eSports And Casino Gaming

Ever since the Gambling Act of 2005 passed into UK law, thereby providing licensing to and regulating the activities of any company wishing to offer gambling services to people in the UK, real-money gambling has enjoyed relatively high levels of popularity within the United Kingdom.

Recent research by the UK Gambling Commission – the Government body charged with ensuring all gambling in the UK is undertaken in a fair and transparent manner – shows that around half of the adult population are accustomed to gambling and partake in it regularly. The same study showed that the number of people in the UK who are gambling online has risen to 17%, despite being only 9.7% in 2008 (UK Gambling Commission, 2015), and the indications are that it has continued to rise since then.

Over the same period of time, the casino sector – both offline and remote – has been a dominant force in the UK gambling industry, along with the other big hitters that are sports betting and poker. But there’s a new kid on the block, and it’s taking the gambling industry by storm: eSports.


What Are eSports?

eSports is the term given to highly competitive video games, usually played in tournaments. These tournaments pit the best players of certain games from around the country, and sometimes the world, against each other – in front of a large crowd of cheering spectators.

Quite often the participants are professional eSports players – that is to say, they play for a living, funding their lifestyle with prize money, sponsorship deals, and monetisation of social media platforms such as YouTube channels and Twitch streams.

What Games Are Popular?

There is a wide variety of games that are played at eSports tournaments (Wikipedia contains a very useful list of eSports games here), but five of the most commonly found ones are:

lol logo

League of Legends

A multiplayer online battle arena game in which you control a Champion imbued with special abilities. Has a large following and widely considered as a classic title in competitive gaming.

dota logo

DotA 2 (Defense of the Ancients)

A modified version of Warcraft 3 where your Hero works with your team to destroy your opponent’s ‘Ancient’. Very popular with online viewers - thousands tune in to watch streams daily.

csgo logo

Counter-Strike: Global Offensive

A modified version of Half-Life, abbreviated CS:GO, this competitive first-person shooter (FPS) has been played at LAN tournaments since long before eSports rose to prominence.

tekken logo

Tekken 7

A fighting game allowing you to choose from a varied arsenal of characters, each with their own strengths and weaknesses, and then beat your opponent with them.

overwatch logo

Overwatch

Team-based multiplayer online first-person shooter video gam. The second most popular game of 2017 (only CS:GO had higher player numbers), with over $1.5m given out in prize money.

fifa logo

FIFA

The quintessential football/soccer video game. Popular with casuals and uber-competitive players alike, this game will always get the crowd and players shouting.


How Big Is eSports?

The short answer to this is 'very'. And it is growing at an extraordinary rate, with an expected year-on-year growth of just over 40% resulting in estimations that the industry will grow to be worth $1488 million by 2020 (Newzoo, 2017). That is without even taking eSports betting into consideration. It’s not surprising that huge corporations have seen the opportunities that eSports can provide.

how big is esports

Source: Newzoo, 2017

These are some big numbers - and they don't even include money made through eSports betting.

For example, US telecom giant AT&T recently acquired Time Warner for $109 billion – which does not seem relevant until you know that in the same week Time Warner, in turn, acquired Machinima, ‘an active player in the development and sale of content formats around eSports’ (Newzoo, 2017).

When you also consider that Turner, another Time Warner subsidiary, is the operator of a small empire of eSports channels such as the ELEAGUE, it begins to become clear why AT&T saw enough potential in this industry to justify such a large investment.

Football (soccer) leagues throughout Europe are also getting in on the act, with FIFA leagues already formed in France, Spain and Holland to mirror their real-life counterparts. Paris Saint-Germain helped to found the e-League 1, and has even expanded into supporting teams of other games such as League of Legends.


In The UK

The size of the UK eSports audience is expected to reach 8 million people by 2019, assuming a 7.5% year-on-year growth (UKIE, 2015). Game, the largest gaming retailer in the UK, recently acquired Multiplay – founders of the hugely popular consumer event Insomnia, and highly experienced players in the eSports industry – for £20m (Parfitt, 2015).

esports uk viewers

This graph extrapolates findings by UKIE in 2015.

eSports is even making inroads into mainstream media. ‘Ginx eSports TV’, the UK’s first 24-hour TV channel exclusively showing eSports coverage and content was launched in 2016 (BBC, 2016). The channel is available on Sky and Virgin Media and offers a wide range of programming.

