The game is on

eSports has taken the US by storm. Martyn Hannah asks what RMG and social operators can learn from the sector, and how they can get in on the action

eSports is one of the fastest growing forms of entertainment in the US, and is on track to have a larger fan base than the NFL by the end of 2017. eSports events, huge tournaments where teams go head-to-head in games such as League of Legends and Counter Strike: Global Offensive for big cash prizes, are held in sports arenas with large live audiences while being streamed online to millions of viewers around the world. The tournaments are sponsored by global brands, who are among a growing number of stakeholders positioning themselves to cash in on the sector. [private]

But what opportunities do eSports offer real-money and social gaming operators? The clear opportunity is the demographic. eSports players and fans are males aged between 18 and 34. In other words they are Millennials, the much sought-after demographic operators are trying to engage and acquire. And while RMG and social firms have yet to fully tap into their psyche, eSports appears to have cracked the Millennial code.

But it’s not just the demographics that should pique the interest of the real-money and social gaming industries, as online gaming consultant Mark McGuinness says there is direct cross-sell potential between eSports, RMG and social. “eSports is a highly addictive and intellectually challenging game that has a lot of similarities to poker. Therefore, given the male audience bias there is bound to be some intersection between real-money gaming, social casino, poker, sports betting and eSports, and vice versa,” he says.

Cashing in

eSports and social casino face similar challenges with monetization. While both sectors have a huge potential consumer base to reach out to, actually converting fans and players into sustainable revenue streams is no easy task. And while social operators struggle with turning freeplay players into depositors, for eSports the challenge is finding legal ways of monetizing them in the first place. But Rahul Sood, CEO of eSports wagering operator Unikrn, says there is an opportunity to cash in on the sector by offering betting markets on games and tournaments.

“Sports betting is another area that’s picking up thanks to operators like Unikrn,” he says. “We have only just got started, but we have already set up an exclusive international partnership with Tabcorp, one of the largest and most reputable gambling companies in the world. We know that there is cross-over between those who watch and bet on traditional sports and those who consume eSports, although it’s not huge crossover – yet. There is no better way to increase engagement on watching sports than by placing a bet on the game,” he adds.

Indeed, wagering on eSports contests is perhaps the most direct way for operators to get in on the action. In Europe, gaming giants such as Pinnacle Sports and William Hill already offer markets on some of the major tournaments that take place across the world. But for US-based operators offering real-money wagers on eSports is strictly out of the question, even in Nevada where mobile sports wagering is legal. Dan Shapiro, director of business development at William Hill US, says regulations state they can only offer bets on “professional sports with results decided on the field of play”, ruling out markets on eSports.

But social operators do not have their hands tied by the same regulatory ropes, and are able to offer social wagers on any “sports” markets they choose. And while social sports betting has failed to gain much traction to date, could eSports be the catalyst vertical it has been looking for? Derrick Morton, CEO of Seattle-based social developer FlowPlay, which offers social sports betting, says that eSports is certainly an area of interest, but notes there is a significant disconnect between the audience that is interested in wagering real-money on eSports and those that are interested in wagering virtual currency in more casual environments.

“While eSports is rapidly growing, it still doesn’t have a mainstream draw – or at least nowhere near the audience size and scope of sports in general,” he says. “At this point, we see eSports gambling as commanding a similar audience as daily fantasy sports, which overall is motivated by gambling real-money more than the actual experience they’re betting on. For our social sportsbook offering, we’re focusing more on the season-long fantasy players that are more motivated by following certain sports teams and players and the social experience associated with being a part of a league.

“As eSports becomes more mainstream and the online gambling landscape changes in the US, there’s always an opportunity to focus our attention eSports. But for now, we’re hyper focused on making a fun and engaging free-to-play experience for more traditional sports,” he adds.

Is this just fantasy?

For real-money operators looking to explore the potential cross-sell with eSports, the most direct route is through marketing partnerships and sponsorship deals with players, teams, tournaments and leagues. McGuinness says this is already happening, with Pinnacle Sports joining forces with Russia-based Team Empire to become its official betting partner. “Other egaming brands have done deals to advertise on Twitch, the world’s largest video game streaming platform for eSports in a bid to drive customers to their real-money gaming platforms,” he adds.

These sorts of deals have been widely used by daily fantasy sports operators FanDuel and DraftKings, who have joined forces with the likes of the WSOP, NASCAR, the Tiger Woods Foundation and countless sports leagues and franchises in a bid to target their core player demographic. Indeed, the fantasy model is perhaps the best way for operators to enter the eSports sector, with first-movers like Vulcun and AlphaDraft already offering fantasy eSports tournaments for real-money prizes. Ed Chang, VP of business development at Vulcan, says any market with a large viewership and top echelon of players fits with the fantasy model, and eSports is no different.

“Fans are emotionally invested in their favorite players and teams, and fantasy is a perfect outlet for them to see how easy, or hard, it really is to run their own eSports team. On top of the standard stats that are seen in all games – such as kills, assists, deaths – there’s even more actionable data unique to each game than seen in traditional sports. I’m personally a huge fan of the second-screen experience – that is, what are players doing while they’re watching or playing their favorite games. That is what we are trying to build at Vulcan,” he adds.

In reality, real-money and social casino operators are unlikely to embrace and offer eSports products in the near future, but they can certainly learn from how the sector is targeting, acquiring and monetizing its ever-growing fan base. Lessons can also be learned from how the industry is using technology to expand is global footprint, and its relationship with some of the largest brands in the world such as Coca Cola, Red Bull and Samsung. And with revenues from eSports set to reach $143m in North America this year alone, the fledgling industry will only get stronger and the lessons more valuable.