Big Question

By Gambling Insider
After enjoying rapid growth throughout the early stages of the pandemic, what does the future look like for esports?

Kambi, COO, Erik Lögdberg

What was at one stage a largely niche pastime, esports is currently one of the fastest-growing global entertainment industries with an audience of more than 450 million people worldwide. Buoyed by the success of popular games such as League of Legends, Counter-Strike: Global Offensive and DOTA 2, as well as the growth of streaming services like Twitch, esports is now estimated to be worth more than $1bn in revenue this year at a growth rate of 15% year-on-year, according to Newzoo.

Such strong growth is why, particularly in recent years, esports has become such an enticing opportunity to the sports betting industry. Indeed, more and more betting companies have begun offering markets on esports and many have invested significantly in their respective esports betting products, in some cases treating it as a standalone vertical alongside casino, poker and sports.

As the question this article poses might suggest, there was a particularly large surge in the popularity of esports betting at the height of the Covid-19 pandemic. The cancellation of major sports across the globe resulted in a more limited offering comprising the likes of Belarusian soccer, table tennis and esports in early 2020. By way of example, in March 2020 the number of esports bets placed on the Kambi network was approximately 250% higher than in the same period the previous year.

Interestingly, when the global sporting calendar returned to normality, the interest in esports remained high, which served to underline that the growth of esports betting was no flash in the pan. Data from the Gambling Commission, for example, showed that gross gambling yield from esports betting continued to rise into May 2020 once the sporting calendar had resumed, while other ‘niche’ verticals reported a decline. The potential for esports to be a significant part of the sportsbook has never been clearer.

Of course, the future growth of esports betting is largely dependent on how it is regulated on a country-by-country basis, or, in the case of the US where licensed sports betting in general is still in its infancy, on a state-by-state basis. This forms part of a wider industry trend which has seen many regulators across the globe permit betting on esports; while also attempting to establish a framework that ensures the highest standards of integrity monitoring are upheld, and that esports is protected from manipulation. 

Since the repeal of PASPA in May 2018, an increasing number of US states such as New Jersey, Colorado, Nevada and West Virginia have regulated esports betting, and more states are expected to follow suit in the future. Many US sports teams have entered into partnerships with esports betting providers too. In general, esports is immensely popular in the US and, as we don’t feel anyone has really cracked the esports betting product or market yet, we believe it offers a significant opportunity moving forward.

Another area we see ripe for disruption and growth in the esports betting market is in-play wagering. This is a particularly immature aspect of esports betting as the data value chain has largely not been as structured as in football or tennis, for example, but we see significant opportunities to deliver a fast, automated and friction-free live betting experience for esports bettors. We believe whoever can combine risk, trading and algorithmic expertise from traditional sports with esports data management expertise will be in a strong position to do just that.

These are still early days in the evolution of esports betting. However, as the market continues to grow, the future looks incredibly bright for esports, and it will no doubt become an increasingly vital component of the wider sportsbook offering going forward.

Erik Lögdberg joined Unibet in 2005, quickly becoming head of live betting, with responsibilities including operations and product development. This period coincided with the growth in live betting and the formation of Kambi. Erik is now COO of Kambi and leads on product and operational matters.

 

Amir Mirzaee, COO, Bayes Esports

We get this question a lot and the only thing to say is that without a doubt, the trajectory is unchanged and still unparalleled across all sports. Before, during and after the pandemic, growth has been stable between 50-100% year-on-year by any meaningful metric. With this growth comes key findings and developments that reveal a bright future for esports, specifically in the betting realm.

Thanks to deep insights gained from transaction-level details of our clients, we’ve seen a phenomenon where the number of betting transactions has slightly decreased, but transaction value per ticket has shot up, setting total turnover far above last year’s. That is to say that, while the pandemic has seen lots of hobby punters give it a go with esports and subsequently move on, total turnover is showing stable growth via an ever-expanding fan base. This is in line with the trends we were seeing even before the pandemic.

