Promoted feature: A window of opportunity

The hype coming from within the esports space in recent years has made other industries take notice. Backed-up by the commercials and prize pools that put some more established sports in its shadow, then it’s hard to argue that esports is, objectively, a big deal. The International 10, Dota 2’s flagship event, saw a prize pool topping $40m back in October, with $18m of that going to the Russian winners, Team Spirit. The event saw 107 million hours of streaming consumed, with almost three million viewers tuning into the final against favourites PSG.LGD.

It’s already disrupting the dominance of the bigger traditional sports in the mainstream media, and increasingly threatens well-established betting sports, such as basketball and tennis, when it comes to betting revenue.

The rise of esports

Esports’ rise to the top table has been gradual in the betting space over the past decade. Early advocates have pushed hard to break it into the mainstream, but it has taken the events of a pandemic to provide the spark for other operators to take it seriously, albeit many as a simple solution to fill a content void. Whatever the case, several multi-million dollar acquisitions of late seem to suggest it’s now well lodged in the consciousness of boardrooms’ industry-wide.

Despite this, there’s a long way to go before esports, from a betting point of view, matches up in terms of performance that the sector’s potential and growth justifies. We’re increasingly seeing product and content improvements that have the potential to cut through, but we’re a long way off the broader commercial success and gross gambling yield (GGY) that would be expected considering its community’s vast size and increasingly mature status as an entertainment giant.

Something seems to be preventing its betting arm from reaching its full potential. There are success stories showing what can be achieved when it’s done right, but across the majority of B2B and B2C operations, there’s a lot more to be done.

Rising to the challenge

Those invested in the esports community and making an effort to understand its unique demands, have prospered, while those expecting the custom to roll in on the back of a basic offering, hoping for the best, have been left wanting. The esports hype has failed to deliver for some, and that’s to the detriment of the whole industry as we look to position betting as a key component of the esports experience.

One theory that has arisen in various conversations on the subject is that a lack of delivery, in terms of bottom-line gross gaming revenue (GGR) performance, has deterred many trading department heads and sportsbook managers from prioritising esports to the level required to match its potential. This lack of realised success has discouraged the continued investment that many may have previously been committed to. Marketing pushes have driven new revenue and custom from the esports community, but this hasn’t translated into the raw profit that many hoped for, or expected.

Some have reached the conclusion that esports will become a mainstay as a second-tier betting sport. Offering a respectable offering is crucial to being seen as a progressive, modern operator. But with breakeven results, it’s not going to warrant the investment required to take it to the level of more profitable, established offerings that already deliver. This is the wrong attitude.

Pinnacle has been in the space for over a decade and has seen these same issues that many in the market now face. Delivering working models across tens of esports titles – with little foundation in traditional sports – is one of these challenges, and this is compounded with a lack of data access as might be found elsewhere.

Overcoming these issues is key to deliver the range of titles and markets, as well as the low margins, that are required to build trust with the esports fan. As a vertical, trading esports is more demanding, it requires more knowledge from individual traders to be seen as authentic, and modelling teams have to find innovative ways to execute those high-risk decisions and translate them into results.

It takes years to put the teams and processes together that can consistently generate the profitable performance across the full range of esports titles. It’s an ever evolving process as the event calendar grows and new teams, and even titles, come to the fore. But this is a challenge that we want, and it’s been shown to be achievable.

A next level push

Whether it’s a more established title like CS:GO, or an emerging one, like Valorant, attractive hold can be delivered that rivals the performance of more traditional sports. That’s why I think we should, as an industry, be more ambitious in our expectations for what esports can deliver in terms of cold, hard results, in order to push it to the level of a tier-one betting sport that I believe it justifies.

That obviously requires strategic readjustment for some firms. Those who have already seen their in-house esports efforts underperform shouldn’t assume it’s unfixable. Likewise, those yet to see the returns from supplier relationships should assess whether the product they receive is backed up by the expertise required.

A managed trading service may be able to find market comparisons to offer “1st barracks” prices in Dota 2, or “Knife Kill” prices on CS:GO, but can they back these markets up with the proven workings that allow operators to lay the higher limits and lower margins that the esports customer wants? Only with skin in the game can you put your money where your mouth is, and if you can’t, the trust that is so important with the community won’t come around.

Over time, trading tools, pricing comparisons, and data sources should improve, but in the meantime, it’s imperative that we, as suppliers and operators, invest in the personnel, partnerships and tech to deliver the impressive results that other industries tapping into esports are seeing for themselves.

Ambition is key

Esports stands apart from the crowd as a betting sport. The unique markets on offer, its frantic live nature, and the distinctive, demanding nature of its audience have come together to establish something refreshing and new for our industry. Some operator-supplier relationships won’t necessarily be suitable to deal with it.

There will be a time when this isn’t the case, and all suppliers will be able to deliver esports content as the norm, but that time isn’t now. For now, the opportunity to get a foot in the door of the esports community as a trusted esports operator is getting smaller, and so ensuring you have the right platform in place to deliver what the community expects from a betting offering is key.

So, for those that have invested and failed to return the results they were after, maybe it’s time to reconsider the route to esports success. We must be more ambitious to achieve the higher performance that I believe the esports hype can deliver upon. This requires hard work, investment and innovative thinking in appealing to a new audience, but it’s worth it, and the esports industry is more than big enough to deliver for us industry-wide.

Pinnacle’s trading director Marco Blume oversees all trading activity across Pinnacle and its B2B arm, Pinnacle Solution. Pivotal to the group’s pioneering esports product over the last decade, Blume has also been instrumental in the development of Pinnacle’s industry-leading risk management practices which continue to deliver customers of its B2C and B2B brands standout prices with the lowest margins.