The astonishing growth of eSports has been widely discussed and even more widely hyped amongst established operators and start-ups alike. This year’s Pitch ICE, the start-up competition held at the annual ICE expo, highlighted the ever-increasing popularisation of eSports, featuring numerous start-ups who are looking to tap into this potential gold-mine. These bright-eyed self-starters have developed specialised platforms specifically designed for an eSports-betting Millennial audience. Similarly, larger operators have started to offer odds on eSports tournaments in an attempt to cash in and catch the widely coveted attention of the largest generation yet, creating an $892.4m industry in 2016. With both industry goliaths and flourishing start-ups eager to profit from this market, who will the eSports punters eventually flock to, and why?
One of the first things to consider is if these companies can apply the conventional models of traditional sports betting to the eSports betting market, or whether there are other variables that must be considered.
Tim Hurks, Founder and CEO at ArcaneBet.com, states: “In my opinion there is no huge difference between eSports betting and betting on regular sports. The eSports tournaments themselves are very competitive and have a live crowd atmosphere just like any other sport. The betting scene evolving around it is nothing more than a natural phenomenon.”
However, other industry experts have suggested that there is a world of difference between these two markets that must be taken seriously by operators looking to adopt eSports in their offerings. This first is, of course, the target demographic; it is widely accepted that Millennials take centre stage in the eSports market, and operators need to know how to cater for this unique generation of future bettors.
“In my opinion, traditional sports betting has flourished rather slowly, and only because operators have felt the need to cater for the wants and needs of Millennials,” says Suraj Gosai, Co-founder of Blinkpool.com. “Right from the very beginning, eSports has been tailored to this coveted demographic; Millennials are used to products with high-quality graphics, and which allow them to multitask and handle a lot of information at one time. All the data gathered about this demographic would indicate that they would like gambling, yet the products they are offered do not spark their interest. I believe eSports offers the industry a chance to innovate on the prolific gambling and viewing experience together.”
Mark McGuinness, eGaming Futurology Consultant at Mainstream Marketing and Communications, further argues that this particular form of sports is much more relatable to the everyday lives and interests of the younger generations: “eSports players typify the true Millennial generation in that they have grown up and are fully au fait with digital technology and media. Their consumption and media patterns are different; they understand Bitcoin, social media, the decentralised internet and so forth.”
While this form of gaming is already popular with this sought-after group, James Watson, Head of eSports at Betradar, suggests that the consumer demands of this generation will not be particularly easy to appease: “They are typically a younger demographic, perhaps not particularly accustomed to betting, and react quite unfavourably to poor user experiences. This means that the most successful eSports betting operators to date are those who have tapped into the mindset of the end-user, creating easy to navigate and simple to understand offers that resonate with them and their lifestyles.”
Indeed, Hurkss also believes that speaking the language of Millennials is no easy business, particularly in terms of marketing: “ESports is a relatively young and currently fast developing industry. It is a new market with new users compared to other sports. Partly because it’s main audience can only be found online, it is a challenge finding successful ways of approaching and connecting to this audience. It is still difficult to estimate the true potential and value of both the audience as well as channels such as YouTube and Twitch. With a lot going on in an immature market these aspects can either be under-valued or over-valued, which can have a big impact (both negative and positive) on the profitability of eSports betting.”
McGuinness points out that amongst eSports consumers, you’ll find “huge loyalty, tribal behaviour and engagement with one particular video franchise in the value chain” and therefore the opportunities for betting crossover on eSports can often be scarce when compared to traditional sports betting.
Another significant difference between eSports and the traditional market is the nature of the games themselves – particularly their tendency to be continuously updated and reworked by gaming publishers. While Michael Doyle, Chief Marketing Officer at PVP.ME, believes that the “changes in mechanics keep the games engaging and extend their eSports ‘lifetime’”, these changes can make the production of odds for eSports tournaments especially tricky.
This is further complicated by the vast amount of factors to consider when generating odds on games such as DOTA II, which has approximately 500 in-game variables – not to mention the competencies of the teams themselves.
