Making a play: esports betting’s Rivalry lays down a challenge in its home market of Ontario

The world of esports betting is one that not many sports betting operators are prepared to touch. Yes, there are multiple companies across different markets but very few offer esports betting. However, we can can see that the mood is changing among the igaming sphere on the whole, as we saw with the recent purchase of FUTBIN by Better Collective for €105m and Entain’s acquisition of esports betting firm Unikrn in 2021 for a reported £50m. So, could this signal a change of approach?

As one of the originators in the esports betting market, having started up in 2018, Rivalry has tried to diversify itself by pioneering a new category – massively multiplayer online gambling game (MMOGG) – with its proprietary casino game Rushlane. The operator was co-founded by Kevin Wimer, Ryan White, Steve Isenberg and Steven Salz, neither of whom had any prior experience in the sports betting sector but have succeeded in posting new highs for financial results at almost every turn.

The firm also went public last October but, like some of the industry’s big hitters, has seen its share price tumble. Nevertheless, the operator launched in two significant markets this year, Australia in May and its home province of Ontario on 4 April when the regulated market opened.

Speaking to EGR Intel, CEO Steven Salz details how Rivalry broke into these crowded markets, what going public means for the firm and where he thinks esports betting is heading.

EGR Intel: What did it mean to receive a licence in Ontario?

Steven Salz (SS): It was important because we have always been based here. We never took any wagers here offshore, and even though we technically could through our Isle of Man licence, we never did. So, when you put the hometown thing aside, it was great for our organisational health as neither most of the company nor I have a background in the sports betting industry. It was a first for all of us. We spent a long time building a product that no one could use, so getting that licence was very important to us.

EGR Intel: How has the market reacted to your presence?

SS: We were pretty vocal that we were going to have a really limited initial start, knowing that the launch of a newly regulated market would see a lot of the larger operators dumping a huge amount of spend on the promotion and bonusing front to attract customers. Our model across the board has always been inverted. We spend as little money as possible on all of our new market launches, whether they are grey or regulated.

In the two months we have been in Ontario, we have spent less than C$100,000 (£82,474), including all marketing spent on bonuses and promotions, etc. We have competitors that were spending that in the first couple of hours of their first day of promotion. We’ve got a cohort of customers, we’re continuing to refine our product and conduct small tests on marketing to find where the pockets of value exist for us.

EGR Intel: You also recently gained a licence in Australia; how have you found tackling the market?

SS: From a regulatory perspective, it’s very different compared to Ontario. It is the most unique market for us because our product in Ontario and the Isle of Man has been running for the last couple of years and is very similar. That product did not need any tweaking apart from a few footer changes, but our Australian product had to be unique.

In Australia, the regulation doesn’t allow in-play betting online; you have to pick up the phone and call somebody. This means we can only offer pre-match, prop betting and services along these lines. You also can’t offer casino in Australia, which didn’t affect us massively as that is not a big part of our business. The product that customers see in Australia is a very different version of our product, which took a major engineering effort on our part.

EGR Intel: Rivalry has posted record numbers in each financial period but what do you think is the secret behind this success?

SS: It goes back to our original philosophy of keeping things simple. We never had the luxury of a big balance sheet; we were just a bootstrapping startup until we went public last year. Then, we raised a bit of money, but even then, it pales in comparison to some of our competitors. The company has always had to operate with a very lean and sort of scrappy mindset, which means we don’t blow our brains on marketing better bonuses or promotions because we don’t even have the financial capacity to do so.

EGR Intel: How has the company developed and matured since its float in Q4 2021?

SS: We went public because getting new licences is tricky as a private sports betting company. Diligence is slow. We went public for the operational ‘green’, not for access to capital as we have been able to raise money privately. We did a direct listing on the IPO so, technically, we didn’t raise any money. However, we were looking to go public for operational speed, which has significantly helped us get through regulatory hurdles. When you are filling out all of this diligence, being publicly listed in a regulated jurisdiction massively accelerates the rate at which you can complete things.

EGR Intel: You recently launched esports betting for mobile. How is this progressing?

