Sports Betting and Gaming: Surging Users and Rapid Revenue Growth

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Today's episode is extremely timely as we approach the peak of the football season and sporting season in general. With upcoming championship games, many fans are probably excited to see their favorite teams go up against each other, while others are turning to gaming and betting applications for their excitement. I'm joined today by Roger Sherwood, director of Team MEGS Practice at Prosidio, and Jay Donovan, Prosidio's National client director for Betting and Gaming, to discuss the current state of the gaming and betting industry, how Prosidio is helping to expand it through application devas development, and what we can expect as more states legalized betting activities.

Rog I'll kick it over to you. I just want you to give us a little bit of an update about what Team MEGS is, what this new practice is, and you're hand in it absolutely. Thanks Alex, thank you for hosting and Jay, how you been quite well. Raj, good to see again you too, Man you too, thank you Alex.

So yeah, Team MEGS is it's in my tible. As you mentioned, it's quite the mouthful, but it does stand for Telco Media, Entertainment, Gaining and Sports. Which within there are three different industry sectors. But we are you know, helping Prosidio really put a focus on the customers across those industries and we'll talk a bit a little bit about that through this podcast.

You know, these are big companies and industries that are really focused on consumer clating applications, consumer flating services, and the gaining and gambling pieces you know, increasingly becoming dominant across all all. Of the other sectors. So Presidio's building actress practice. We have a heavy partnership that we announced a few months ago with one of the big cloud companies AWS, but we're really looking at you know, this industry as a whole across you know, inclusives of all cloud providers and technology and hopefully through this we'll explain.

Where Presidio plays that role. Jay. Great to see you've been at the front and center of this for some time as we come up to. The you know, the big game, the end of it, you know, the end of the season here, you know.

Love to take tafest through your role at psidio. Your history with you know, some of our listements, and then whether you see this industry right now at the beginning of twenty twenty five. Thanks Roger. Yeah, Betting and gaming is a really interesting space for a number of reasons.

It's a highly seasonal environment. As you can imagine, our operators are linked in extricably to the ongoings of the professional sports seasons from which their user activity is derived. Right so, as the football season approaches the Big Game, or as March Madness kicks off, or as a baseball season begins, you see different flavors of different betting and gaming activities reach peaks and valleys. And in addition to that, betting and gaming is one of the fastest growing industries in North America.

A combination of increased user demand and probably more explicitly, increased legalization across individual US states has led to a naturally growing market. Something that's really hard to replicate something that we don't see in a lot of other industries. So when you add those two things together, what you get is a group of companies that are very much every day defining what the new frontier looks like in an environment where user activity and engagement is, by its very nature pretty inconsistent.

It's been fun to work with them through those challenge. Persidos developed a number of solutions targeted specifically at the space with an eye towards helping these companies have not just financial consistency, but operational consistency and uptime and what is every day more and more competitive? Mark Yeah, and then take this through some of those peaks like how big is this right now? Like where are we comparing this to?

Is it are we compared it to? You know, to the financial industry, to the video streaming industry? You know, why do you think it is? Well?

On its whole? The aggregate revenue across the industry is certainly not yet comparable to the financial industry or a streaming industry or something like that. What we have seen is the revenue of some of the largest operators in the space has grown at roughly one hundred percent year over year going back several years. So I challenge, you know, pick your favorite industry or your favorite venture capitalist firm or whatever.

One hundred percent year over year revenue growth is certainly nothing to shake a stick at brow. The handle of the profitabilities operators continues to grow as well, and the reason for that is a more and more engaged user base, and most importantly, a user base that is engaged more progressively across a number of different sports upon which they're betting. Rather than the historical trend of people being in individual fans of football or basketball, you now see cross sport fandom being represented very truly in these betting and ginning apps.

Excellent from a growth on the technology side, you know, as you translate that into transactions per second, transaction per minute, and what have you seen how fast and how much scale as these companies have to build over the last few years. Absolutely. Yeah. We have the number one day on the sports calendar coming up here, the second weekend in February, right, and so transactions per second is easily registered in the millions for that event.

And so the fun challenge to solve for here is we have to build a platform that is sustainable and economical three hundred and sixty five days a year, which includes the professional baseball season all Star break, during which there's famously no sporting activity to watch unless you're prepared to go international with it. And also that same platform has to be able to service the needs of customers from six pm to midnight on the special Sunday in February, right, And so the scalability challenges are very real there, and they're served very specifically by the cloud industry, the hyperscaler cloud industry, which is developed largely in keeping with the sports betting market.

