Does the esports industry need sports betting?
Sharpr is a weekly newsletter covering the intersection of esports and betting
Hello from Iceland!
I’m on vacation this week, but thanks to the scheduling feature on Substack you’re all still able to receive our weekly newsletter.
This week I decided tackle a subject that’s been burning on my mind: does the esports industry need sports betting? Let’s dig in and see.
In this week’s edition of Sharpr…
Does the esports industry need sports betting?
ESL FACEIT Group strikes data deal with Bayes Esports.
Luckbox provides 2023 business update.
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Does the esports industry need sports betting?
With last week’s news that OpTic Gaming is exploring a betting venture, I wanted to bring a certain conversation to head: does the esports industry need sports betting?
The discourse online after breaking the OpTic story wasn’t entirely surprising. A few people stood behind betting as a legitimate avenue to diversify and expand, but as expected, the majority of readers turned to the potential risks and harms often associated with gambling.
I’m leaning yes–but let me explain why.
The esports industry is in the midst of some serious growing pains right now.
The current macroeconomic environment is putting pressure on esports businesses to show signs of profitability or bite the dust. It’s an issue the industry has wrestled with since its inception, and those behind the funding need more than just large audiences and impressions to point to–they need to see revenue.
The esports winter has arrived, and according to GamesBeat’s Jordan Fragen, “the cold snap will be lethal for many.” Pure-play esports companies will need to diversify to survive, expanding into new categories like consumer products, but not all companies will make it out in one piece.
With an industry searching desperately for profitability, sports betting may start materializing as an opportunity too large to ignore, especially as traditional sports is seen reaping the benefits.
The advent of legalized sports betting in the U.S. has driven value across multiple verticals for sports stakeholders in the last several years. Professional leagues such as the NFL, NBA, MLB, and more are witnessing tremendous growth with increased viewership, media rights deals, and fan engagement, not to mention big ticket sponsorship sales from betting partners.
NFL 2023 regular season games drew record viewership across broadcast and streaming platforms.
Electronic Arts is reportedly set to pay the Premier League double the rights fees paid under its current deal through an extension.
CAA’s eight-figure agreement with FloSports was “the most lucrative media rights deal in league history.”
Professional sports teams are fetching record prices too, with Forbes noting the world’s 50 most valuable sports teams are worth 30% more than they were a year ago. While it’s not easy to quantify the exact impact legal sports betting has on sports, it would be naive to think these significant bumps in engagement aren’t connected.
A recent study found that 69% of millennial NFL bettors watched more sports than usual when placing a wager on a game. I was part of the statistic this weekend watching the Super Bowl–I’m not a football fan, but placing a $10 parlay to win $7,000 got me into the game, even if it was horribly busted after half-time.
If the trends we’re seeing in traditional sports are anything to go off, there’s a lot of unrealized value being left on the table with esports in not embracing regulated sports betting. But simply recognizing the opportunity at stake isn’t the biggest obstacle at play, it’s the rights holders: game publishers.
For decades the games industry has fought to outgrow its perception as a vice industry often associated with violence, laziness, and whatever else mainstream media tried to feed us. Despite maturing blissfully into mainstream culture, game industry stakeholders would be rightfully wary to publicly stand behind the gambling industry.
Much of the negative commentary spurred from the OpTic Gaming story pointed to underage gambling and advertising to minors. It’s a very real threat, and certainly not one game publishers want to be entangled in, but it shouldn’t be used as an argument to dismiss regulated and responsible gambling.
There are clear, well-documented risks attached to sports betting, but proper consumer protections can mitigate issues and create a safer environment. Avoiding underage consumers may be more tricky in esports than traditional sports, but the audience is aging up–the average age of an esports viewer is 26 years old.
Interestingly, one key shift materializing in the larger games industry highlights the shared interests between sportsbooks and game publishers.
Today, most games are free-to-play and publishers now make a majority of their revenue from in-game transactions. In a live service world, long-term player engagement is the new benchmark for success.
This shift places an important focus on esports as a key driver of the engagement publishers need to monetize their games, but also points to an area where sports betting could slot in.
In an era where player engagement is the primary success metric, betting could be a valuable tool for game publishers to drive increased activity around their games and IP.
Rivalry CEO Steven Salz recently commented on the link between gambling and engagement, stating that “where we see momentum in betting activity, it often translates into enhanced economics and overall viewership growth for that esport.” *
This might not be enough to win over key esports stakeholders like Riot Games, Microsoft, and Activision, but they’re also not the ones being pressed against the walls right now.
Downstream, esports event organizers and teams would be able to reap all of the aforementioned and much-needed benefits of welcoming sports betting into the ecosystem. Unfortunately for them though, they’re operating at the discretion of game publishers.
🗞 In the news
ESL FACEIT Group strikes data deal with Bayes Esports.
Rivalry partners with professional Valorant player Matthew ”Wardell” Yu.*
G3 names games industry veteran Doug Kennedy as its advisor.
Clout Fantasy debuted its first-ever content series with several well-known Counter-Strike players and personalities.
📈 By the numbers
GeoComply saw 100M sports betting transactions this Super Bowl weekend, a 25% increase over last year.
Luckbox reported its first time depositing players grew 182% in January.
NorthStar Gaming received a $9.2M strategic investment from Playtech.
*Disclaimer: I am a full-time employee of Rivalry.
Online betting has ruined live sports viewing in Australia. It's part of the pre game show, during ad breaks, and embedded in the broadcast.
Really trying to push the concept of social gambling with your mates. Of course now the orgs are used to this cash, which comes as a direct result of losses from teen-agers and young adults, they can't go back.
If the only way eSports can survive is by creating a horde of degenerate gamblers, I'd rather go back to watching games in Phreak's basement.