Nicky Senyard CEO & Founder Income Access Group

1. Seizing the Opportunities of the US Gaming Market: Online Horse-Racing Wagering & Daily Fantasy Sports Nicky Senyard CEO & Founder Income Access Group • Peter Laverick • Director of Marketing • BAM Software

2. In your webinar (#webinar 1) on Tuesday, you looked at the US opportunity of social casino and also mentioned in passing daily fantasy sports (DFS) and online horse-racing wagering. To start, what’s your take on horse-racing in the US market?

3. The Dark Horse • Horse-racing wagering is currently regulated in 37 states, both at racetracks and online. • Regulatory Context • Betting on sports in the US very restricted. The Professional & Amateur Sports Protection Act (PASPA, of 1992)preventsall US states except Nevada from operating offline sportsbooks, though Delaware, Oregon and Montana are permitted to run sports lotteries. • Online Horse-Racing • Unlike online casino and poker, betting on horse-racing over the internet was not included in the US federal government’s Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006. • Over $2.5 billion spent on horse racing online each year.

4. Horse-Racing History: • 1665: Horse-racing in the United States is deeply ingrained in the country’s culture and heritage. Dating back to 1665, the first racetrack was constructed on Long Island (http://www.horseracing-hq.com/) • 1890: There were 314 tracks operating in the United States by 1890 (http://www.horseracing-hq.com/) • 1970’s: Interstate wagering on horse racing was first made legal under the Interstate Horseracing Act • 2006: Horse racing excluded from The Unlawful Internet Gambling Enforcement Act • 1990s- 2000s: Major online horse wagering sites are launched: TVG (f. 1993), Xpressbet (f. 2002), Twinspires (f. 2006), BetAmerica (f. 2008) • 2013: Total betting at the 2013 Kentucky Derby was more than $130 million • 2015: A sizeable majority – 37 out of 50 US states – allow their residents to wager online on horse-racing events, as well as offer the alternative of greyhound racing

5. What do you perceive are the biggest challenges faced by horse-racing operators?

6. Product • Homogenization of content within each product • Races • Hands • Pricing • Distinguish the product with strong branding and customer service Acquisition • Positive migration of customers from tracks to online • Encouraged by mobile wagering applications Retention • Fostering players to develop an affinity with the brands • Shift in age demographics

7. What do you perceive are the biggest opportunities within the horse-racing vertical in the United States?

8. Product • Ability to diversify product offering to other verticals; for example, DFS • Create friendly user experience and brand identity Acquisition • Ability to diversify acquisition using multiple channels • Strong acquisition through above-the-line marketing (TV strongest) • Digital acquisition potential via Google, Facebook • Affiliates (performance marketing) provide ability to target niche digital customer segments Retention • Investment in mobile applications for improved usability and intuitiveness of product • Mobile accounts for 40%+ of customers

9. What similarities or differences do you see between the horse-racing markets in other regulated jurisdictions?

10. US • Pari-mutuel wagering in the United States • Familiar brands such as Churchill Downs Interactive moving into social and bingo space – Luckity.com and Big Fish Casino (2014) UK • Gross win from British Racing £570 million, 2013 (British Horseracing Authority) • Regulatory changes and discussion of Betting Right Funding System (increasing fees bookmakers pay for right to offer betting) Australia • Three key methods for horse-race betting: • On-track with fixed odds • Off-track pari-mutuel betting • Individualized wagering • 15.7% participation rate of adults 18+, New South Wales, 2009 (Parliament, NSW) Hong Kong • Pari-mutuel horse-betting run by the Hong Kong Jockey Club (Government-granted monopoly)

11. Following horse-racing wagering, what does the market look like for Fantasy and Daily Fantasy Sports (DFS) in the US market?