Now, there's a strong argument to be made that that timing is a coincidence. But at the same time, you have a growing demand of users in this industry and frankly in others that are for the first time able to meaningfully achieve the savings or the fluctuation that business demand represents. That's something we have proceder. We're seeing a lot of We've been really excited.

By that, and I think we're helping there's a couple of customers that we have we're. Actually helping manage that consumption. Right. I mean, I, like you said, Seasonal, I think we are broken on downtime maximum up time.

It is going to be based on seasons and you know the leagues and everything else. But what have we done in terms of helping you know, customers save optimize you know throughout those seasons. What a want to we do specifically. So there's two ways at its core to save or to optimize, right, and it's either you can use less of a resource that costs you money is to use it like a hyperscalar cloud, or you can achieve a superior discount on the usage from that cloud that you're consuming.

So when we seek to save customers, I think it's it's very easy and a lot of people's instinct are you know, you drive a hard bargain and you go to the negotiating table and you know, I don't I won't settle for a ten percent discount. I need an eleven percent discount or you know, something as quantitative as that. And it's not to say that's an invalid strategy because absolutely, if you get a better discount, you pay a better price that will save you money. More importantly, what we're also helping our customers do is seasonally adjust their demand plan against what they know will be seasily adjusted user demand right to help them move out their bills for those cloud providers and have consistency in what they know, they can forecast and what they can budget, and doing so actually save themselves money by consuming the less of the resource.

And we're also seeking to increase the efficiency by which these organizations have a meaningful obligation to do demand planning exercises, to do scaling planning exercises to know that gosh, you know NFL Week one kickoff is coming, the conclusion of that season is coming as well, and they are meaningful scaling events that need to happen to prepare for that. And in a scenario where that scaling does not happen, where there is an outage or where there's unavailability of a customer facing application, the revenue implications for these operators are really significant, significant, And so what we're helping customers do is, yes, absolutely do that scaling planning, you know, do that pressure testing of the environment of the application, but at the same time, do so in an economical way.

It's very easy to know, you know, how much area you can put in a balloon if your plan as well, just you know, I'll pop one hundred balloon and then I'll know how much er it took to get there. It would be a lot better if you could do it by measuring the balloon and knowing how much air it could hold. And that's what we're seeking to do. And Roger, I suspect I'd love your opinion on this.

I suspect that's really similar in some of the other areas within media and entertainment that you have experience with. Streaming must have the same experience, broadcasts must have the same experience, right. Yeah, absolutely, there's uh in the M and E world, streaming world. You know, the compute capacity it is kind of fixed, but you know, the CD and the content distribution.

Side is where that plays a very very heavy role. You know, optimization really understanding you know, when a new series is launched, you know, understanding where that load is going to be, and trying to anticitate that audience demand. You know, as I've gone through the industry, they've been I mean still I think there was an event. Netflix had an event in December which broke the Internet again.

You know, they just couldn't scale high enough. Right, So there's the challenge of technically being able to deliver solution and then once you understand you know, oh. My god, what is the size of the loom? You know, then figuring out who economics behind it.

I'd say in some areas again trying to. Replicate that live broadcast network, which is a lot of the streamers are having to do. They're still figuring out, you know, where the peak is. They're still trying to figure out how they can scale in for those events.

So yeah, this is common across you know, all Team Men's customers that provide that sort of consumer end service. How they anticipate how far. They get out ahead of it. I guess one of my questions back to New Jay was if we look at the you know, the game coming up, you know, a company like Draftings, for instance, how how early are they planning for that, Like, how are they how far ahead are they anticipating what they think they'll.

Need to scale to. Absolutely, Yeah, this isn't necessarily a Drafting specific answer. I'd say every operator in the space, they're preparing all year for this event. Yeah, and the mission is clearly build a system, build an infrastructure that is capable of absorbing spike events like this.

As a matter of course, but this is a day that circled in the calendar on red you know, in one hundred million American homes and at every sportsbook operator to boot because it is this is this is the big day on the calendar. Now. I think the key though, is rather than having a large collection of manual scaling efforts, you know, things that are put in place. And Netflix would say the same thing here.