Competitive FIFA players are even being snapped up by professional football (soccer) clubs in the English Premier League. West Ham United and Manchester City were particularly fast out of the blocks (BBC, 2016), keen to establish themselves on a new and exciting stage early on in its development. The players are sent to eSports tournaments representing the club, as well as competing against fans of the team with prizes available to anyone who can defeat them.

Who Watches eSports?

According to statistics collected in 2016, the typical ‘eSports enthusiast’ is male, aged under 35 years old, with a full-time job (Newzoo, 2017). This is not altogether surprising, as video games have long been catering to a primarily ‘young male’ target market, but the signs are that more and more females are showing interest in eSports, particularly in the 21-35 age bracket.

All in all, the eSports enthusiast market is a very appealing one for marketers of big brands as they are likely to have relatively high levels of disposable income compared with other demographics. UKIE


How Does eSports Generate Revenue?

This very helpful visualisation shows the global eSports revenues from 2017 (Newzoo, 2017):

esports revenues

Source: Newzoo, 2017

As you can see, eSports benefits from a number of lucrative revenue streams, with sponsorship and advertising providing the lion’s share (60%) – demonstrating a highly competitive marketing arena with brands queuing up to get their name in front of legions of eSports enthusiasts and players.

eSports Gambling

As with almost all forms of gambling, betting on eSports can take many different forms. Most of the odds you find will be decimal, but operators offer fractional odds too. The odds work in the same way as in other forms of betting – the lower the number, the more likely that player is to win. These are the types of bets you can choose from:

  •    Standard – i.e. Team Yellow to win vs. Team Blue
  •    Futures – i.e. Team Yellow to win the tournament/event
  •    Propositions – i.e. Team Yellow to win 5 games in total
  •    Accumulator – i.e. Team Yellow and Team Blue to win in the first round

Challenges

As you can see, in terms of the bets available, eSports is not so different from ‘normal’ sports betting on horse races or football. The biggest differences are who is betting and what they are betting with.

As eSports ‘is unquestionably an activity that has a large following of children, who both watch and actively take part, either through playing the underlying games casually or in events and competitions’ (Gambling Commission, 2017), then the industry has a responsibility to proactively prevent any underage betting from taking place. The UK Gambling Commission is not overly concerned by this, as licensed betting sites ‘are required to have in place controls to prevent underage gambling’ (Gambling Commission, 2017).

However, the Gambling Commission is concerned that unlicensed sites are able to provide under-18s with access to the most predominant form of in-game item gambling (Gambling Commission, 2017) – commonly referred to as ‘Skin gambling’. Skins are used within the game to cosmetically alter a player’s on-screen avatar, or the equipment used by it, but theoretically does not afford the player any extra advantages. With that being said, Skins can be purchased for real money, and therefore it can potentially have real money implications when a player loses their entire Skin inventory. The Gambling Commission will be exploring ways to deal with these issues in the coming years.


eSports Betting vs Casino Games

So how does the up-and-coming eSports scene stack up next to the UK’s booming casino industry, with its hugely popular games such as online Slots? We will use the online numbers to ensure a fairer comparison.

Revenue comparison

esports casinos revenue infographic

  •    Online casino games generated £2.4bn in the UK from October 2015 – September 2016 (Gambling Commission, 2016).
  •    eSports betting generated revenue $168.9m globally in 2015, however this was only 23% of its total revenue - $748m (UKIE, 2017).
  •    Most eSports viewers are male, aged 21-25 (Newzoo, 2016)
  •    This is similar to online casino demographics, higher percentages of which were males ages 18-34 (UK Gambling Commission, 2015)
  •    The number of global viewers tuning in online to watch eSports and eSports tournaments regularly runs into the tens of millions

Viewership

As you can see from the graph below, in 2014 the most watch eSports event was The International, with 20 million viewers. That has more than doubled in three years, with the viewership of the Intel Extreme Masters Katowice 2017 hitting 46 million viewers.

esports events viewership

Source: Business Insider, 2017

The closest thing that casino games has to compare with this would be live dealer Twitch and YouTube streams, but these are are nowhere near the same level – likely because eSports are more ‘skill-based’ than games like Roulette or Blackjack.

