We know that eSports is one of the most talked about areas in online gambling right now. In fact, it often seems to have dominate discussions at recent conferences with proselytizers often talking about how eSports as a phenomenon is set to be bigger than almost every other sport.
It’s hardly surprising then that start-ups are springing up with regularity in the related area of eSports betting; for many, it would appear to be a natural fit particularly given the prevalence of skin betting where players wager in-game items on the outcome of matches.
Unikrn is the most high-profile eSports betting start-up. It launched in Seattle in 2015 and has the backing of celebrity start-up investor Ashton Kuchar’s Sound Ventures alongside other big name investors such as 500 Startups, Advancit Capital, Freelands Group, Indicator Ventures, and Australia-based betting giant Tabcorp.
Meanwhile, the winner of the recent WH Labs accelerator competition is another eSports betting concept, this time called Betgame which hopes to exploit interest in betting on console games such as FIFA16 and is currently working on a prototype.
But the question of how big the betting market on eSports will be in the next three years is rather dependent on how the eSports market as a whole grows over the same period, and predictions are mixed.
Some are applying hockey stick projections that put revenues for 2018 at over $1.2bn from $85bn in 2014. But the technology, media and telecommunications team at Deloitte have done some analysis of the eSports market and their suggestion is that such standout predictions are likely wide of the mark.
But they still forecast a sizeable enough market for this year with revenues of $500m, up 25% on the circa $400m figure the format achieved in 2014. Moreover, they forecast an audience for eSports to hit close to 150 million this year.
But as the Deloitte team emphasise, this is till way below the revenues of major sport such as football and NFL (see chart 1 ‘Revenues from major sports). Although eSports events may attract up to 40,000 people to watch it live and with 10s of millions of people watching online, in dollar terms eSports is “not yet playing in the big leagues”.
As Deloitte point out, though there is evidence enough of interest in investing in eSports. Amazon acquired the eSports streaming site Twitch for $1bn in 2014 and Swedish media group Modern Times acquired a majority stake in eSports league ESL for $87m last year. Canadian cinema exhibitor Cineplex is spending $15m on acquiring an eSports company and the first dedicated eSports venue has been opened in the UK by a cinema chain.
From a betting perspective there are good reasons to suspect that eSports could be very lucrative. As Deloitte says: “One report describes eSports as an ‘advertising goldmine’, which is supported by their spending habits: eSports fans are more likely to make in-game purchases, buy more apparel and buy more branded peripherals than other gamers.”
But as Luke Cotton, marketing manager at affiliate programme manager Digital Fuel points out, eSports still has its challenges. “There is uncertainty around player values that will be seen from such customers; obvious search volumes are low and existing activity is almost all undertaken on questionable skin betting websites.”
As Cotton says, with millions being wagered via unlicensed skin betting site it was almost inevitable that betting companies would get interested and so far Pinnacle and Betway are leading the way. “After the failure of social gaming to take off, eSports has provided operators a low-risk, high-reward product that hasn’t required significant investment in to test the waters,” says Cotton.
This also leaves the way open for start-ups to get involved, particularly if they are more attuned than regular betting operators to the eSports milieu. As for the wider eSports world, the enthusiasm among the investment community for companies looking to exploit enthusiasm in the area is unlikely to abate this year. In January, a UK start-up called FaceIt raised $15m from investors Anthos Capital, Index Ventures and United Ventures. With VCs circling, it won’t be a surprise if eSports chatter continue to dominate the online gaming conference circuit for a while yet.