“The monthly revisions of rules and mechanics in the game have a major impact on performance and results. In comparison to traditional sports, eSports is a very dynamic and fast-developing sector dedicated to answering the audience’s requirements for thrills, entertainment and a superb betting experience,” notes Mario Ovcharov, Chief Marketing Officer at UltraPlay. “Teams need to be up-to-date with the current environment. Teams that quickly adapt will possess more advantages in the game and be more successful. That’s why it’s really difficult to create odds in eSports and for betting players to follow the trends of gaming performance of all eSports teams.”
“The subject matter is several magnitudes more complicated than the majority of more traditional sports; try showing a Data II stream to an eSports newcomer, and they’ll walk away with a very blank expression,” adds Watson. “This is down to the sheer amount of micro-events and activities taking place every minute. This has several knock on effects when it comes to effectively creating mathematical models and dealing with the vast quantities of live data during a match.”
ESports also suffers from a lack of regulation, which also has an effect on the betting market; consumers are discouraged to bet on matches which may have been fixed with an operator who is not complying to any formal regulatory standards.
Fortunately, many countries have made huge strides in terms of regulating the eSports betting market. “For most jurisdictions, including the UK, eSports betting is already regulated and accepted just as any other sport,” explains Watson. “Indeed, there are now almost 100 licensed bookmakers globally offering eSports betting options. There are some exceptions to this rule; for example Italy and France, where the regulation process is a bit more complex, although these territories are also making remarkable progress.
“The more complicated story surrounds skinbetting and other more informal betting mechanisms. The UK Gambling Commission has taken a firm stance on such activities in recent weeks, announcing that any gambling operator dealing in these pseudo-currencies will require a license. This is a trend that will most likely continue in some of the more heavily regulated markets.
However, the regulation of eSports tournaments themselves remain a huge problem for this market, as Gosai explains: “A formal regulatory body for eSports needs to be put in place and there needs to be an improvement in tournament standards, including a base threshold of what is expected and permitted. One of the greatest threats to the market is the increase of match-fixing especially if the gambling market grows at a faster pace than the professional scene. Players themselves need to be protected, assured they are competing on a level playing field and being paid enough so that financial incentive to fix a match is diminished.”
McGuinness notes that “operators need accurate data in order to offer odds on eSports events”; so if the lack of regulation continues, operators may be put off by this market due to the complications of predicting odds for an unregulated sport. This will in turn limit the competition between operators, ultimately stunting or decelerating the growth of the betting market itself. However, Ovcharov warns that regulators will need to consider “how to improve and enrich eSports tournaments rather than restrict and encapsulate the market sphere”.
Further down the line I predict that partnering with bigger operators is going to be the way forward for smaller bespoke eSports betting companiesGiven that the market is still in its infancy, we can only conclude that the industry players who are better equipped to take on these challenges will be most likely to win this battle for the eSports betting market. “I believe the bijou provider that specialises shall win the war,” states McGuinness. “Pure play eSports operators put the player first and create a community around the player and the eSports video games. ESports is firstly and foremostly about community and sharing via social channels. This concept is alien to traditional sports books except peer-to-peer betting companies like Betfair. Traditional betting with a sports book is passive, in a silo without any interaction with other players, so the experiences are the polar opposite of what the eSports fan and player is used to in today’s digital economy.”
Indeed, Hurks agrees that smaller eSports operators are able to develop a stronger relationship with consumers than the larger betting companies, adding that “younger generation users feel more closely related to new dynamic betting operators. They are not at all sensitive to the size of the provider. I have the impression that these big websites mainly have customers who already make use of the company’s core offering and who also happen to be interested in eSports. These customers do not feel the need to switch to another provider. Big operators will most likely attract customers who are betting on many more markets than just eSports.”
Doyle believes that appealing to the specific eSports consumer base will require a great amount of focus, flexibility and innovation further down the line: “As a small company, you can modify your user experience more quickly, and this audience requires constant understanding of the current trends to provide what they are looking for. The thing with eSports is that fans are always looking for new ways of wagering.
“Right now big bookies are just offering eSports as an additional betting market without looking at the real needs the viewers have with that type of engagement. As the eSports betting market has not been saturated, there has not been a need to innovate to bring new traffic. Right now, bookies are not competing to take users from each other, they are just attracting new users that are introduced to betting with eSports. When that changes, innovation will become a prime objective.”
