Bring your A game to esports

Unless you have been living under a rock for the past decade, you really can’t fail to have noticed the stunning  rise of esports – and betting on esports. While it is tricky to put a precise number on the scale of gambling on competitive video gaming, some companies have attempted to do just that. A study recently published by Market Insights Reports suggested the size of the global esports wagering market will grow at a CAGR of 13.1% between 2020 and 2025 to reach just over $13bn, up from almost $8bn in 2019. Also, prize pools for esports events that pack out arenas continue to swell to staggering levels: Valve’s Dota 2 championship event, The International, will take place in Sweden this August with a record-breaking prize pool of $40m, the majority of the bounty crowdfunded by fans of the multiplayer battle arena title.

Meanwhile, the global esports audience was estimated to be 495 million in 2020, equivalent to the combined populations of the US and Russia. “It’s not the next big thing; it is a big thing and it’s already here,” claims Dr Brett Abarbanel, director of research at the University of Nevada, Las Vegas, International Gaming Institute. And if you look at the wider video gaming and mobile gaming market, worth more than sports and movies put together last year, it is expected to swell to over $200bn by 2023.

“Esports is an amazing phenomenon, because even when the vast majority of the world had no idea about its existence, it was still filling stadia with thousands of people,” says Adam Savinson, head of esports at international bookmaker Betway, a brand aiming to make a splash in the US after parent company Super Group announced plans in April to go public via a SPAC.

“Betway has been involved in the esports industry for six years now, and even in that short space of time we have experienced the incredible growth of the industry first-hand. Tournaments that we sponsor attract millions of viewers and they continue to grow across the world,” Savinson says.

Betting markets on matches involving games like CS:GO, League of Legends (LoL), Dota 2, Overwatch, and Rainbow 6 is a familiar fixture at European bookmakers’ sites. Betting on esports competitions, both pre-game and in-play, has been a thing across the pond and elsewhere for the best part of a decade, yet legal options are still limited in the US. Lawmakers and regulators are, however, tentatively warming to this vertical as it piggybacks on sports betting’s rollout.

Leveling up

It is almost five years since the Downtown Grand Hotel & Casino in Las Vegas became the first casino in the US to take bets on esports matches, namely a LoL event in Oakland, California. Three years later, New Jersey gave the green light for licensed operators to take bets on the LoL World Championship finals in November 2019.

Lately though, more states seem to be increasingly receptive to esports betting. Of the four states to give the go-ahead for sports betting this year, three (Wyoming, Arizona, and Maryland) explicitly included esports in their definitions of sports betting. Dakota remains an unknown at this stage.

Eilers & Krejcik Gaming wrote in the previous issue of EGR NA that esports has “turned a corner” and that 75% remains in line with last year’s esports approval ratio, and higher than the ~66% of first-wave states that rubberstamped esports as permitted betting events. Nasdaq-listed Esports Entertainment Group (EEG) hopes to be live in New Jersey by July with brand VIE.bet (EEG has just received its license from the Division of Gaming Enforcement) as the first esports-centric operator in North America.

CEO Grant Johnson suggests there is a “substantial gray market” currently in the US with consumers placing esports bets with offshore sites, so he hopes to “bring those bets home to the United States so nobody has to break the law.”

Johnson is in conversations with several states about esports betting legislation, although he concedes lawmakers and regulators are not always familiar with the concept. “There is an education process [and] I’ve recognized that in the conversations I’ve been in,” he remarks.

“There is tremendous motivation, by the way. I’m not saying the regulators are hindering this, they want to understand. It’s new to them, but it’s not new to the world […] Regulators are not known for their innovation, but they have got to be cautious and they don’t want to be reckless. I’m quite thankful we’re being invited into these conversations and I’m getting the opportunity to express my opinions to the senators themselves. All the states know illegal gambling is taking place and they want to stop that.”

Take center stage

When Covid-19 wreaked havoc on professional sports last year, leaving bettors with slim pickings like low-quality soccer from Belarus and Nicaragua, or endless table tennis action from obscure corners of Eastern Europe and Russia, esports betting stepped up to fill the void. “Nothing pushed it further into the mainstream than Covid,” Abarbanel says. “It was a growing phenomenon which was accelerated in its growth during Covid because it started to fill in gaps where sports had been kind of left behind for at least a few months.”

In the UK, which is still the world’s largest regulated online gambling market, the regulator, the UK Gambling Commission, revealed last July that wagering on esports had rocketed 2,922% year on year in March. UK-licensed firms generated GGR of just £50,223 in March 2019. A year later, it had risen to £1.52m. In May 2020, it was £4.6m.

This increase looks impressive on face value. Putting it into context, slots generated £184.3m that month, and real-event sports betting was more than 20 times larger at £101.4m despite the limited action due to the pandemic. Nevertheless, esports betting certainly grew in popularity during the pandemic, and many players have stuck with it at Curaçao-based Pinnacle.