You know, Netflix famously has one of the most scalable infrastructures for B two C content delivery on the planet, and they would be the first to tell you that, Like the key is automation. That's true for sportsbook operators as well, because if you're reliant on people being you know, in front of their computers engineers, site reliability engineers, infrastructure engineers manually turning up additional clusters or turning up additional compute capacity to serve additional customers or additional current streams, you will never be able to scale fast enough to accommodate this spike.

And then the flip side is we're talking a lot about the sportsbook operators who are enjoying the patronage of the people watching this game, but also during commercials of the same game, the sponsors of that game are going to have the same spike targeted at them like this. This is a very consistent problem that we're seeing across many industries. Yep, there is a difference, you know, which you educated me on when I joined, so that you know, in M and E and sports dreaming, there's no jurisdiction limit, there's no rules or laws on a statewide basis around where Netflix constreme, right, and so my son always gives me sends via comment when he flies back to California and.

He's like that my my app stop working. I can't place best. You know, I'd never considered that, and I remember you and I talked about why that was happening, and that was, you know, the geo fencing and really understanding where consumers are and how they're allowed to use the betting and gambling applications. You know, talk to us a little bit about that.

I know that there's two large states. That haven't yet come online, but you know, we've we've helped. I think we've been you know, in discussion and what with our customers around really making sure that yeah, use this concert to step over a state border and you know, gamble and gain from that, Like. How does that work at scale.

That's an interesting technological challeng I would suspect absolutely. Yeah. Congress wrote the Wire Act in large part to prevent people from participating in illegal financial transactions across state lines. Yep.

And that was a great idea at the time, and unfortunately nobody has had the time to go back and update the Wire Act to clarify that sports betting is not illegal nationally, and in many states it is legal. So what we're left with is, for whatever reason, the same way it used to be illegal to pick up your phone and call a booky in another state, it's now illegal to be a draftings customer in Massachusetts, where sports betting is legal, and open your app and hit a server in New York where sports betting is also legal.

So, as silly as that may be, what we're left with is, nonetheless the legal framework where these operators are required very intensely to know the location at which bets are placed, and they have an obligation to deny the acceptance of any bet which was placed either out of a jurisdiction where sports bending is legal, or in a jurisdiction where that user should not have been because there was a VPN engaged or traffic was being bounced or paying through a server somewhere else.

They're also maintaining independent environments, infrastructure environments to host a version of that application in the state of Massachusetts where I live, or New York or Roger, Florida, where you live. And so if I'm in Massachusetts, I'd better hit the Massachusetts version of that application, or there are legal ramifications Tota. Now you mentioned your son's flying back to California. So that the two most populous states in the USA are California and Texas.

Those states have a population about seventy million people combined, which is a little over it's twenty percent of the total place in the US. Yeah. Yeah, Well, so we've talked about the growth of this industry, which has been significant, you know, exponential, you pick your favorite adjective. We haven't even hit the two largest states.

It will eventually. Both of those states have legislation that is being proposed and crafted to legalize sports betting in California and in Texas, And when that happens, it's yet a new final frontier for real money gaining sports betting to expand to absolutely. Yeah. Yeah, And from an industry perspective.

I suspect the people that have built these applications that are already I mean, they must be preparing for Texas in California. Right, do you have a time frame, Jenny is there? Do you have any idea from what you've heard and read around when those are liking to go? I mean, thank goodness, No, I'm not professionally obligated to try and forecast the wins of state legislature.

What I could say is it will happen. Right, The tax revenue is too significant to credibly suspect that these states are never going to legalize sports betting, and so what is hard for these operators is when it is legalized, it typically the notice before legalization or the opening of the market is not very long. So all the different operators have now an obligation and effort to be first to market, to try and launch their app in that state as quickly as possible, and that's deploying infrastructure, creating a version of the app that is local to that state, that is compliant with any particularities of the legislature that that state has approved, and is ready to meet customers with open arms on the first day that betting is legalized, and so this is It's interesting because on the one hand, it's an opportunity for the large players in this space to flex their muscle and say, you know, we have the capacity to build out a co located data center in advance and we are ready to go.

Don't you worry about it. It's also an opportunity for the smaller players in this space to demonstrate with agility a net new market where you don't have a saturation of Everybody already has their favorite sportsbook app on their phone and it's a free for all, a land grab in a meaningful and tens of millions of users are up for grabs in that capacity. Moving on to Presidio specifically, we talk about the solutions that Prosidio has provided. You know, where would you say, I guess, first of all, how did we get into this?

