ESI Gambling Report: Esports betting spike recedes, maintains flight

As the world came to a grinding halt to safeguard itself from the effects of COVID-19, gaming and internet consumption rose, highlighting it in ways too large to ignore.

From unimaginable mainstream crossovers such as the NBA 2K Players Tournament to NASCAR and Formula 1 racers sitting in the cockpit of virtual racetracks; with all that had transpired over the last several months, one mutual belief remained consistent: gaming was a solution for businesses and industries which were forced to pivot during the pandemic.

While esports charity events fundraised to provide relief for essential healthcare organisations like the International Federation of Red Cross and No Kid Hungry, the NBA 2K League and eMLS filled key television programming gaps on ESPN and FOX Sports.

The same could be said for sportsbooks around the world whose revenue streams were reduced to a mere drizzle. The pandemic saw the esports betting category rise dramatically in volume and awareness, with a number of non-endemic bookmakers adding the digital sport to its catalogue – but with traditional sports returning to the docket, can esports sustain its growth trajectory? Esports Insider explores the very topic in this edition of the ESI Gambling Report powered by EveryMatrix.

Feeding the fire

The idea that esports would rise in the global gambling market amid COVID-19’s onset quickly became far more than speculation – it was indeed proven.

As traditional sports leagues adjourned to comply with health and safety protocols, companies like Luckbox and its esports betting platform experienced surges of growth. On March 18th, Luckbox reported a 54 percent uptick in new player registrants following cancellation of the English Premier League. More recently, the company disclosed a 500 percent increase in global wagering alongside securing a $3.8 million CAD (£2.23 million) in investment during the first tranche of its latest funding round.

B2B iGaming supplier EveryMatrix outlined a 40x growth in esports betting in May in its market study, The State of Esports Betting Report 2020. The report parades almost every metric is on the rise, outlining an impressive 80 percent of betting volume stemming from NBA 2K and FIFA at a time when their unsimulated counterparts were offline.

For global online bookmaker Pinnacle, which has been vested in esports for over a decade, competitive gaming occupied the platform’s leading category globally in June, swaggering the overall majority of wagering.

Even the United States, which regulatory position on esports makes for an administratively challenging task to accept wagers, has seen significant advancement. Up until 2018, Nevada regulators had approved just three esports events for wagering. Since March, the state issued 13 separate licenses for esports leagues and tournaments – which major non-endemic sportsbooks such as the likes of William Hill took advantage of.

Talk of esports gambling is starting to rise in other states, too. Malta-based online gambling enterprise Esports Entertainment Group had established a subsidiary last month with the specific intent of obtaining gambling licenses throughout the United States. In the Garden State, a bill has been approved and motioned to the Speaker for consideration to permit esports wagering on a full-time basis.

Across the ocean, esports contributed to a sharp revenue increase for operators in the United Kingdom. A data study conducted by the UK Gambling Commission covering approximately 80 percent of the online gambling market showed esports betting gross yield grew 124 percent from March to April. Perhaps more impressively, the report also indicates a year-over-year growth change of 2922 percent since March 2019.

Such figures would typically suggest the esports vertical is more than just a flash in the pan; although, with the world on its way back to normality, and with it, the return of competing betting handles, there is rightful hesitation about esports’ continued prosperity.

Surviving the return of sports

The escalation of esports in the gambling market was forecast to taper off once traditional sports came back onto the marketplace; and as inferred, this was indeed the case.

Esports is no longer Pinnacle’s highest grossing product, FIFA and NBA 2K betting has dipped back to regular volumes, and a majority of punters are back to having a cheeky bet on football over the weekend. Even with traditional sports leagues such as the Serie A and La Liga resuming, allowing bookmakers to reacquire its customers, esports time in the limelight perhaps won’t end in vain.

According to Luckbox CEO Quentin Martin, the boost in volume ushered in alongside COVID-19 is “automatically sustaining.”

“The boost is automatically sustaining in the sense that there were some people who weren’t really aware of esports before, or had heard of it but didn’t know much about it, and now people are knowledgeable,” Martin said. “That kind of growth is still there.”

“More likely it’s people that were aware of the title, enjoyed the games, but are now more clearly aware that there are betting opportunities on them. Maybe they’re a little bit more familiar with the teams and players, and now more likely to place bets due to that familiarity.”