We are also seeing that new stars in betting aren’t born overnight. There are quite a number of solid titles that have had good traction on the player side, like Mortal Kombat, Rocket League or Fortnite, but player interest isn’t the only factor in determining whether or not a title is suitable or preferred for betting. What sets the “Big 3” game titles apart – that is CS:GO, DOTA 2, and League of Legends– is that these titles grew consistently and built massive followings over the course of the last two decades. Their game mechanics are well understood and are constantly refined (unlike EA’s sports titles, which only see substantial changes in game mechanics annually). It is also the case that the teams who play these titles are continuously delivering matches packed with displays of high-quality performance, and these matches offer a good balance of predictability vs. turnaround-and-upset moments.

Getting to – and maintaining – that level of traction and comfort in terms of betting behaviour continues to be a major challenge for any new game titles coming to market, including Valorant, Call of Duty Warzone or PUBG Mobile. Valorant, in particular, is an exciting challenger in the strategic first-person shooter space, since it is at the forefront of a new breed of game titles designed with esports in mind from the start. It is a game format expertly tailored to deliver a fast-paced, exciting viewing experience for the crowd. For the time being, however, the “Big 3” game titles continue to make over 90% of all esports betting revenue (not counting eleagues content like FIFA 21, NBA 2k, etc.) and taking a spot among the “Big 3” will not happen overnight.

In terms of eleagues, we have seen a massive boost in betting volume simply because the game mechanics, and resulting meta, are so similar to their traditional sports counterparts. This makes them particularly attractive for betting especially because the nuanced ways in which game mechanics differ change the experience for punters. One of many instances of this nuance can be seen in FIFA 21, where a simple 1:0 lead is much harder to turn in the last 10 minutes of the game than in real football. This has certainly made eleaguesa betting favourite in the past year (both for operators and for punters). Sadly, because EA Sports is not currently engaged in establishing a data offering, the eleague market is among the more fragmented, unregulated markets, creating a space for content and data providers that target the black and grey markets.

If we look at it from the content side, the amount of inbound business we’re seeing is just absolutely staggering, so much so that it could be likened to that of a gold rush. Game publishers – looking to follow in Riot’s footsteps – are beginning to come out in favour of creating infrastructures that support esports organically. New league brands are chasing the ESL in an effort to become the next big brand in the events space. New game titles and teams are shooting out of the ground as well. It’s simply mind-blowing.

Amid the rush, fans are increasingly eager to connect with their favourite esports in meaningful ways. This is, in some ways, facilitated by the quality and diversity of the digital offering, which is largely driven by official data. At Bayes, we see it as our mission to provide high-performance infrastructure and access to clean, undelayed data feeds to support any kind of digital esports use case, from in-depth analytics to betting offerings. With Riot, ESL, Beyond the Summit, and OGA as our exclusive content partners, we’ve laid the groundwork for what data services need to be to the esports industry, in terms of driving standardisation and integrity.

Amir Mirzaee has been active in tech business for over 15 years as founder, strategy consultant, Business Development professional, and as the head of a family office. Most recently, he spent six years as the BD lead at Google and Waze, and has spent the last three years investing in tech startups across Europe and the US. Amir is acting as COO, managing commercial, business, legal and financial operations at Bayes.

 

 

Malte Hegeler, Head of Product Development, OddsMatrix – EveryMatrix

Firstly, it is important to recognise exactly how transformative the pandemic was for esports betting. Our own research showed that the shutdown of live sports resulted in this vertical growing 40 times over. The extraordinary bubble of esports betting did not suddenly pop once the Premier League and other major sports resumed operations, either. We have found on our platform that betting revenues on esports events are nine times higher than they were in the pre-pandemic era. One industry-wide report predicted that the esports betting market will be worth more than $13bn by
2025, up from $800m in 2019.

Clearly, a large reservoir of potential for esports betting remained untapped prior to last year. Sports-themed games events that emerged onto betting platforms proved an extremely popular option for bettors, with the knowledge barrier for understanding the mechanics behind FIFA and NBA2K contests easily overcome. These simulation titles remain popular mass-market choices within today’s sportsbooks, as quick-fire matches from across the world constantly take place around the clock.

With the more traditional esports disciplines, such as CS:GO, their ascent into the mainstream has been less dramatic but no less impressive. Once a niche pastime, competitive gaming now commands massive sponsorship deals, huge prize pools and is covered on major TV channels. While Dota2 might not ordinarily pique the interest of a Premier League fan, the $40m prize pool on offer in The International this year certainly provides a point of intrigue for many who would not typically take in a major esports tournament. Many football fans will also have been interested enough in Jesse Lingard’s recent purchase of a Rainbow Six Siege team – rebranded as JLINGZ esports– to take a close look at the game mechanics on YouTube. The patronage of global sporting superstars does not stop there and also includes Sergio Aguero (founder and CEO of KRÜ Esports), Gareth Bale (Founder of Ellevens Esports) and David Beckham (Co-owner of Guild Esports).