“We saw our core esports customer base grow organically during the shutdown, and we haven’t seen this demand fall away in a way some operators have highlighted,” says CEO Paris Smith. It is a similar story at DraftKings. Co-founder and CEO Jason Robins told investors and analysts last year that his company had witnessed “exponential growth” in esports and that it was a case of “when, not if” esports would be a huge category. He even suggested to EGR NA last December that it could one day become bigger than any traditional sport.

Such is esports’ opportunity and ability to target a whole new cohort who may not bet on traditional sports, it led to the emergence of dedicated esports betting sites such as Unikrn, GG.bet, Luckbox, the aforementioned VIE.bet, and many more. Midnite is another esports betting start-up, albeit still in beta mode, based out of London and licensed by the UK Gambling Commission that received funding from founders and executives of leading gambling companies.

Co-founder Daniel Qu insists Midnite is able to better appeal to esports fans and acquire bettors at lower acquisition costs than incumbent bookmakers. “If you look at traditional operators, some of them have an esports tab, but a lot of those platforms are built with a different audience in mind. For the most part, traditional punters are still going to be the lion’s share of their business.

“The trick here is better understanding this customer base and being able to better address their needs by building a compelling, entertaining, and immersive experience for them. And we can find those less capital-intensive ways to acquire those customers when traditional operators are willing to spend upwards of £100 ($141) to acquire a customer.”

Qu adds: “By further entrenching ourselves in this ecosystem and being more of an authentic brand and platform, there’s an appeal that is harder for traditional operators to replicate.” What he is hinting at is sponsorship of teams and events. On the same day as his chat with EGR NA, Midnite announced it was to sponsor Call of Duty esports team London Royal Ravens.

There is an argument to be made that a dedicated esports betting operator has a better chance of being accepted by the esports community than a traditional bookmaker as it may seem like the latter is invading their hobby and passion to try to cash in on the next big thing. Betway, however, is one betting brand that has managed to integrate itself into esports far more successfully than any another bookmaker globally. As well as sponsoring esports teams BIG (Berlin International Gaming) and renowned CS:GO outfit Ninjas in Pyjamas, Betway is a sponsor of leading esports event BLAST. The operator has an abundance of smaller deals, too, meaning its black and white logo has become deeply connected with competitive gaming.

In addition, Betway’s esports Twitter account has amassed 143,000 followers since its creation in 2015 and the firm has a strong presence on esports platforms, including gamer chat hub Discord. Savinson stresses “authenticity” has been Betway’s main objective when communicating with esports audiences.

He says: “The esports audience existed for years without the support of commercial partners, and for many fans it was kept afloat by their passion. When a commercial partner, such as a bookmaker, enters the scene, they must ensure that they are giving back to the community, and not taking anything away.”

He also offers this piece of advice: “Many fans don’t see themselves as an ‘esports fan,’ but instead a follower of a specific game. Trying to appeal to the whole industry can lead to appealing to nobody, and it’s extremely important to understand and speak directly to the audience you are trying to appeal to.”

A strong deterrent

Of course, one thing that could clip the industry’s wings is match-fixing. If bettors don’t have confidence that what they are watching and gambling on is completely clean, esports betting doesn’t have much of a future. The threat was underscored again recently with the Esports Integrity Commission (ESIC) and the FBI revealing they were investigating allegations of match-fixing and illegal betting involving CS:GO. Three months beforehand, ESIC banned 35 Australian players for breaching its anti-corruption rules by betting on their own matches, while another seven Australians were banned last year. What’s more, a number of players were handed suspensions or permanent bans by Riot Games relating to match-rigging involving China’s LoL Pro League.

Although Midnite’s Qu accepts match-fixing is a concern, much like it has historically been for lower-level tennis, he believes the huge prize pools and eyeballs on higher-profile competitions disincentivizes potential skulduggery. “This audience is very tech-savvy, so if there’s suspected match-fixing, you’ll get massive threads on Reddit. There are so many eyeballs on all these matches as well, so you’ll find that it’s a lot harder to get away with match-fixing given how far the industry has come.”

Johnson of EEG admits that the thorny issue of rigged matches has cropped up during his conversations with lawmakers and regulators. “It definitely comes up,” he says. “Anywhere there’s people and money, there’s a potential for corruption. [But] enforcement is getting better, and rules are getting stronger.”

Despite the threats, him and Qu are, as you’d probably expect, extremely bullish about the outlook for esports betting. And the fact that states are including esports betting in legislation is a positive step for the US when esports’ popularity is only headed in one direction: up. There is even talk of it one day being included in the Olympics. “Gaming is already the most significant leisure activity for Generation Z,” says Qu. That’s loosely considered those born from 1995-2010.

For Abarbanel, the growth trajectory is clear. “We’re not talking Super Bowl numbers, yet. But esports has many different games and the umbrella of esports is growing, not just a spectatorship of competition but also in terms of a betting market. We’ve seen a number of online books talk about how esports is already bigger than cricket and golf, and some speculate that it will soon become their second biggest market after European soccer.”

That may seem a fanciful prediction today, but 10 years from now it could well be a distinct possibility if esports truly goes mainstream. œ