May 14, 2021 eSports

A Footnote No Longer

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At the moment, esports is merely a ripple in the overall sports betting community, but it is poised to become a tsunami. And this wave is coming a lot faster than you may think. The worldwide sports betting industry is expected to easily surpass $150bn in the next few years, with some analysts predicting a figure closer to $180bn as more North American jurisdictions legalise and expand sports betting. In the US, which is in the early stages of sports wagering, state after state continue to report record-breaking numbers every month.

By contrast, esports betting is about a $1.8bn industry – barely a footnote when compared with these overall numbers. But it won’t be a footnote for long. Make no mistake, the esports slice of the overall sports betting pie is getting increasingly larger each year. Pinnacle, arguably the leader in esports markets, has already publicly stated esports is its fourth most-popular offering.

By the end of this decade, many experts are predicting esports will account for 10% of a sportsbook’s turnover. It could be even more than that in some countries. Asian markets, which had the foresight to see this trend coming, will get there even quicker than North American and European markets. So it’s not unrealistic to think 10% will be the floor, not the ceiling.

How big can the esports betting industry get? If it follows the trajectory of the esports marketplace in general – a reasonable presumption – it will be massive. Steve Bornstein, chairman of Activision Blizzard’s Esports Division and former CEO of ESPN and NFL Network, recently told Business Insider: “I believe esports will rival the biggest traditional sports leagues in terms of future opportunities, and between advertising, ticket sales, licensing, sponsorships and merchandising, there are tremendous growth areas for this nascent industry.”

Esports is already eclipsing movies and music for entertainment dollars. There will be more eyes on esports events in 2021 than there will be viewers of every professional North American sports league, save for the NFL. Newzoo projects that esports-related content will have 250 million regular viewers and more than 300 million casual viewers this year. SafeBettingSites.com also projects that number will hit 650 million global viewers by the end of 2023. Twitch, which outpaces Facebook and YouTube for streaming esports, saw more than 1 trillion minutes watched on its platform in 2020.

Marketers at mainstream companies salivate at those figures and the demographic dream that is the esports audience. Mostly constituted of 18- to 30-year-old males who are savvy with ecommerce and well-versed in rapid decision making, it’s a very attractive group to market to, yet one that is remarkably hard to connect with. You aren’t going to reach them through traditional TV, and targeted ads and banners might as well be background noise. Also, forget about radio, where brands will have nearly zero influence. Esports is the best direct line.

It's worth noting that sponsorships are not limited to the Red Bulls, Mountain Dews and Cheetos-type of brands that one may presume to be popular among those playing and watching video games. Legacy brands like IBM, Nike, Honda, Mercedes Benz and Adidas are flocking to esports, aiming to get an early foothold in the market. Celebrities and athletes are also jumping to align their names with esports, aiming to beat the eventual rush to associate with top teams and gaming organizations. Mark Cuban, Ashton Kutcher, Drake, Steph Curry, Jennifer Lopez, Tony Robbins and David Beckham have all thrown their proverbial hats into the esports ring.

Michael Jordan even took a prominent place in a $26m funding round for aXiomatic, the group that owns Team Liquid, one of the most successful esports teams in the world. Brands and A-listers aren’t alone in foreseeing the potential marketplace. Cities across the globe are capitalising on the industry’s rapid expansion and building the necessary infrastructure to support its inevitable growth. Shanghai recently announced a new $900m, 1.5 million-square-foot sports event hub. Last year, Abu Dhabi’s Al Qana broke ground on what it claimed at the time would be the largest esports and virtual reality (VR) gaming complex in the world.

New facilities for professional esports contests are popping up across the UK and the US, joining existing arenas all over Asia. Additionally, dozens of universities in multiple countries have announced plans to build facilities for their burgeoning esports programs. All of this is great news for those in the sports gaming space, as it translates to more attention, more events, more money and, most importantly, more potential customers for gaming operators.

I feel quite confident saying if you replicated that survey in other countries, it would yield similar results. It’s only natural that as esports continues to gain traction, the pool of bettors interested in wagering on esports will increase. The yet unanswered question is: Where will they will be able to bet? Many regulators have been slow to move on esports because of their lack of understanding about the industry in general and their warranted concern about match integrity. That’s why having a recognized body like the Esports Integrity Commission (ESIC) is so important. ESIC removes the burden from individual jurisdictions and increases the marketability and legitimacy of esports events.

As for operators, many are still hesitant to get into esports as the ROI is a bit of an unknown. They are wary of spending big development dollars up front with no guarantees, and quite a few have voiced concern about lengthy timeframes to get up and running. They shouldn’t be. First, the bettors are there, not so patiently waiting for an operator to take their bets. The numbers and trends are unmistakable. Second, the upfront costs and timelines are much lower than operators assume. From what I’ve seen, operators are often surprised when they learn they can get a licensed esports book up and running quickly and affordably. It's important, however, that operators look for partners that are well-versed in esports – partners that really understand the ins and outs of the marketplace.

In the end, the esports betting trajectory is like that of a rocket ship, and it’s gaining incredible momentum. Brands have to jump in now to have a shot at being seen as authentic in this space. The sooner they can do that, the more their message will resonate in the long term. After all, it’s not a matter of if competing operators will add esports to their menu of mainstream sports offerings. Based on current trends, it’s just a matter of when.

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