Why the Continued Growth of E-Sports is Good News to Gamblers

Date Created: Jun 12
Written by Jerico

Not too long ago, the term eSports was used only by a handful of people, and those involved in it were no more than a small community of video game players who gathered at conventions. Their games at that time were limited to the likes of Call of Duty, Counter Strike, and League of Legends.

These days, the term has become mainstream and eSports has become an industry of its own, made up of several gaming communities. Tournaments and other eSports competitions are now being held all over the world. Media giants like ESPN and Turner have even gotten involved, broadcasting the most popular tournaments and competitions. Amazon also joined the fray in 2014 when they acquired the live streaming platform Twitch. Even YouTube now has YouTube Gaming, which is their contribution to the live streaming gaming community.

Those who are just now taking notice of eSports are questioning just how much it has grown, what the future holds for it, and whether it holds boon or bane for gamblers and the gambling industry. These are the issues we will be taking a closer look at.

The Boom of the eSports Market

If you’re still unconvinced that eSports has become a major industry, try this simple experiment: Do a Google search for “lol”. You will find that the top result is no longer “laughing out loud”, as it was several years ago. Rather, the top result is League of Legends, which is one of the most popular competitive games in the world. In fact, there is now a global community called the League of Legends Championship Series. This community is fondly known as either LCS or LOL eSports.

Today, in various parts of the world, there are already official networks of pro gamers as well as established gaming tournaments and leagues. There are countless official gaming teams who compete in these tournaments at various locations several times each year. Some of these teams are even sponsored by known establishments such as AHQ, MLG, and Denial, and they compete internationally.

Consider as well that at the most recent Dota 2 tournament, the prize pool was over $20 million, and you will realize that eGaming certainly is no joke. There are even websites dedicated to showing eSports scores in real time, allowing fans to track competitions wherever they are in the world. There are also eSports leagues that follow a similar concept to fantasy football. And there is now a growing eSports betting and gambling scene, which is why there is now a lot of talk about how eSports will affect the gambling industry.

There are about 300 million people all over the world who now tune into eSports, and that number has not stopped growing since eSports went global. It is estimated that the number of people tuning into eSports will be closer to 500 million by 2020. Some people say eSports is now mainstream, but others disagree. What we know for sure is that if it isn’t mainstream right now, it sure will be very soon.

What the Future Holds for eSports

It certainly looks like eSports has a bright future, especially because well-known financial institutions are now starting to take notice of the growing community. In 2016, Goldman Sachs estimated eSports value at $500 million. They also reported that they expect the market to grow at 22% annually. This would mean that this year, eSports is expected to become a $1 billion industry.

A look at present industry statistics will show that this valuation made three years ago wasn’t that far off the mark. The eSports community is already showing potential for huge earnings. Just recently, YouTube made a huge eSports investment when it signed a broadcasting deal with Faceit, so they can stream Faceit’s Esports Championship Series. Additionally, Swedish media company Modern Times Group acquired ESL’s holding company, Turtle Entertainment, for a whooping $87 million. And just last year, the NBA launched their very own eSports league.

While people are excited about the current developments in eSports, many are also wondering how high the community can climb. Will it become as popular as football or baseball? How will it gain that kind of popularity, with a community that has been known to shield itself from advertisers? Will there come a time when advertisers will be able to penetrate and capitalise on this growing phenomenon?

Technology consulting firm Activate projects that by 2021, in the United States alone, eSports will have more followers than all professional sports leagues, with the exception of the NFL. This is based on their estimate that eSports will have about 84 million viewers by that time, which is definitely more than the 63 million NBA viewers and 79 million MLB viewers, but much fewer than the 141 million NFL viewers.

Considering this, it becomes easier to believe that eSports will indeed be able to climb much higher and grow even bigger than it already is. Consider as well what Eunky Lee, Marketing Professor and Associate Dean for Global Initiatives at the Martin J. Whitman School of Management at Syracuse University, said:

“Unlike football or cricket, eSports is not rooted in any region or culture, so it has a more global appeal. In today’s world, being able to reach...billions of eyeballs is very important for building the product’s commercial value.”

Now, eSports broadcasters and game developers will have to contend with those who market traditional sports, as they are targeting the same demographic--individuals aged 18 to 34. As mentioned earlier, the eSports community has been shielding itself from advertisers, so it will definitely be a challenge for them to go up against traditional sports in terms of reaching their target audience. But it does seem like they’re ready to take on that challenge.

They have borrowed a few tactics from the sports industry to go after their target demographic. They have established competitive leagues like Overwatch, and league owner Blizzard has signed a deal with Disney for ESPN and ABC to broadcast league competitions. Other developers have also started investing in flagship competitions. Esports was even included as a demonstration event at the 2018 Asian Games, and there are talks of it being included as an Olympic sport in the future.

