ESPORTS BETTING REPORT

OCTOBER 2020

TABLE OF CONTENTS 

INTRODUCTION 

Across all sporting events, there is often one constant familiarity – a large and easily accessible betting market. Some bigger events rely  on this market as a judge of success such as those found in combat sports, where others use it as an additional activity with esports  fitting in to the latter. 

This report will aim to take a look at the emergence and growth of esports over the past two decades, the growth and spread of the  esports betting market during that time and what future predictions could have in store for esports betting. 

AN INTRO TO ESPORTS

The term “esports” had first been introduced in the late 70’s and early 80’s as arcades and other consoles were growing in popularity,  but there hadn’t really been any development in the space that could really define it as a sport with the support for professional  athletes or teams until the early 2000’s with the development of titles such as Starcraft in Asia and the rising popularity of Counter Strike across Europe.  

In many ways, these early offerings couldn’t be considered a huge success – the games were often very niche and had a much smaller  audience during the earlier years, players weren’t paid and tournaments were often much smaller as a hobbyist activity once or twice  a year. The development in the space has largely started to progress over the past decade – but the movement within esports during  that time has been enormous. 

esports-revenue-growth
2020-esports-revenue-streams

The numbers certainly paint a clear picture – as viewership and interest rose, the revenue grew quickly alongside it with the current  year showing just where the revenues are placed. It can often be difficult to paint the full picture with the numbers – Asia remains one  of the biggest markets for esports in the world with China being one of the biggest contributions, however not all sources can be fully  accounted for and as such these numbers may in fact be much higher than what is reported.

esports-audience-growth

ESPORTS BIGGEST TITLES

To understand the growing esports industry and the betting market that has grown alongside it, it’s important to understand the  biggest titles that have pushed this growth and how they’ve affected each market individually. Currently the majority contribution is  made by the three big titles of Counter-Strike, League of Legends, and DoTA, but there are some notable names that have played a  huge role.  

esportsbook-betting-volume-by-game

League of Legends is widely regarded as the biggest esports title currently, and it shows by being the most bet event too. Launched  in 2009 by developer Riot Games, it had joined another big name at the time in Heroes of Newerth to help redefine the multiplayer  online battle arena genre. In order to develop a competitive environment, the game had went a different direction to those before  however – prior to the release, most titles had typically relied on a circuit style for events where different third-parties would host  larger LAN parties and attract teams that way, whilst the more successful teams could afford to travel internationally, most were hosted  for the local teams to attend. League of Legends instead focussed on building an internal broadcasting infrastructure with a seasonal  league and playoff structure – each region would receive its own league, teams and players would be compensated if they were able  to qualify and participate, and it brought the League of Legends esport as a whole under one roof. The game has often been credited  as being the reason for the growth of esports in North America which had previously been underrepresented, but has been extremely  successful in Asia and has a very healthy European scene too. 

The second of the big three is within Defense of the Ancients 2 (or DoTA2) – the original was launched as a mod for the popular game  Warcraft III, and gave the base for other games like League of Legends to develop. The fully developed sequel wasn’t launched until  2013 however by publisher Valve, and in part used the League of Legends blueprint to succeed. Whilst it was able to capture a loyal  audience who remained fans of the original game, it was able to capture many looking to jump on the growing MOBA trend. DoTA2  does still rely on a large circuit for events, but each year the developer hosts the largest tournament of the year in The International  which invites the best teams from around the world. What DoTA did different however is introduce a system for players to obtain  ingame cosmetic items, with the money generated going directly to the prize pool at The International, and leading the game to  have the largest pot available of any esport to date. In 2019, with player contributions and the developer set amount too, the event  managed to offer a total prize pool of $34,330,068 with the winning team taking the majority share of that for a total of $15,620,181.  The young athletes that were now competing were no longer playing for a few hundred dollars as a grand prize, but now stretching in  to the millions.

The last of the big three is Counter-Strike: Global Offensive. The game can often be considered as the grandfather of esports alongside  one other title, initially being launched as a mod for the popular game Half-Life, it had found a full release as a title in 1999 with the  most played version at the time being released one year later. Counter-Strike was able to do for Europe what League of Legends had  done for North America, and had quickly become the hub for Counter-Strike 1.6. In 2004, the audience became fragmented however  as a newer version of the game, Counter-Strike: Source, was released – this split the core audience of the game into fans and players  of version 1.6, and fans and players of Source. This problem was solved in 2012 with the release of the latest version, Global Offensive,  which set to unite both audiences and give the game a more global audience – whilst it was successful in achieving this, Counter-Strike  is often more widely known for being the catalyst to start the esports betting scene.  

