No, esports betting isn’t dead
Sharpr is a weekly newsletter covering the intersection of esports, betting, and Gen Z
Hey everyone, Cody here.
After a few unpredictable weeks in the esports betting sector (and a number of readers reaching out for my thoughts on the topic), I figured I’d take this week’s edition to provide some macro industry analysis of what happened and what, if anything, this month has signaled.
Let’s jump in.
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No, esports betting isn’t dead
The esports betting sector has seen some major shake-ups this month. If you’ve missed any of the news, here’s the TLDR:
Real Luck Group indefinitely suspended all betting activity on Luckbox after failing to secure funding.
Entain shuttered the D2C business of Unikrn, the esports wagering platform it relaunched in December 2022.
Midnite underwent layoffs last week and will continue to “pivot away from esports,” Esports News UK reported.
🔎 Between the lines: The wave of negative news coinciding at once has cast a degree of unrest over esports betting.
While the optics here don’t look great, the events aren’t necessarily indicative of the overall ecosystem’s health and interest, although it has reaffirmed some of my beliefs, which I figured I’d share.
#1 This isn’t the upheaval of the esports betting industry: Online betting is a deeply competitive industry and brands that look strong on paper with seemingly all the right ingredients aren’t necessarily guaranteed success. (Think: FOX Bet, Barstool Sportsbook, WynnBET).
We’ve seen this situation play out in traditional sports several times where operators fizzled out in the US despite having convincingly promising strategies and respected brands behind them. To that end, we can also contextualize that there’s a finite addressable market and room for only so many players within it.
The size and scope of esports betting may be different, but the same principles still apply. And despite several of these closures, we’ve still seen interest and awareness of the segment continue to trend upwards.
#2 Exasperated optics: The macro esports industry has had a rough year coming to terms with profitability and is currently bracing itself for another so-called esports winter.
A number of high-profile teams and leagues have collapsed in the process. Some entities, such as the Overwatch League and FaZe Clan, have faced more excruciating public downfalls than others, mostly owing to their once overly ambitious plans and promises. Mainstream press had previously lifted these stakeholders up in a way that their undoing became an inaccurate reflection of the industry and where it’s headed.
But while some companies are seen sinking, others are rising to the top. Valorant is becoming a top esports title (it’s betting segment rising with it, ranking fourth on Rivalry’s list of most bet-on titles*). Apex Legends is showing promising viewership gains and long-term staying power. Counter-Strike continues to break new playership records, recently reaching 1.5M concurrent players.
The other end of this is the course correction, and like any other emerging vertical, the market was bound to appoint winners and losers as it matured.
Even if profits aren’t immediately materializing, esports and gaming consumption is continuing to rise at a steady clip, growing 15% to 651M hours watched in Q1 2023.
#3 Smaller stakes, higher risk: Let’s tackle somewhat of an obvious point. Esports betting is a fraction of the overall sports wagering industry.
That’s not to say that esports can’t generate a meaningful amount of action or help drive a new customer base, but it does mean that there’s less money available for capture at the moment. Disciplined spend and dependable ROI becomes much more critical by virtue of a concentrated revenue pool and addressable market.
For companies placing esports at the forefront of their offering, there’s very little margin for error. No matter how you slice it, that’s a tall order for an emerging category with limited historical data and comprehension.
#4 Elusive demographic: Establishing reliable and sustainable customer touchpoints has proven to be a challenging task. This is true in the broader sports betting sector, but can be especially difficult with regards to the esports and gaming consumer, comprising mostly the two hardest-to-reach demographics: Millennials and Gen Z.
The dynamics of customer acquisition and engagement among this demographic are also noticeably different from mature sports bettors.
It’s about content creators, not big-ticket team deals. Internet culture over sports culture. Digital over physical. Immersive, entertaining, and social experiences above speed and functionality.
As ambiguous as it may sound, all of these things, and perhaps more, are central elements of engaging the next generation of consumers and would ideally work in harmony across the product, marketing, and brand. That’s not easily brought to life, and very few brands are fit to deliver everything in a cohesive way that speaks specifically to this audience while keeping up with their ever-changing demands at the edge of product and technical innovation.
#5 Esports betting really isn’t about esports betting: That may sound silly, but it’s a point that I’ve made numerous times and one that I’ll continuously fall back on.
The opportunity in esports betting is much greater than esports betting itself. It’s an opportunity to engage an untapped demographic of bettors, differentiate product offerings, and future-proof businesses by gaining street cred with the next generation of consumers.
Viewing esports as purely a percentage of the overall sports betting industry and nothing else isn’t taking into account the bigger picture. It’s worth noting that certain markets are more ripe for esports than others, which is an important piece to get right, but as regulation evolves in the US and elsewhere the opportunity within this category will expand with it.
🗞 In the news
DraftKings is offering lines on the League of Legends World Championship and IEM Sydney.
Netflix partners with Light & Wonder for Squid Game-themed slot machines.
PrizePicks offered fantasy betting on the Halo World Championship.
📈 By the numbers
Esports Entertainment Group revenue was down 60% in FY23 (ended June 30), iGB reports.
A recent study found that 30% of players find the frequency of promotional messages from iGaming operators overwhelming.
Mobile Legends: Bang Bang league MPL Malaysia has recorded 550,000 peak viewers during its Season 12 Grand Finals, setting a record for the sixth consecutive season.
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Reach me directly at luongomanagement@gmail.com 📩 or on Twitter 🐦
All figures are quoted in US Dollars at the current exchange rate unless otherwise specified.
*Disclaimer: I am a full-time employee of Rivalry