Esportsbook betting sits somewhere between fantasy esports and skin betting in terms of size and prominence in the market, but arguably has the greatest upside in the medium-term of any wagering product focused in or around esports.
What it is
Simply put, esportsbook betting is the traditional sports betting model applied to esports. Instead of wagering on Premier League or NBA games, participants wager on outcomes of esports events, such as the recent CS:GO major in Columbus or the LoL Spring Championships at Mandalay Bay.
This kind of betting takes place primarily online, although we should expect the emergence of land-based esportsbook betting options before too long.
The companies offering sports betting on esports are a mix of traditional online bookmakers expanding into esports (e.g., betway, bet365, Pinnacle) and newer sites that are focused primarily or exclusively on offering esports wagers (e.g., Unikrn).
How big is it?
Our current estimates call for roughly $649mm in total handle for esportsbook betting in 2016.
That’s a number that towers over expected handle for fantasy esports, but sits well below the expected aggregate handle across all genres of skin betting sites.
There are a few caveats attached to that projection, most notably that it only addresses betting that takes place at online sportsbooks licensed in known regulatory jurisdictions. As a result, the number is likely a material factor below the actual handle that would result were one able to sum the regulated activity and the grey-to-black market activity.
Adoption of esports among major regulated online bookmakers has been rapid and comprehensive. To that point: In 2012, virtually no major bookmakers outside of Pinnacle offered esports odds; today, virtually all major bookmakers offer some esports action, although the quantity of fixtures varies dramatically from site to site.
See the charts below for an illustration of that point. The first captures fixtures for CS:GO across major books, the second fixtures for League of Legends:
Why it works
I expect rapid growth for esportsbook betting to kick in during the end of 2016 and through 2017. There’s an extensive case behind that assertion, but the key points look like this:
- Just another sport: Once the challenges of data and pricing are solved (more on those below), there’s little that sportsbooks will have to do on the platform side to embrace esports. The vast majority of systems and structures that underpin the multi-billion dollar sports betting industry will cross-apply relatively neatly to esports.
- Attractive audience: The core esports enthusiast is an attractive customer for the typical sportsbook: Younger (think late twenties to early thirties) with disposable income (gaming is far from a cheap hobby) and a proven propensity to gamble. The appeal of that audience will likely drive sportsbooks to invest heavily in esportsbook product and marketing in an attempt to beat the competition in the race for a much-desired demographic.
- Cross-sell potential: While it’s still early days, my conversations with traditional online gambling sites that are offering esports indicate that there’s a greater cross-sell potential to stick-and-ball sports betting and casino play than one might imagine. That may be a fluke or a function of early adopters, but if the trend holds and esports customer prove to be not only potentially valuable customers at some point in the future, but actually valuable customers in the near-term, we will see a massive push across several operators to establish a prominent place position in the vertical.
- The data problem: The lack of availability of reliable, robust data from esports matches across a wide swath of titles is definitely dampening the potential of esportsbook betting. Companies such as Sportradar and BetGenius have recently rolled out partial solutions on the data side, but the industry will need these solutions to evolve and expand in order for the full potential of esports betting to be realized.
- Pricing is a challenge: While some sharp bettors can beat pricing on traditional sports like football and baseball, the skill of correctly pricing a wide range of bets for such sports is a relatively established one (and one that is frequently packaged as a data stream of pre-priced bets that operators can simply pipe into their platform). But the same cannot be said for esports betting, where there simply isn’t a deep pool of available talent for pricing even the simplest bets (e.g., match outcomes)
- Developer ambivalence: The relationship between gambling and game developers is a complicated one. It’s also a dynamic relationship that continues to evolve on a week-to-week basis. But, as things currently stand, the majority of major game developers appear content with keeping gambling at arms-length, an attitude that exacerbates the data and pricing problems described above while limiting endemic exposure opportunities for sports betting sites that offer esports.