Previously, Esports Insider reported how the pandemic crisis had inadvertently grown the esports betting handle, but also served as a catalyst for the industry at large. Now in a period when esports as a betting product is becoming overshadowed once again, online bookmaker Rivalry’s Chief Marketing Officer Kevin Wimer insists the industry will carry on from this point having created a wealth of “positive ripple effects” to surf on.

“The net result when comparing February to perhaps September this year, we believe, will show that esports betting is in a much better place in September than it would have been without the epidemic,” Wimer told Esports Insider. “While some in esports will certainly not make out from this, we believe the industry as a whole, including the gambling sector, will end up seeing a net positive outcome. Gaming entertainment even beyond esports has seen a massive spike in viewership and all new interests from sponsors. This will end up long-term creating a lot of positive ripple effects for the industry.”

The lack of alternatives which led to both the acceptance of esports by traditional books and bettors, as well as its mainstream appearances during the quarantine’s height, has accelerated all of the industry’s KPIs. Most namely, it has created an awareness which will establish a foundation to tee-up esports and its betting precinct for a grand slam.

The big leagues

Bleeding revenue and tumbling stocks had instilled the fear of god in operators globally. While many bookmakers reached for esports out of pure necessity, it offered those unfamiliar an opportunity to get acquainted.

Gaming group Enlabs and its flagship sports betting brand OPTIBET is just one example of many. Last month, the company teamed up with B2B iGaming supplier EveryMatrix to offer esports coverage of its own.

“The COVID-19 pandemic outbreak, of course, became the entry ticket to enter the arena of the major classic sports,” Daniel Belozertsev, Head of Betting at Enlabs, told Esports Insider. “This branch grew quickly, but now it has made itself very loud. In the future, growing popularity among the masses will become a catalyst, since the 21st century with rapidly growing technologies and a constantly replenishing number of new games makes it possible to find something for each existing and new player.”

The pandemic very well served as a gateway to esports in the mainstream gambling industry, but it provided far more than just an introduction. Operators have had several months to experiment with esports as a primary handle, deploying first string resources and allowing them to truly assess the market.

What non-endemic bookmakers are finding is that the appetite for esports is established, and with it, the appetite for its betting district is growing.

Although DraftKings CEO Jason Robins acknowledges how a “pent-up demand for sports” likely coerced bettors into trying something new, he admits “esports has stuck,” in a CNBC interview.

“It’s been a huge growth area over the last couple months for us and [it’s] hard to say what it will look like once the traditional sports are back, but I think a lot of people are finding it fun,” said Robins.

Consumer research agency 2CV and market researcher ProdegeMR reported esports gambling revenue is set to double from the $7 billion (£5.8 billion) earned in 2019 worldwide to over $14 billion (£11.5 billion) in 2020 in wake of the coronavirus outbreak. Whether this riveting projection comes to fruition or not, it’s just one piece of chatter this category and its potential has generated in recent times.

The gambling industry saw bookmakers approach esports from a variety of different levels. Whether improving upon and promoting existing offerings to starting fresh with a new product, this period provided first-hand insights into its capabilities and made industry decision-makers “acutely aware” of esports, Martin said.

“On a business level, all of the business development people, all the people at the top are now acutely aware about what a role esports can play and how it can react, and then need to make sure they’ve got a good product going forward,” he added. “But also to make sure [bookmakers] have it on their growth and acquisition targets moving forward.”

Saving grace

For most traditional sportsbooks, esports indeed may drift back out into the peripherals with leading betting products being restored onto the point spread. Operators aside, esports as an industry flexed its ability to adapt and, for the most part, operate within the pandemic’s parameters without a hitch.

Competitive gaming acted as a lifeline for operators to dampen the revenue loss from sports betting when there was truly nowhere to turn. Having displayed its versatility in this climate, as well as its other redeeming qualities, executives and directors will likely opt to pay the piper by maintaining and growing esports as a category on their betting platforms.

Much less a case of being too late to turn back, but more so because esports will keep a card up the sleeves of bookmakers if and when another pandemic occurs. Phill Adams, CEO of RPGG Media, the owner and operator of UK-licensed esports betting platform Puntt, elaborated on this idea for Esports Insider.

