Catching the eSports wave

It is easy to see why eSports has generated as much excitement among the online gambling fraternity as among gaming enthusiasts. When Jens Hilgers, the founder and chairman of eSports league ESL Gaming, took to the stage at last year’s EiG in Berlin and described his business as a “crazy idea that turned into a billion-dollar market”, he wasn’t just expressing the dream of all entrepreneurs. He also set the seal on the sector’s growing love affair with the form.

Unsurprisingly, the online gambling sector isn’t alone in its intense interest in eSports. According to a report from Amsterdam-based games market research firm Newzoo published at the end of March, brands will be spending $325m in the coming year on direct eSports advertising and sponsorship, a 49% rise on last year’s total. Concluding that this year will be a pivotal one for eSports, the report suggested: “With so many investors, media companies, game publishers and brands increasing their involvement, 2016 will define the pace and direction of growth for the global eSports economy.”

James Watson, head of eSports at data provider Sportradar, points out that the betting markets on eSports will develop in tandem with the genre. “We envision that in very short order we will start seeing more bookmakers, more matches and more markets,” he says. “In the eSports ecosystem generally, we also anticipate new game titles being added. Live betting has only just started in this space as well, but we do feel that this will be where the future of betting in eSports will lie.”

One company that has led the way in offering betting on eSports is Pinnacle, and marketing chief Harry Lang points out that since 2010 when the company first offered markets on eSports, the growth has been exponential. “It’s become one of our fastest growing markets by bet volume and wager numbers,” he says. “eSports is now Pinnacle’s seventh biggest sport in terms of wagers – in 2015 we took more wagers on eSports than American Football. It’s now bigger than established markets like handball, volleyball and even golf.”

Pinnacle has blazed a trail and the gold rush has already begun. Watson points out that by the middle of last year there were already circa 25 operators offering eSports betting; now there are more than 60 betting and lottery operators offering markets.

Clearly these operators think they are catching a very big wave, and as the Newzoo report points out it is already a substantial one in terms of potential audience. In 2015, the researchers suggest that 115 million people were eSports enthusiasts – either watching tournaments live or online via services such as Twitch at least once a month – while another 111 million were occasional viewers, watching tournaments and games online less than once a month.

The analysts expect these figures to grow by over 13% this year to a combined 254 million this year and hitting 354 million by 2019. At the same time, revenues (from media rights, merchandise and tickets, online advertising, brand partnerships and additional game publisher investment) is likely to soar from $325m in 2015 to over $1bn by 2019.

The challenges

But the size of the potential audience is only one factor in the eSports phenomenon. As Watson points out, to focus on the size of the opportunity is to perhaps ignore some of the nuances. “The first thing to remember is that eSports is a very imprecise term,” he says. “The reality, as obvious as it may sound, is that each game is completely different. It is played in different ways, has different audiences, demographics and, of course, betting markets. After all, tennis, rugby and snooker are all ball sports but you would be crazy to assume you could roll out the same markets across all three.”

Then there is the question of the nature of the audience. One of the most interesting aspects of the eSports audience is the general age of the enthusiasts, which is very much the famed Millennial age-group. The Newzoo report points out that among the 115 million enthusiasts in 2015, the largest age-group was 21-35 males at 37%, with the percentage of females in the same age group standing at 16%.

As well as being younger than the more general betting demographic, they also display, as Watson puts it, “really different behaviours”. “We have noticed that they tend not to trawl through a variety of bookmaker sites,” he says. “This can of course be a huge positive if an operator can attract and keep an eSports bettor but also makes the loss of a punter all the more difficult to undo.”

The eSports audience might well have no interest whatsoever in betting on more traditional sports. Mark McGuinness, director at Mainstream Marketing and Communications, says it is a mistake for the gambling sector to see betting on eSports as being something new for the enthusiasts. “We in eGaming think that we have introduced betting on eSports, when in fact the ecosystem has a different form of betting called ‘skin trading’,” he says.

Skin gambling or skin trading has given rise to huge eBay-type community marketplaces and platforms like CS:GO Lounge and OPSkins, which provide the ability to buy and sell digital items, referred to as ‘skins’, such as knives and guns related to the game Counter-Strike, Dota 2 and Team Fortress 2. “The players then bet these in-game skins in tote pools, either on the outcome of eSports matches or in casinostyle jackpots,” McGuinness adds. “They generate millions of dollars in betting trades per day.”

Rethinking the product

More traditional online bookies have to rethink how they present their product, says Lang from Pinnacle. “First of all I’d recommend they start from within eSports and work outward, not vice versa,” he says. “Just offering eSports betting as an operator isn’t enough. You need to understand the games, trade the tournaments correctly and support that with great content that will motivate and engage a younger eSports fan base.”

Sportradar is working with the aforementioned ESL in order to provide services that will attract the eSports audience, including data and streaming. The Newzoo report found that 63% of eSports enthusiasts had watched stream  via Twitch, Youtube, Hitbox, Azubu or DingIt. Intriguingly, 17% of the total online population had also watched.

“Streams can really make a proposition come to life,” says Watson from Sportradar, who argues their exclusive streaming rights for the betting industry can be instrumental in drawing bettors. “We made the conscious decision to package our eSports products separately from our other products. This ensures that they appeal to both normal sports punters as well as the new generation of eSports punters.”

Another important aspect of Sportradar’s deal with ESL, though, is concerned with the issues around integrity and eSports. Another demographic well represented in Newzoo’s audience analysis is the 10-20 age group – 20% of males and another 7% of females – and this poses a problem for gambling providers. “eSports is still a relatively young and vulnerable sporting sector, the same can be said for the players involved,” says Watson. “Historically, eSports has had some high-profile integrity issues, ranging from players manipulating matches all the way to organized and mafia-driven fixing.”

But Lang is adamant that the betting companies are well-positioned to deal with the issues around integrity and matchfixing. “Whether it’s doping or fraudulent betting activity they need to be stamped out in eSports and more traditional betting markets for the good of the industry,” he says. “Pinnacle Sports has been integral to supporting fair play in betting and we have translated that same intent to our eSports betting offering – in some instances suspending betting when suspicious activity has been detected. Anyone entering the space ought to follow similar protocols.”

Indeed, when it comes to the intersection between traditional betting and gaming and eSports, the potential is there for eSports to teach the old dogs in the betting world some new tricks. McGuinness believes virtual reality is one possibility. “Likewise alternative forms of skill-based products and digital goods that are used to barter or trade for good and services, currently commonplace in eSports, shall likely converge into general sports-betting world.”

This is particularly the case with data. Says Watson: “eSports is not the first sport to generate data that is so critical to those that offer and place bets. But since it is played on computers, the level of data that it generates per match is far greater than a normal sport.”

As Watson concludes, with data growing in importance to the end consumer as much as with the operators, sports that can generate and optimize the information will be inherently more appealing. “Data is valuable to all users, no matter who they are,” he says. “Any sport that can find ways to arm its fans and followers with more data and more data points will definitely find interest levels rise.”