The fact that most eGames involve a lot of killing might make it practically impossible for eSports to be included in the Olympics, but just the fact that the idea is being considered shows just how big it has become. Lee says, “Few now have doubts about the long-term staying power of eSports in mainstream culture.”

eSports and Gambling

As eSports continues to grow and show signs of becoming a serious player in the gaming and sports industries, some people are now turning their attention to the potential for betting on competition outcomes. It is expected that eSports will become a big part of the gambling industry by 2020. The continued growth of eSports, therefore, can be seen as good news for gamblers worldwide, as it can provide them with another platform on which to have some fun and excitement.

According to a market research conducted by Eilers, eSports and gambling fans are expected to spend about $23.5 billion betting on competition outcomes in 2020. And operators are expected to generate $1.8 billion from this projected betting pool. From the observations of online betting company Bwin, it looks like eSports betting has already started making its presence felt in the gambling industry.

Alex Igelman, Managing Director of Gaming Research Partners, has said in a report: “Many of the world’s leading bookmakers regularly take bets on numerous eSports matches and although in its infancy, the betting volume already exceeds that of golf, tennis, and rugby and is rapidly growing.”

There are, however, some obstacles that betting operators need to overcome before they can truly capitalise on eSports as a new area of gambling. For one thing, it may be quite a challenge to expand the eSports audience from its current core of video game fans. Most industry analysts aren’t sure if betting fans such as those who bet on horseracing and sports would be interested in betting on eSports. Even gamblers who frequent casinos for the excitement of slot machines and table games may not be easily convinced to give eSports betting a chance.

IHS Technology Senior Analyst Steve Bailey told CNBC in an email: “The key issue with broadening eSports appeal is that the very things that make it exciting to current audiences may very well be off-putting for many other audiences. The tournament-like pitch of excitement is driven by combative, reflex-dependent showdowns. Ditto the culture of controversy and stardom that surrounds it all.”

Global Betting and Gaming Consultants Research Director Lorien Pilling also sent an email to CNBC, where he said: “Sportsbooks will need to engender a betting interest in eSports’ core audience, which is perhaps not immediately identifiable as a sports betting one. But attracting a new audience is no bad thing for a sportsbook.”

Pilling also pointed out another challenge for betting operators in terms of turning eSports into a gambling area, which has to do with betting regulations. “At present, some of the key markets for eSports are Asia and North America (U.S.)--two regions that have prohibitive regulation on betting and from which many firms will not take bets/customers,” he explained.

Another thing to consider is the availability of eSports data for bookmakers. Bookmakers typically provide odds for games and events, and the more data they have about a particular game or event, the more reliable their odds will be. The problem is that not all eSports organisers provide bookmakers with enough data to give reliable odds. If bookmakers find it too difficult to obtain sufficient data to offer accurate odds, then they will be less likely to provide betting for that particular game or event, unless there really is overwhelmingly high demand.

One particular issue for bookmakers in this regard is Blizzard Entertainment, which develops several of the most popular eSports games, including Overwatch and Hearthstone. Blizzard typically provides limited data, and whatever data they do provide is often of no real use to bookmakers. Bookmakers therefore have to take significant risks if they choose to allow betting for Blizzard games.

Despite these obstacles, though, industry experts remain positive regarding the potential of eSports as a betting vertical. Even Pilling has this to say: “There is no reason why eSports should not become a meaningful and profitable part of a sportsbook’s portfolio. eSports tournaments are competitive, exciting, fast-paced events, with a live crowd creating atmosphere, just as at a ‘traditional’ sports event like a football match.”

Where the availability of data to bookmakers is concerned, one good thing is that Valve, which owns Dota 2 and CS:GO, two of the most popular eSports games currently being bet on, does provide bookmakers with sufficient data. Although they sometimes have a tendency of providing too much data, much of which is useless to bookmakers, this is a minor downside that can easily be ignored. What’s important is that they enable bookmakers to provide the best and most accurate odds.

The atmosphere is also expected to change soon, and other developers are expected to follow Valve’s example of providing sufficient data to bookmakers in the near future, especially in light of the ever-growing popularity of eSports in the gambling arena. Businesses will want people to bet on their games and events, as that can only mean wider recognition of their brand and bigger revenue for them. The smaller producers will likely make data freely available first, and then the bigger players will most probably follow suit.

Some parties are also concerned about the potential for game-fixing, especially in events where the bets could easily go into the millions. Industry players recognise the legitimacy of this concern, which is why they are already taking steps to mitigate the possibility of game-fixing as early as now. Experts are looking into the wisdom of putting in place a system similar to the one used for cricket, where players are required to complete a license course before they can take the pitch.

There is definitely no stopping the growth of eSports, and its marriage into the world of gaming and gambling is inevitable. While it is understandable for some people to resist this latest development, the best thing to do would be to embrace it. It is going to happen one way or another, so betting fans might as well take advantage.