“It has increased the realisation from traditional bookmakers that they need to have something in their back pocket in case [a pandemic] happens again,” said Adams. “Even if no one believes it will ever happen again, they can’t go to the city and not have this as part of their risk planning. I think you’ll find an increased interest in esports betting from the operators as they try to find products that are easy to plug in and easy to risk assess.”

Even as traditional bookmakers turned to esports, most arrived too late to the party to yield the profits they so desperately needed. Meanwhile, books who had already invested in esports with established and abundant offerings were sent soaring. It’s all the more reason to believe competitive gaming will become a usual suspect on bookmaker’s menus in the future, or as Pinnacle Trading Director Marco Blume says, a saturation orbiting “100 percent.”

“Pre-COVID there were still some bookmakers which didn’t have an esports offering. I think going forward, we’re going to see almost a saturation of 100 percent of bookmakers offer esports,” Blume said. “I think esports is here to stay, esports is just going to grow – so bookmakers would be foolish to not continue having it in their portfolio.”

Of course, esports has a lot more to offer to operators than just a fail-safe plan during a crisis. In particular, it serves as an entry point for sportsbooks to tap into a much younger, and historically difficult to reach, demographic and have them as long-term customers. Furthermore, esports can supply close to around-the-clock action on a global scale which is accommodating to players betting from around the world.

Blume also noted that the esports customer “spends a lot of time” on the Pinnacle platform comparatively to traditional sports bettors. The ability to embed streams for users to watch tournaments and also place wagers at the same time is thought to be the culprit.

Kevin Wimer of Rivalry describes them as “endless options” for both operators and users, but notes the betting market still has a long way to go. “There’s essentially 24/7/365 matches going on. Endless options for [bookmakers] and their users. But with the market being so immature, there’s a lot of baggage that comes with it. There are often mispriced markets, cancelled matches, and other unexpected ‘esports’ things.”

Meeting the standard

While the studies yielded from this report certainly motion towards a brighter future for esports betting, the industry at large needs to mature in many ways before it can accommodate for the high standards set by the upper-echelon of gambling operators and regulators.

“Esports has challenges which don’t exist in traditional sports, and I can’t emphasize that enough. Traditional sports [are] highly regulated, highly standardised. You have big organisations like FIFA, UEFA, the Bundesliga – all these leagues have been doing this for many, many years. Esports is the wild west,” Blume explained. “Everything under the sun is happening in esports. So, if you don’t have a team that’s dedicated to this who actually understands esports and can understand betting on esports very well, I don’t think you have much of a chance to actually get a great product out of the door.”

It’s safe to say the level of quality and merit sportsbooks are accustomed to is simply not all there yet in esports. Understandably so, traditional sports are as old as time itself, and while esports is growing at an impressive rate, it’s difficult to compare the two in this context.

There’s an inspiring amount of growth in esports as a gambling market left to be obtained, and for Blume this comes down to one thing: data.

“Data has always been the one element that prohibited esports from becoming great. So now companies are taking up the challenge and providing data in sustainable matters and companies like us now can make it into a great product,” Blume told Esports Insider. “I think people are going to be in for a ‘rude awakening’ how good esports betting is going to get very, very soon. We’re launching with GRID data this week or next week, and our uptime is phenomenal.”

In June, Pinnacle procured the likes of Abios to “facilitate further enhancements to the company’s renowned esports offering.” The partnership will vamp up Pinnacle’s existing data collection efforts with esports data provider GRID, which inked its deal together in September 2019.

It would be naive to think esports would come out on the other side of the pandemic as a cardinal betting product globally. Although, that’s not to say it hasn’t come around the bend of a significant turning point from its time at the top.

Esports may have passed off its championship belt back to traditional sports, but it proved itself as a worthy contender in the gambling ring. In the process, its winning potential was revealed as well as calling to attention its areas of improvement.

With this attention, awareness, and direct insight, esports can be brought into the hands of key stakeholders in the gambling business who will groom it into a competitive betting handle.

“I think it’s actually a slow burn still,” Martin said. “There was an irregular jump where we just levelled up and fast-forwarded into the future and its growth trajectory. But now, if we can say that the world is back to ‘normal’, then I think it’s fair to say the growth of esports will continue on the same kind of growth trajectory, but from a much more advanced place.”

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