Unfortunately, the traditional sports betting world for some time turned a blind eye to the continued ascent of CS:GO, League of Legends and similar titles. This is out of a lack of understanding of the genre and its devotees, who sit outside of the demographic that enjoys regular sports betting. What is needed is for true esports market knowledge to be integrated within a reliable and quick sportsbook platform, to appeal to a generation that sees little or no difference between esports stars on Twitch and football superstars on the pitch.

That deal points to one of the major challenges that still needs to be resolved within esports: the lack of reliable data from below the top level, both on the teams and from the organisers of tournaments. While the likes of the ESL are very well-served with credible data, the next tier of esports events – which are still very popular – features semi-professional players who can suddenly quit mid-season, making it difficult to build reliable pre-match markets, and with inferior in-game data.

Ultimately, operators entering the esports space need to select a solution that is comprehensive, powered by people who hold a deep understanding of the vertical and who can offer partners the widest range of compelling products. At OddsMatrix, our enhanced platform currently features more than 50,000 live events every month across over 370 tournaments and with 95 different bet types. Those numbers are constantly growing. Operators also benefit from real-time odds, stats, scores, settlements and automated trading, as well as the option for operators to configure their own odds to customise profit margin. The future growth and continued development of esports betting is guaranteed, so selecting the right partner now can ensure operators get on the front foot, to stake a claim in a vertical that is only  just getting started.

 Malte Hegeler leads the product development for EveryMatrix across all its sports products. Having a deep understanding of bookmakers’ needs, thanks to his 10+ years of experience in trading and sportsbook development, Hegeler is a key contributor to the recent revamp of OddsMatrix’s front-end and back-end capabilities, as well of the launch of the Esports Services in 2019.

 

Marco Blume, Pinnacle Solution, Trading Director

The pandemic was no doubt a boost for the esports betting space. But it was by no means the catalyst that made it a mainstream betting product, as some claim. Esports took root decades back, and from a betting point of view, there have been viable products in action for over 10 years now. These offerings have evolved into first-rate betting destinations in their own right and will continue to succeed despite external disruptions.

The shutdown of the sporting calendar thrust esports in front of a new, largely traditional sports betting audience, but we must not forget the massive fan base that esports already had worldwide. And it’s this community that we have to appeal to in shaping esports products for the future.

Cross-selling from sportsbook is something we should aspire to. But tailoring esports offerings to the mass market, and not to the unique requirements of the esports fan first, is to do a disservice to the millions worldwide who have enjoyed betting on CS:GO, Dota 2and the like, long before soccer and tennis seasons went on hiatus.

We are at a fork in the road in the esports betting journey. On the one hand, we’re seeing leading operators and suppliers finally take this vast market seriously, delivering broad content in a way that legitimises the space but perhaps doesn’t excite the audience. On the other, there’s an increasing number of standalone esports betting destinations that live for the gaming community. They’re run by esports fans and deliver betting experiences in a way that these same fans enjoy.

The future success of this space probably lies between these two approaches. There’s no reason why major sportsbooks can’t deliver esports content in the same manner as specialist operators. It does require are think in delivery though. Esports fans are undoubtedly more engaged with their pastime than the average soccer fan would be. This means that as an industry we must serve them at a higher level.

Authenticity is key to building trust over time, and successful esports operators of the future will be those who have taken their products to this unique audience on different levels. Content should be specific to individual sports titles, not just adapted from the core sportsbook variety. Pricing should be sharp, fair and accurate. After all, these titles are data-driven and their fans are well-versed on the risk-reward of competitive gaming. All of this content should be packaged in a way that suits the specific demands of the esports audience.

The future of esports is as its own betting vertical. Esports encompasses over 35 traded titles, so crow barring the catch-all term alphabetically between Darts and Formula 1 on a sportsbook will undersell the offering and deter acquisition. Specific hubs are needed for esports fans to find their own space to bet in. This could mean spin-off brands, tailored betting layouts, or darker-themed aesthetics; but at its core, it requires giving the esports fan a destination of their own, not an add-on to an incompatible sportsbook environment.