There is so much demand for this type of viewing content that in the UK, eSports has broken into one of the mainstream sports channels, with BT sport broadcasting games from the FIFA Ultimate Team Championship Series (The Guardian, 2017).


Casinos And eSports Betting

So it is clear that eSports is competing with the casino industry, among others, for a larger proportion of the total remote Gross Gambling Yield in the UK. However, the rise of eSports does open up new opportunities for land-based casinos, some of which are already being explored in the US.

A former nightclub at the Luxor Hotel and Casino in Las Vegas is already being converted into a purpose-built eSports contest venue as ‘U.S. casinos are turning to videogame competitions to attract younger visitors and turn around years of subdued growth’ (Wall Street Journal, 2017). It has been hypothesised that this will be an effective technique for bringing in more customers who fit the ‘millennial’ description – namely, under-30s who prefer the concept of skill-based games more compelling than chance-based games like Slots. The casinos are presumably hoping that players and spectators will then convert to table games (Rock, 2017).

tropicana event

Taken at the 'Smash Roulette' sit 'n' go tournament in the Tropicana Casino, Atlantic City. Credit: tischphotos.smugmug.com

Even quicker off the mark was the Tropicana in Atlantic City, who hosted a regional eSports tournament in May 2017 with a prize pot of $10,000 and around 500 participants (Tropicana Atlantic City, 2017). And it doesn’t stop at tournaments either; Fifth Street Gaming Chief Executive Seth Schorr has set up properties in Las Vegas offering training facilities for eSports teams (Huba, 2017).

One of the pioneers in this regard is the CMO of Gamblit Gaming Darion Lowenstein. His company recently announced its brand-new eSports platform, and hopes that enticing the ‘millennial’ demographic by hosting eSports tournaments will breathe new life into many Las Vegas casinos, stating: ‘with our interactive, skill based and social games, people can have an experience more similar to a modern video game arcade while still enjoying the thrill of wagering with each other’ (McCarron, 2016).

If these types of events are successful in engaging the next generation of players, it can surely only be a matter of time before land-based casinos in the UK begin to follow suit.


Future Predictions

So, with everything we have discussed in mind, here are our thoughts on what the future may hold for eSports and their relationship with the casino industry. 

growth

Growth

All of the indications seem to be that eSports is set to continue its rapid growth for the foreseeable future - Newzoo estimate that revenues not including betting will reach nearly $1.5 billion by 2020 (Newzoo, 2017).

Online casino gaming is also enjoying a prolonged renaissance, with mobile device players in particular leading the charge, as well as players who were previously nervous to commit real money to playing online being emboldened by the increasing prevalence of PayPal casinos in the UK.

regulation

Regulation

In the UK, there is little concern in the eSports industry that there will be further regulation constraints applied, following the Gambling Commission’s assertion that ‘although some respondents consider there may be heightened risks associated with eSports betting compared with other betting events, our view is the existing regulatory framework, rigorously applied, is sufficient to mitigate these risks’ (Gambling Commission, 2017).

Whether this will change in the future, particularly when it comes to so-called 'skin betting', remains to be seen.

opportunities

Opportunities

The UK has the opportunity now to carefully observe the levels of success experienced by the various Las Vegas establishments who are moving to embrace the eSports revolution. If they turn out to be successful, it is surely only a matter of time before land-based casinos in the UK begin to follow suit.

The UK boasts some of the hottest eSports talent in the world - if this technique succeeds in enticing an entirely new generation of players into casinos and boosting casino game interest to the levels it enjoys with older demographics, it won't take much for the large chains such as Grosvenor and Genting to jump on the bandwagon.

With regards to online casinos in the UK; they’re here to stay, and their popularity is still huge - but they will need to stay on their toes to keep ahead of eSports in the coming decade.

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This article first appeared on CasinoGuide.co.uk.


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