SS: There is a huge audience for mobile games, especially in South America and Southeast Asia where we are active via the grey markets. There are more players and viewers of mobile esports than are on desktop or console, so it’s an extremely popular field to explore. We have just got into it. We were one of the first sportsbooks to offer a pretty deep offering on mobile esports and we have seen a definite pick-up for sure.

EGR Intel: What areas are the biggest concentration of your customers leaning towards?

SS: The top three have been the same since we launched, which I think are the same across everyone in esports, namely, League of Legends (Riot Games), Counter-Strike (Valve Corporation) and DOTA (Valve Corporation). This may vary slightly based on location, but for us and others, those are the top three, and they cover 80%-90% of all esports betting.

The only title I can see breaking into that group is Valorant (Riot Games). Since it launched, it’s been the quickest up-and-comer in terms of size and overall betting handle for sure. My expectation is that, for us at least, Valorant will probably knock DOTA [out of the top three] within the next 12-18 months.

EGR Intel: Do you think esports has drawn bigger firms’ attention, as seen by Entain’s acquisition of Unikrn? Do you expect other major players to concentrate resources in the vertical?

SS: I think that [Unikrn] deal is still so young that there hasn’t been much focus on it, but now the equity markets are collapsing, I’m guessing most operators are focusing on a tighter circle of competence so they can just drive the business for survival for the next year or two.
I think there will be a lot of opportunistic M&A during this time because the markets have fallen so much. We’ve seen public companies in the sports betting sector have their valuations drop significantly in the last four months, and the business is either the same or performing better, but that’s just where valuations lie. We’re down around 60%-70% from our IPO. Big companies like DraftKings have seen theirs drop by 70%.

Due to this drop in valuations, you will see these kinds of M&A, as people will be more inclined to part ways with what they have built for significantly less than they thought it was worth a year ago.

EGR Intel: What were your thoughts around Better Collective acquiring a video game database like FUTBIN? Will we see more deals like this in the future?

SS: I am not 100% sure but my gut reaction is that Better Collective is hoping to attract people to the sports betting sector with a deal like this rather than specifically betting on a game like FIFA. When you analyse the kind of person using this sort of database, they will likely be real-life football fans and enjoy playing FIFA. If you are a diehard football fan, you play a lot of FIFA, so tapping into this kind of market for a sports betting operator is a gold mine.

I think this will be quite a unique deal. I know Better Collective bought HLTV.org as well, but through the affiliate work we have done with these kinds of sites and video game news sites, it does not convert as well. But, again, this is because a video game player is very different from an esports bettor.

EGR Intel: How have you seen the esports market evolve since you founded Rivalry?

SS: It’s odd because the esports industry has not grown as much as expected. There was a lot of chest-thumping language being used between 2017-19 that did not come to fruition at all, which was quite predictable in my opinion. This has not taken away from the viewership, though, and I think that esports as an industry has monetised in a way that everyone thought it would.

The interest, the viewership and the fandom has definitely shot up, clearly visible from the record number of viewers tournaments are attracting across the world. Take the viewership of Valorant in Japan. Historically, Japan has not been a fan of first-person shooter (FPS) games in this style, however the viewership numbers were insane. This shows that these kinds of games are starting to spread across more regions. Through this growth of viewership, we, as a company, have seen an increased interest in esports betting.

Aside from this, there hasn’t been any major changes as we have the same titles proving to be the most popular among bettors. The internal economics of esports betting and the internal health of the industry has simply not tuned into what was anticipated it would become.

EGR Intel: What can we expect to see from Rivalry in the coming months?

SS: I think we will continue to show the growth that we have had up to this point, and it’s also an overall balancing act that we have with many other people. Stepping away from being a betting company but looking at the situation on a wider scale, at the moment, is quite challenging. If you are a small-to-mid-sized company that is not yet profitable early on in your cycle, then this is the moment where only the strongest will survive.
From a percentage and evaluation basis, this is the closest we’ve been to the 2000-2002 dotcom crash, and it pales in comparison to the situation we had in 2008; this is already much worse. We are going to see a lot of skittishness from operators, and people just sticking their heads in the sand, wishing it all away.
For Rivalry, it will be about continuing to give the business oxygen to grow, while simultaneously not burning up our cash right away as we don’t know how long this recession will last. So overall, I think you will see us grow but not take any wild steps to get there.