I mean, it's really a very interesting industry to be part of. Like what was Presidio's entry point? And then what have we done over the last two or three years, you know, folks on a couple of news cases that we've delivered for customers. For our customers here.

Our entry into the sports betting market was an interesting one. We've talked about Prism previously on the Digital Decode podcast, and so that's our offering by which we're offering customers guaranteed discounts on compute consumption without requiring them to make commitments to things like reserved instances or savings plans. And so for an industr that has a highly seasonal demand, that's an offering that naturally is going to make a lot of sense. We're offering guaranteed discounts regardless of what your usage is.

It can be on demand, you can spin up, you can spin down. You can, for example, triple the size of your infrastructure on the second Tuesday and February, and if you want to spin that down on the following Monday or Tuesday, you can do that right. And so PRISM's a great offering that's been a really natural fit for the sports betting industry and that was the first place where we started attracting bending and gaming customers. But as we got into these customers, what we realized is, in addition to financial operations tooling right helping them save money, the rapid growth that these customers were experiencing was also putting them in a position where they were constantly looking at projects they had to take down from a technical basis and either meaningfully expand the size of their technical delivery team or stretch out the timeline of these projects.

And I'll give a specific example because DraftKings has agreed to share this story publicly in the past, right, and they've done their own video testimonial, so I don't mind mentioning it specifically. But they, for example, they wanted to replatform their mobile application away from Microsoft Zamor and onto a new development platform. They were going to move to Native Development Swift and Cotland for Android and IOMs respectively. Right, And what they were looking down the Barrelaube very much was well, we can go hire a bunch of full time employees to do this.

We could pull everyone off the projects that they are working on, building new features, building new applications, making new things that will make the Draftings application better, or we can find a third way without stretching out our project completion timeline. Now, they had a particular deadline where they had to get this project done by, so stretching out the timeline was clearly not an option, and so they engaged Persidio Because what we have is a workforce of over a thousand delivery engineers who have the ability to engage with the customer.

In the Draftings example, we were engaged in committing code inside of three weeks from the initial conver station we had on the topic. And we very quickly developed sectional expertise expertise in this space because we worked so heavily on a sportsbook operator application. And as you do that, it becomes clear that other operators who are all experiencing the seasonality, who are all experiencing growth in the same way, we're all facing not the same technical challenges, but technical challenges driven by the same underlying characteristics of the business therein are having the same problems they need to be solved.

And so while when we engage at different operators, certainly it's different projects, we're doing different different problems that we're solving for them, but the core ability to engage technical delivery resources extremely quickly with experience, specifically in the operator betting and gaming space, has helped us spread to other operators very quickly. And I think you know you mentioned now that DraftKings, you know have done a test anonial with us. So any data Jay, any data points around what we achieved and how we helped Drafting specifically.

Absolutely. Yeah. In conjunction with the Draftings team, we migrated the development platform wholesale from Zamorin to Native Swift and Cotland inside of nine months. Now.

In addition to that, by virtue of that replatform, latency on the application was reduced significantly depending on which screen you're testing, up to seventy percent. At the user level, they're meaningful performance improvements. It became easier to commit code, easier to launch new features and new applications within their platform. But the big thing is that's that's a massive project to undertake in a short timeline to do it.

Absolutely, that's it. I mean, do you know how many people we had on that at its peak. At its peak there were fifty six Pertudio delivery engineers on that project other nine months. Yeah, that's terrific.

I to be able to go from zero to something within three or four weeks, it's five minutes. Absolutely. You know, DraftKings is a really special technical organization, right, so they demonstrated clearly they had the agility, the presence of mind, the interest in the appetite to take on a project like that and rather than being daunted by it. You know, it was okay.

You know, we we do big, scary things every day, and this is one more thing that they'd committed themselves to doing. So they are fantastic partners in the effort as well. Awesome. So you know, as you look out twenty twenty five, twenty twenty six, there'll be a sigh of relief, I'm sure for everybody at about four week's time and we're through this, you know, and everything's gone extremely well.

What are you looking for, Joe? What are our customers looking for in terms of innovation? You know, whether it's on the cloud, on the app. From a consumer facing perspective, you know, what are you?

