The Dark Side of eSports: Underage Gambling | THE NEXT LEVEL 012
THE NOT SO SECRET WORLD OF ESPORTS UNDERAGE GAMBLING
My Take: eSports has come a long way from basements and ballrooms and the money is flowing in. What’s just beginning to happen is the overlap with Casinos, Poker and Gambling — and the massive amount of revenue involved. Some recent news:
- Poker and Hearthstone Pros at one event competing in both games
- PokerStars sponsoring Team Liquid
- Nevada Governor Sandoval and the Gaming Policy Committee met to discuss eSports
What’s not talked about until recently is a hidden economy that’s expected to generate a turnover of $7B this year. Let me repeat that: $7B. Even if you believe the high estimates, the entire eSports industry is estimated to bring in just $500M (Turnover vs. Revenues Yes, but just for comparison).
Welcome to the world of Counter-Strike skin gambling.
Unless you really follow this scene, you will not have heard of this. If you’re a parent of a young boy, you probably didn’t know the amount of money of being gambled. Start here → Bloomberg provided a great overview and Daily Dot did an extensive look written by a former Poker pro.
3 years ago, Counter-Strike’s publisher Valve launched an online marketplace for “skins” which is just decoration that changes the look of your gun. Why would anyone care about decorating a virtual gun you ask? There’s a deep motivation factor for players in collecting skins and having exclusives. Ill leave FarmVille right here. Valve made $130M+ on Counter-Strike alone in 2015. Here’s how gambling works:
- Buy skin for cash
- Bet on eSports using that skin via 3rd party websites
- Win bet and sell skin for cash
Valve also benefits greatly from this. At the launch they literally said “you can experience all the illicit thrills of black market weapons trafficking”. Not only did Valve create the underlying software, they take 15% of every transaction. Further, Valve saw 1500% user growth 2 years after launching skins. I don’t believe that’s a coincidence.
The other side of this is the shady business of promotion. There’s a lot of money also being generated through sponsorship of CS Skin betting sites — which I’m not linking to — and potentially via video ads. A quick search on YouTube for “skin gambling” turns up 67,000+ videos:
Just like the Breaking News that “water is still wet”, media companies and sports leagues greatly benefit from gambling and fantasy sports as related to TV ratings. Some fun data for you:
- In non-competitive games with large point spreads, viewers tune in longer if either team gets close to covering
- Once total points surpasses the Over/Under, viewership drops
- Fans consume +40% more content once they start playing FanDuel (Absolutely true for me also — for the three weeks I played until I figured out what an awful scam Daily Fantasy is).
Further, there’s also an interesting tie into E LEAGUE. The deepest coverage of the space has come from Chris Grove of Narus Advisors who’s research provided the estimates and has been talking about it on eSports Betting Report. In E LEAGUE’s first month, an estimated $33M was wagered on its games. Here’s the biggest one for me:
“The figures obtained by ESBR appear to illustrate a plateauing of skins betting on the average match, and underscore the idea that betting volume is correlated to television and online viewership”
I‘ll let the others in the space cover the recent controversy between an E LEAGUE analyst and a skin gambling site — Ill stick to the media and business side and you’ll see E LEAGUE’s Week 4 viewership below.
My biggest concerns are the potential legal issues, bad press and what impact this will have on the industry. I firmly believe that in it’s current state, eSports is much closer to Poker than traditional Sports.
“Look to history: Online Poker and Daily Fantasy. Let’s not let this happen to eSports.”
Last month, CEO of Unikrn Rahul Sood made a passionate plea and also worth a read. TL/DR:
E LEAGUE WEEK 4 REVIEW
- TV: 128,000 18–49 Viewers showed strong increase from Week 3 but lower than opening Week 1
- Twitch: Similar increase in digital viewership but also less than Week 1
My Take: Trying to make any estimates on ratings is very challenging given the minimal data and nascent industry. Even with that, I’m befuddled why Week 4 performed worse than Week 1. Not only did Week 4 feature fan favorite Fnatic and US team Faze, there was also no NBA game and nor a Holiday weekend.
Maybe the luster of E LEAGUE has started to fade or after a month it may not have convinced a new audience that Counter-Strike is for them. True.
I think there there’s something more: Clutter. While those new to eSports are seeing the headlines or flipping channels in bed (do people still do that?) they may not realize the massive amount of eSports content out there. Here’s this past Friday:
Not all of those events are directly scheduled against E LEAGUE or streamed but it shows you the relative breadth of programming available. The biggest — ESL One Frankfurt — definitely had an impact. I would even estimate that ESL One Cologne Qualifier last Friday June 10 had a similar affect on viewership. It doesn’t have to compete head-to-head, after three hours do you want to watch for another three hours if the team quality is not there?
Ill continue to look at E LEAGUE and hope to see it get back to previous levels. It’s only been one event and I still have no idea why the numbers were that high but Madden in contrast is looking interesting:
I spoke further about E LEAGUE and Madden’s debut on SiriusXM’s eSports show last Friday:
SPONSOR SPOTLIGHT: AUTO
My Take: This week let’s look at the Auto Ad category. Auto is enormous in terms of Ad spend estimated at ~$9B in 2016 for Digital alone. This doesn’t even include the Accessories category either like Turtle Wax who have already sponsored OpTic Gaming. However Auto Brands have been reluctant to make the investment in eSports:
However, this past weekend showed a few examples of Brands testing the waters. Both Audi and Michelin had sponsorships tied to the 24 Hours of Le Mans event with Twitch and Forza.
The most active brand in the space has been Nissan. They partnered with Team Curse back in 2013 and further when Team Curse merged with Team Liquid. This was the only major team brand sponsorship I could find — and it maybe over. While Nissan is listed as Team Liquid’s sponsor it’s not on their Twitter with their other numerous brands. Could be an advantageous opening for another Auto Brand — Steve if your phone rings today you can thank me later.
My recommendations for Auto Brands considering eSports:
- Just Jump In. One day’s worth of TV spend would more than enough cover a test of the space with a prime, engaged audience.
- Don’t Focus on Racing Alone: It makes complete sense to attach yourself to Auto content for your first run — no pun intended. The challenge there is that the viewership is extremely low. I checked this weekend’s Le Mans event and for having several popular streamers totaling easily 1M+ in subscribers; the stream had about 2,000 people watching (The new “my dog ate my homework” — my Mac ate my screenshot so don’t quote me on that figure but it was low)
Football, Basketball, Baseball, and Hockey aren’t auto related but provide engaging content and the right audience. eSports provides the same.
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