12. Daily Fantasy Sports • The US restrictions on sports betting, whether online or offline, have almost certainly played a major role in the rising popularity of fantasy sports. • Size of the season long US fantasy sports market: $11 billion • 40 million+ Americans play season-long fantasy sports • 2 million Americanshave tried DFS

13. Daily Fantasy Sports History: • Late 1960s: The concept of assembling a fantasy team of real-world athletes and competing against your peers based on your team’s performance dates back to the 1960s • 1990s: The rise of the internet in the mid-1990s helped transform a niche offline hobby for sports fans into a billion-dollar online industry. • 2003: Fantasy Sports Trade Association survey showed that 15 million people were playing fantasy football and spending about $150 a year on average, making it a $1.5 billion industry • 2006: The Unlawful Internet Gambling Enforcement Act specifically excludes Fantasy Sports, labeling it as a game of skill rather than chance • 2009 to 2011: Websites initially specialized in season-long fantasy games, which covered an entire National Football League (NFL) or Major League Baseball (MLB) season, but more recently brands like FanDuel (f. 2009) and DraftKings (f. 2011)have created the concept of daily contests - DFS born • 2014: Industry consolidation of brands continues asDraftKings acquires DraftStreet • 2015: Disney in discussions of $250 million investment into DraftKings

14. DFS has been in the news a lot lately. How has the US DFS market evolved over last year?

15. Sector Growth • Season-long market in North America reached 40 million customers for the first time • Major Partnerships • Market consolidation: The second and third largest DFS operators, DraftKings and DraftStreet, combine. • Disney in investment talks with DraftKings DFS entry fees (money ‘wagered’ expected) to surpass total money entered on Nevada sportsbooks in 2016 (Eilers Research) DFS revenue/market could total $2.5 billion by 2020

16. What are fantasy brands trying to achieve?

17. Understanding their Players • Tap into demand, create experience for customers, understand what they’re wanting, product evolution related to demand • Remaining Competitive • Importance of remaining competitive in an increasingly saturated market • Marketing Efforts • Need to diversify marketing channels to optimize player acquisition. Make acquisition cost-effective – maximum bang for buck. • Need to optimize acquisition via the mobile channel, given mobile penetration • Importance of SEO, environmental audits on websites as basis of marketing approach • Consider multi-channel approach: supporting acquisition with offline channels – print, radio, TV, billboards/ads

18. Focusing on DFS, can you explain the different types of fantasy products?

19. Fantasy Products: • Fantasy leagues: Season-long activity involving building teams and competing against other fantasy players • Daily fantasy sports: Numbers-driven activity by activity spending across football, soccer, golf, tennis, hockey, baseball • Alternative verticals: Finance, sport-specific brands, celebrity • 20+ Daily Fantasy Sports sites in North America Player Experience: • Social and mobile engagement • One-click transactions • Alternative to sports betting

20. What do you know about the businesses and approach of the leaders in the market at the moment?

21. Business Approach • Big investment • Partnerships with national sports leagues • Backing from major organizations (ESPN, Disney) • Customer Volume • Big brands focus on volume and market saturation • Tipping point with volume yet to happen • Create Barriers • Barrier to entry low • Barrier for competition extremely high (marketing budgets acting as inhibitors)

22. For smaller brands that want to enter the market, what marketing approach would you recommend?

23. Take Retention Approach • Tap into the minds of your ideal player, and identify their expectations and needs • Using the social approach, create a unique and tailored experience to target higher value players and their friends • Diversify Acquisition • Use broad range of channelsto identify those delivering highest volume and highest value customers • Performance marketing • Importance of Mobile • FanDuel 9th most downloaded sports-related app (ESPN 1st) (Eilers Research) • Mobiles apps allow for accessibility and intuitive use

24. What do DFS operators need to consider related to marketing?

25. Acquisition • Brand-driven play • Crossover with other verticals (poker, sportsbetting, horse-racing) • Innovation of marketing difficult • Social media and social experience • Strategic marketing • Mass marketing and leveraging impactful, household names • Importance of data: track customer acquisition and player values across offline, online and mobile channels • Challenges • Liquidity of users is key to product success • Volume of DFS sharks on the rise • Acquisition costs

26. THANKS FOR ATTENDING! For more Information, please feel free to email Nicky at nicky@incomeaccess.com Thank you to Pete Laverick of BAM for joining the discussion. To contact Pete: pete@bamsas.com