What are they telling you? And then you know how we position you prosidiout to help. Absolutely so, we have now a suite of betting and gaming specific engagements that we've become comfortable delivering for our customers. Right replatforming is something that any customer could be interested in doing, right So, I don't want to say that's betting and gaming specific, but what we have done is we're working into things like QA are specific in some meaningful ways for the betting and gaming industry we're having meaningful discussions around chaos engineering.

You've already mentioned Netflix that resiliency engineering is a conversation we're having with multiple operators right now as well. This is an area that pursuer has the ability to deliver and where there is meaningful appetite as these companies mature to go from. We are staffed by the best engineers and that's how we maintain our uptime too. We have programmatic approaches to resiliency and Persidio is helping to deliver those as well.

Absolutely. Yeah, Yeah, it's a fascinating time. I've seen that in needing entertainment, you know, the large again, the large streaming companies, even some of the telecomes to byers who have made that transition, right. They built, built and built and built.

And then recognize that they had to platform turn it into a program, you know, and really and use Anna's like Prosidio to help deliver right and maintain and all of that. So that's absolutely great. You know, I mentioned that my focus is really on you know, we're working with users that have an end consumer focus, right. They have millions of end customers.

They they entertain right, they provide entertainment and I think these you know, the gaming and the betting companies that are in the same sphere. Anything you can share from a you know, what a customer is looking for from these applications, or you know, how are these companies competing with each other to get people to switch? Or you know what do you see from at end user perspective? End users are looking, as with all things sport, probably for engagement and excitement.

That's what people are seeing. That's why people buy tickets to go to the stadium and watch games. That's why people, you know, request push notifications to their phone for scoring updates. That's why.

You know, anyone who's a sports fan has their their sports fan group chat, which is them and their buddies who are sports fans, sometimes the same team, sometimes not. That is consistent. You know, did you see that? Did you see this?

And I think sports betting scratches that samage in a lot of ways where people are seeking engagement. People are seeking ways to be excited and things to be engaged on. And so the age old, you know, the sports debate that people would have with their friends has now been augmented and added to by If you are really confident in your opinion in this debate, you can put your money where your mouth is in a very real way, in very real time. And I think that's for me, the core philosophy.

And so as these operators are competing for users, are trying to grab market share from each other, part of its advertising part of it is, you know, the bonus bets, and that's largely when you enter a market and you're attracting net new customers who are not sports betters today, but to attract from another sports book. They're seeking to compete on things like media engagement, on things like streaming property or broadcast property, because what they're hoping to do is have content creation, things that inspire opinions and have people that you have thoughts and conviction about their team or someone else's that they then want to turn around and create a bet or engagement the platform.

And then these worlds really do become super intertwined. I mean Emmy and gaming and sports, I mean they're all there, right, But again, I think, you know, Alec, that's one of the reasons that we are putting this lens in prosidio around teammates. I think, as Jay just described, that these worlds are very, very close right, they're different sectors they have difficult. To market, but the end experience, the end user.

Experience, and how that is awkwardly coming together, whether it's video or voice or messaging or app or whatever it is, it's social. You know, that's what we're here to address. Thank you j for taking it through what we've done in this particular sector. And I think, Alex, there'll be more of this coming over the next few months for MNY and Telco and sports as well.

Absolutely no, and I'm super excited. You know, this is one of those podcasts where I kind of sit back and just listen and learn about how just to say, like how the sausage is made behind this because I am one of those people who's I'm I'm Denver and Chicago fans. So in the next coming weeks, I'm not going to be too happy. I'm going to be putting most of my excitement into the betting apps when the big game comes around.

So it's really really interesting. And yes, like you said, we are going to be having more conversations about our Team MEGS practice area and what we are doing in all aspects of what TEAMGS is. So thank you guys so much. For joining me today to talk more about the sporting and betting aspect of it.

Well, you guys can all find us all three of us on LinkedIn, so feel free to connect with us there. Please remember to rate, review, and subscribe to the Digital Decode podcast wherever you get your podcasts, and you can also stay up to date with us by following Prosidio on LinkedIn and Instagram. Thanks for tuning in to another episode of the Digital Dcode. Thank you Jay, Thank you Roger.

Have a good one. So navigating the digital transformation of your business is no joke, Prosidio can help. Prosidio is a leading IT solutions provider that helps clients simplify IT complexity and drive return on IT investment. By investing in the future of IT solutions, we stay at the forefront of technology trends, which ensures that our clients have access to a wide range of technology solutions.

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