Connect with us

iGaming

How Esports saved the Sportsbook industry

BSN Staff

Published

on

“2020 has been a decent year so far” – that has to be pretty far up on the list of things you’re unlikely to hear from anyone ever… right?

Well, correct. But even if it’s not exactly shooting fireworks in celebration of this year, the betting industry certainly seems to be enjoying above-average results in recent times. Because despite the Great Lockdown affecting sports as much as any other industry requiring exposure to the outside world on any scale, esports is understandably doing a lot better.

Bookies were quick to confirm this new reality. Some betting API developers were ever quicker. Looking back at the first half of 2020, the initial hype phase already transitioned to comprehensive adoption, partnerships, stunts, and serious M&A activity. Of course, the actual effects of recent developments are yet to materialize on a truly massive level since the sportsbook sector is heavily dependent on regulators to make such moves – by design.

With humanity still trying to figure out how to move on from the biggest health crisis in modern history, iGaming, esports, and the vertical potential between the two are something that will simply have to wait for a bit longer in most parts of the world. But preparations are well underway, having hit overdrive by the time governments around the world started implementing social distancing measures in late February.

The rise of esports betting: from CS: GO to SCOTUS

COVID-19 aside (oxymoron of the year?), the actual process of figuring out how to connect a business making money on sports outcomes with a business producing a ton of sports outcomes wasn’t the hard part, of course. It’s not like the betting industry failed to realize video games existed until every other sporting event including the Olympics got canceled.

Not long after the first crude iteration of esports betting materialized in the form of gambling on CS: GO skins in the second half of 2013, first esports betting startups started raising millions of dollars in venture capital.

Outlooks on the esports situation became much more bullish after a top judicial authority paved the way for esports betting – and betting, in general – to return to the world’s biggest economy in style. On May 14, 2018, the U.S. Supreme Court made a landmark rulling that invalidated a 1992 federal law taking away the states’ power to authorize betting. DraftKings, nation’s flagship sports betting company whose entire business model hinged on this happening, sounded chuffed with the decision. “This is going to be a huge industry”, CEO Jason Robins told CNBC at the time. Seeing how DraftKings doubled in value over the following month, reaching a valuation of about $15 billion based on its NASDAQ performance, it seems the secondary capital markets bought into the hype he was selling.

There was still some confusion on how the new regulations might apply to esports events featuring minors, which the majority of the most popular ones do. After all, Fortnite has single-handedly been turning 15-year-olds into millionaires in recent years. But at this point, those were just technical issues, things to iron out as the ball got rolling.

By 2019, esports were already on the verge of becoming a billion-dollar industry, with Goldman Sachs projecting that figure to triple over the following three years.

As of late last year, even top sports brands were feeling the pressure of esports, with Juventus CEO Andrea Agnelli famously claiming football is “falling into irrelevance” due to Fortnite, not because the Generation Z somehow grew up not caring about competitive sporting events.

Esports Betting Saved Sportsbook

The silver lining to a global pandemic

Though the COVID-19 pandemic certainly hit sportsbook businesses hard, that’s a result of multiple factors: regulatory considerations are an omnipresent concern, then there’s the overall betting culture which is still largely catered toward traditional athletes and their respective sports (not least of all due to the regulatory state of affairs), and sportsbook services are still working on drafting large-scale growth strategies with a major esports component.

Given everyhing that’s been happening in the first half of 2020, the sportsbook industry certainly wasn’t short on motivation to embrace esports on a wider scale. While esports accounted for only about 3% of the global online betting market coming into this year, it also remained largely unaffected by the Great Lockdown. At the same time, the betting sector overall is now estimated to miss its $75 billion annual revenue target by at least 20%. That’s $15 billion left on the table, solely on account of the fact that bookies put 97% of their eggs in a single basket; even less (1.3%), if you add walk-in business for a complete industry outlook. Talk about poor hedging performance from an industry built on the exact opposite.