If we can get this right as an industry, esports can sit as a tier-one, top-three sport across the board and not just within a niche few betting companies. In the meantime, we’ve got to keep our fingers on the pulse of this ever-changing sector.

The mobile gaming sector is booming and yet remains pretty much untapped from a betting point of view. The last PUBG Mobile Global Championship saw over 64 million fans tune in over its four-day Finals event, yet PUBG Mobile is hardly represented as a betting product. This is just one example of many where new titles are finding major regional audiences – in this case Indonesia and India – and it’s our responsibility as esports advocates to serve these fans in the same way we do with the likes of LoL and emerging titles such as Valorant.

We’re on the right path as an industry. But it’s important to remember that the esports audience is a unique one. We won’t be successful in the future unless we tailor betting experiences to them and treat them with the respect they deserve, with esports as its own gaming vertical, built for the community by experts from within it.

Pinnacle’s Trading Director Marco Blume oversees all trading activity across Pinnacle and its B2B brand, Pinnacle Solution, and has been pivotal in shaping the group’s pioneering risk management practices and esports product over the last decade.

 

Andrea McGeachin, Chief Commercial Officer, Neosurf

Esports became a lifeline to swathes of lock downers and quarantiners during the pandemic. Not because they enjoyed the isolation, quite the reverse. The world of esports became the valuable daily community that was accessible to them, providing human interaction, mental stimulation, challenge and, more important than anything, enjoyment in dark times.

And it’s the enjoyment that has accelerated the volumes of esports players exponentially over the past two years. Data tracking at Neosurf shows a 38% increase in transactional deposits to the ewallet by the gamers playing, as well as a 42% increase in use of vouchers by the same.

There are no signs that the growth trajectory will not be maintained in the post-pandemic era, and there are five key reasons for this:

– Firstly, esports was already a recognized mainstream activity; lockdowns just gave more time and space for people to play, pay and game. Universal recognition has been one of the main beneficiaries of the pandemic. The numbers were already enormous before. The adoption of payment methodologies is now seen not only as safer payment solutions, but as part of the whole esports experience. There are no indications that universal recognition will do anything other than continue to fuel growth in the future.

– Secondly, the emergence of esports from ‘gamers-only community’ to ‘full ecosystem’ within the gambling space is what has grown in the gambling sector. The general drive to digitisation that was experienced across many sectors was equally felt in esports, and we now have generations of people comfortable with the concept of digital as opposed to physical. If anything, this applies to esports more than any other area and is a trend that is likely to sit behind further exponential growth in esports in the coming years.

Thirdly, professionalism has arrived, and with it the financial gains on offer to the high-level winners. History has shown that money is one of the main motivators of proposition growth and, fuelled by the trend of mega payouts in mainstream sport, esports has an embedded foundation on which to flourish. The launch of the Olympics Virtual Series this year should leave no one in any doubt that esports is at the starting line and not the finish line.

Penultimately, technology has two angles: the ability to develop and the money to do it. Both stand to serve esports well. The old adage of ‘it takes money to make money’ sits well with the prize money, the investment and sponsorship ready to align itself with what is seen as a huge growth opportunity. And with money predictably will come the technological developments with the more and more captivating, quality, challenging and irresistible titles that will adopt ‘Apple’ status and a similar following.

Finally, education benefited, eventually, from the pandemic, with rapidly developed distance learning models. The education agenda has started to make good use of esports in these models. So, we now have education not only adopting digitisation, but also esports as a means of capturing and retaining the interest of learners. Put more directly, we are educating future generations in esports as a way of life, as well as infusing them with technological excellence and enticing them with the prospects of monetary gains.

There is no other outcome likely to make growth in esports even more energised than we saw during the pandemic. The agenda that Neosurf has in this journey is to be at the heart of it, genuinely positioned as a key part of the ecosystem.

Andrea McGeachin entered payments in 2007, and has been working at a senior level in the online gambling sector since. Andrea heads up the Neosurf Commercial team, which since 2016 has grown exponentially, filling the gap from Ukash loss as well as driving further and more smart services for our clients as a strong APM solution.

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