The Rapid Growth of Esports Betting

The Rapid Growth of Esports Betting 1024 490 Arlene Powell

In esports, betting is the biggest single opportunity just like online sports betting. It has uncapped upside down and is one of the least burdened by the publisher of the video game but it is also one of the least spoken of. The new investment surge in esports focused primarily on the space’s most prominent assets being sportive organisations, influencer companies, and content / competition properties. I think it’s important for people to understand that verticals like betting are an enormous part of the sports future now that space interest has skyrocketed.

As one of the fastest growing online gambling categories, sports betting is on track to reach up to $8 billion in total wagers this year, representing $560 million in revenue at an average industry margin of 7%. Estimates for growth point to over $16 billion in annual wagers in years to come. This compares to an estimated $1 billion in revenue to be earned for the rest of esports in 2019, but when adjusting to revenue from publisher-owned / operated assets, I believe the number is nearer to half that. The change networks game publisher royalties, merchandising and ticketing at big company activities, a share of media rights and a portion of sponsorship and advertisement.

Esports Betting Benefits

We make this adjustment as the investable esports ecosystem, all that lately makes headlines, is non-publisher assets, companies building around publisher’s IP. Unlike these categories, betting is IP-agnostic as it does not require any license or licensing fees charged to the publisher of categories such as sports teams or organisers of the competition. It is also game-agnostic, not exposed to game cyclicality, which is the hallmark of the video game and esports industry.

Gamers are fickle and the longevity of a new title is impossible to predict. Betting is a platform that can easily offer anything that you are watching. Ultimately, it is API-agnostic, since there is no dependency on author logins or other third-party Applications like Twitch that can be used in other verticals. That’s why I believe the size of betting potential tops every other field in sports, and will continue to do so over the long term.

Esports Betting Fast Rise

How did they start? Back in 2013/2014, the first big wave came with the use of synthetic in-game esthetics as unchecked casino chips. Valve games, Counter Strike: Global Offensive and Dota 2, the second and third most popular sports (behind League of Legends), have highly liquid real-money economies using in-game aesthetics called skins, which fans started to use for sports gambling.

Nearly all the skins gambling sites were operating illegally, rarely doing any required Know Your Customer (KYC) compliance to ensure the customer is in legal jurisdiction and over 18, had little to no Anti-Money Laundering (AML) controls, and certainly no gambling license. Unfortunately, this has meant that many underage children also gambled from illegal markets, and the skins betting market has swelled exponentially to $5 billion in total wagers. Following multiple scams and a class action lawsuit, Valve sent notices of cease & desist to all major skins gambling sites towards the end of 2016, resulting in a material reduction in betting skins.

Although the illegal skins sites did not directly transition to regulated betting on esports, they have been a key step in the process. The benefit of those sites is that they were completely unregulated. You could build one in 30 days, and get it up and running. It takes a year for a regulated gambling site to move fast. As a result, we have seen nobody switch effectively. Nevertheless, because they represent the same customer base, the companies that make licensed esports related betting products take advertising and advertisement messages from those pages.

The unregulated market has sparked organized wagering on sport. At one point, the skins betting market was estimated to be ten times bigger than the regulated esports betting market, before it was shut down. Without the skins betting market, their unlikely betting on esports would have taken off as quickly, and then when it was eventually shut down by regulators it created a big wave of regulated betting on esports. That created a lot of opportunities in this article that we are discussing. It starts on the unchecked side like a lot of new tech, before it matures.

Esports betting is now among the most thrilling groups in the legal gambling industry in 2019. More so when paired with a U.S. sports betting industry that is State by State opening up. With the nature of sports being video games, it creates unlimited possibilities for unique bets such as round-by-round betting in first-person shooters, or hyper-contextual bets such as first baron kill (provides a team buff) in the most popular sports game in the world, League of Legends. The trend is clear, with new game titles being constantly released, and an ever-increasing population of esport fans.

How to Bet on Esports

The current betting options available for fans of the esports are varied. You have legacy sportsbooks offering sports, purist sportsbook sites, offers for crypto betting, and still some illegal betting sites for skins. As I see it the challenge and opportunity is not to attract the gambler to bet on sports, but to attract and embark on the fan of sports. What appeals to a 23-year-old esports fan who has less betting experience is different from what a 35-year-old football fan is currently being offered.

Similar to any traditional service offered to a new generation which requires a major overhaul of user experience (as financial tech has). I don’t think it’s enough merely to show the odds. Sportsbooks need to offer more contextual betting, team / match data, offers for content / community, deep partnership commitments and more. The exciting thing is that the code wasn’t cracked and there’s vast room for innovation.

New Sportbooks’ Opportunity

Online gambling has been focusing on traditional sports for more than 20 years. Develop and curate best service plans, advertisement strategies and bonus / reward programmes. Brick and mortar bettors are changed to online bettors. Gambling law has grown over that time, sports fans have agreed and the industry has become increasingly flooded with operators.

The emergence of esports as a sport, and consequently as a betting market, represents the first instance of a new generation entering the fold in a long time. That is unprecedented and there is immense interest from the traditional gambling world. They’re seeing a generation born and bred on the Internet for the first time. It’s challenging to solve for that when you’ve spent so long solving the inverse. It means opening up a window of opportunity for new operators, new investors, new strategies, new ideas, and it’s amazingly exciting. All that said, it’s a thrilling time for next-generation sports and media to be in esports, betting, and developing. This is just the edge.