy thing to do technically," says Mark Finnie, an equities analyst at Deutsche Bank. "But the great starting point is that the content for channel operators is negligible because it's about a computer, not buying live rights. These channels all need to drive their revenue per user up and betting is seen as a big, go-go area, and eventually the technology will catch up."
No matter how crazy the idea for a bet it seems, virtual or not, gamblers will put their money on it. If you need proof, recall that Blue Square.com video-streamed live snail racing recently. The races may have been slow but the gamblers caught on fast.