Therefore, 2020 is shaping out to be a do-or-die scenario for many bookies; one in which “do” means “accept esports as your Lord and Savior”. The thing is, while the sportsbook sector is losing the remainder of that $15 billion, esports betting is projected to grow by an annual rate of at least 35% in the second half of the year.

Betting aside, even some organizations such as NASCAR are now pushing to have competitive video games serve as the main alternative to traditional sports until such a time that massive gatherings can once take place.

This silver lining to what’s otherwise hardly been a year to remember so far isn’t a complete surprise, naturally. However, what many may not realize is that the uninterrupted momentum of esports was already massive enough to allow for some M&A experiments, and the Great Shutdown just improved its odds at completing those forays relative to… pretty much everyone else. Meaning that while betting companies’ acquisitions of esports players are still the norm for long-term tie-ups, we’re starting to see some activity in the opposite direction, as well.

The reality of a 3,000% growth rate

As the betting industry can attest, predicting the future isn’t as easy as it sounds. And severe regulatory pressure across the globe already took a toll on its core business model in recent times. The novel coronavirus pandemic was but a catalyst that walked into a room being sucked out of oxygen and lit a huge fire in the middle.

The end result won’t be that different in terms of overall market performance, according to early analyst insights. The industry, on the whole, is expected to either stagnate or see a minor decline in the ballpark of 5% year-over-year (we’re still talking $30 billion worth of “minor”). That would be the entire gambling industry, of which sportsbooks are only a small part (circa 16%). Still, they’re also heading toward becoming one of its poorest-performing parts once this year comes to a close, with esports being the only glimmer of optimism amid all that gloom.

The jury is still out on how redeemable are we talking about, exactly. Global forecasts are still few and far between, not to mention far from focused on esports. Thankfully, we do have some hard numbers from one of the largest betting markets in the world to refer to. As reported by the UK Gambling Commission, British esports betting grew by a whopping 2,922% year-over-year as of March, reaching a monthly yield of over £4.6 million, or 4% of the overall market.

Even after the first lockdown came to an end and sports events returned to a limited capacity, esports betting in the country maintained a 124% sequential growth rate, nearly double the yield of the next fastest-recovering sector – poker. Not bad for a year in which the world did its best to crash every modern economy in existence, right?

Between those insane rebounds and continued uncertainty surrounding physical sporting events, a number of esports betting startups have seen such an increase in traffic that they’re rethinking their entire growth structure. One of those is Luckbox, a betting platform backed by MLS legend Luis Robles, which emerged from this coronavirus chaos with an IPO announcement pending TSXV approval.

As more of these success stories continue to emerge, esports betting is now establishing itself as not just the latest sportsbook mainstay, but an event category so popular, diversified, and competitive that it can only be viewed as an extension of traditional sports. It may not be fair to say esports have single-handedly saved the sportsbook industry this year, but with $14 billion in forecast revenue – more than double compared to 2019 – what was shaping up to a be a full-fledged disaster of a year will now merely be viewed as an isolated period of underperformance.

Because, as many vindicated esports betting evangelists are now pointing out, the niche has outgrown the definition of a niche. And just like we’re not cramming football and basketball into “ball sports”, esports are now reaching a much higher, more nuanced level of public awareness.

Given that state affairs, the fact that esports betting softened the blow of a global pandemic by billions of dollars should soon wane in comparison to how explosive of a growth factor it will prove to be for the overall segment. Because it’s not a highly contagious lung disease that made sports and betting appeal to the infamously unreachable Generation Z. If anything, the 2020 pandemic just highlighted the fact that without esports, the betting industry has long reached the point of maturity. But with esports becoming a larger part of its overall offerings, the sportsbook segment is on the road to more than double its size over the next several years, all while insulating a large portion of its operations from global catastrophes to an unprecedented degree.

Esports Saved the Sportsbook Industry

Original Author: Dominik Bošnjak

Continue Reading