Suraj notes that the changeable nature of eSports trends and products will challenge the larger operators’ hold over this market: “Smaller companies quickly become specialists in their chosen section of the market, purely because they are able to focus on one particular offering, and direct all their energy into devising the best way to present it to consumers. Unlike traditional sports betting, eSports game publishers are continuously economically incentivised to fragment the market, and operators need to be able to adapt quite quickly to major changes. Larger operators are not able to adapt as quickly to the changing trends in the market as the smaller, specialised companies.
“The audience themselves are also highly fragmented amongst multiple platforms and audience owners. These conditions lend themselves well to companies that are able to adapt quickly to changes in a specific market, i.e. eSports-centric start-ups.”
However, others believe that adaptability, authenticity and innovation may not necessarily be enough for bespoke eSports start-ups to maintain an absolute dominance of the market further down the line; “Naturally the smaller platforms have much greater flexibility to build a more targeted eSports experience, but this comes at the sacrifice of a recognised brand name and marketing strength,” Watson says. “However, there is certainly a healthy competition between both types of platform, and in reality there will always be space in the market for both to prosper.”
Gosai proposes that larger operators are more likely to globally expand the eSports betting market, and dominate the market through their brand reputation, size and resources: “As the market matures and stabilises, eSports betting companies will start to experience the same challenges as any other large operator. The global nature of the eSports market will necessitate operators to start operating in more jurisdictions, which will require compliance with the regulatory needs of these new jurisdictions. This is where larger operators will have an advantage, because they are likely to have the resources to comply with these new regulations or have a compliance infrastructure in place already.
“I don’t think that a single eSports-focused product or company will ever be able to compete with a larger operator who is able to offer a greater variety of betting products. So in the beginning the eSports betting market will be very good for start-ups to thrive individually, but further down the line I predict that partnering with bigger operators is going to be the way forward for smaller bespoke eSports betting companies, in order to expanding the scope of their offering.”
Although these bigger companies may have the resources to expand globally, it may not be economically viable for these larger companies to go through that long, grueling and expensive process when they have the opportunity to partner with existing eSports-centric companies who have already developed a wealth of expertise in this particular section of the industry and who have already built a brand and a product that consumers love. Larger operators may find a more sensible option would be to partner with one of these smaller bespoke eSports firms, who not only have a loyal customer base, but are also aware of drastic changes in the market and are well versed in reacting and adapting to them.
So what does the future hold for eSports betting? This thought has certainly split the crowd; while Hurks believes that eSports will “become a very strong niche in the total betting industry, with its own specific core audience to actively bet”, Ovcharov argues that eSports “is going to become mainstream – it will be more and more watched on mobile devices, more VR technology will enter the sector, more sports clubs are going into eSports, more eSports scholarships will appear, and this will definitely expand and develop the whole ecosystem and leave a significant impact on the betting market as well. We also expect with the tremendous pace of growth in the eSports sector and millions of fans worldwide, most of the online gaming platforms will integrate eSports feeds to provide a superb netting experience to their players.
These are two very different visions for this young and unestablished market. Nevertheless, Doyle states that the future does indeed look “bright” for eSports: “We are still in the very early stages, but I would say that in five to ten years eSports betting will have a significant chunk of the betting market, purely due to how it is so easily distributed digitally in all its aspects. It is going to be a bumpy road for many as games will be constantly changing and traditional methods do not work, being quick to adapt is going to be key to survive in offering a product that the public demand.”
Gosai envisions that eventually “some companies will not participate in eSports and other companies will acquire their way into eSports by purchasing existing companies. It will make sense for smaller bespoke companies to team up with bigger operators to expand their offerings on a global scale, as eSports itself is popular all over the world and definitely has the potential to develop. I’m particularly interested to see what the impact of new eSports titles has and if we’ll settle to some sort of equilibrium in terms of the number of titles and genres. Ultimately, I imagine eSports and traditional sports to converge in terms of general market behaviour.”
According to Eilers Research, eSports is predicted to reach an audience of 19.4 million viewers, betting $23.5bn until 2020. ESports will definitely be the hot topic in the coming years as more and more operators will be recognised, more industry professionals will gather knowledge about the ecosystem, and new ways to engage with the audience will be developed. One thing is certain – the golden ticket to success in the eSports betting market remains hidden, and could indeed belong to any operator who is willing to give this market a try.