One of the games represented in the chart is an honourable mention too – Starcraft II. Before the release of the big three modern  titles, Starcraft had largely been considered as the biggest and most successful esports title to date – the scene was largely made up of  Asian players hailing from Korea and China, but some international players were able to climb the ranks. Fast gameplay with intense  focus and lots of macro and micro play was required to become one of the worlds best contenders, but it had been the first game  to offer competitive salaries and bonuses to young players so that they could forgo a regular working job and instead solely focus  on playing the game – similarly it was also the game that kickstarted the trend of a team house, where multiple players would live  together in accommodation owned by an orginisation, something that is still used now. 

INTRO TO ESPORTS BETTING

With an understanding of which titles make up the esports market, it’s easier to understand which titles have been responsible for  the growth of the betting market. However, betting hasn’t always been present in the more familiar way that is known across other  sporting events and has taken on a different form – the more traditional betting practice has only really found a footing and growth  over the past four years or so, with earlier forms looking much different. 

SKIN BETTING

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If you’re just getting into Esports betting you may have at one time heard the term skin betting and may be wondering what this  means, and whilst skin betting still exists in a small way it largely refers to a point in time before regular betting gained popularity. In  2013, Valve, the game developer behind the popular Esports title Counter-Strike: Global Offensive, introduced the Arms Deal update  to the game – this update allowed players to have a chance to receive an in-game item once the game had ended in the form of a  “weapon crate” with the choice to then purchase a key to open a cosmetic weapon appearance that could be used in game. With an  existing marketplace on the platform, these weapons of various rarities quickly established a real-world value as they could be bought  and sold virtually and led to the huge trading scene within the game. 

With a real-world value being assigned to these cosmetic items and the ability to trade them, it quickly led to the establishment of  a number of sites that allowed players to deposit their weapons as a bet, with the pay-out received also coming in the way of skins  – these could then be sold on the online marketplace or used to be traded for higher tier cosmetic items – much of this had been  automated by bots as the trading system was fairly straight forward but issues with the system were quickly discovered. At the time  many players were playing as a hobby with prize money from tournaments often being the only income they’d have from playing with  skin betting providing an opportunity for different – in 2014 the North American team iBUYPOWER had lost a game that they had been  favoured to win with an investigation later discovering that the match had been fixed with four players implicated and later banned  from all future official events – this led to some very quick changes in the way the trading system worked to make it more difficult for  skin betting to occur, and following a lawsuit in 2016 the most popular site amongst players announced it would be ending its services,  bringing an end to the website that had been suggested could generate up to $7.4 billion in cosmetic item value in that year. 

There is something important to note with the way skin betting worked however, and may be a contributing factor to why many of the  events were able to gain as much attention as they did and bring on a growing number of investors, including betting operators – the  crowd funded nature of the prize pool. This was popularized in DoTA2, but had been successful in Counter-Strike too – as mentioned  earlier in the report, DoTA2 in 2019 was able to build a prize pool of over $34 million through community contributions through the  cosmetics market place, and whilst Counter-Strike was unable to generate as much in 2013 and 2014 where the cosmetic crates did  offer this, it did in a sense encourage players to take part in obtaining these crates to open. 

EMERGENCE OF REAL MONEY BETTING 

Whilst 2016 signalled the end of the peak for skin betting, it did kickstart the movement to introduce a more familiar form of betting  to the market as many of the bigger operators saw the interest and potential – keeping in mind that the $7.4 billion valuation for  the cosmetic betting and gambling market was the figure attributed to just one game, and with a growing number of others gaining  traction such as League of Legends and DoTA2 at a similar time.  

As 2016 drew to a close, many fans were seeing how much more reliable real money betting within Esports had become and the  bigger operators began to realise the true potential, and 2017 really ushered in the change – more titles were added to the betting  cycle outside of the big three games previously mentioned, many more events were also being represented as official and community  events would be opened up for punters with all of the information needed, and the legal grey area that skin betting was able to  operate under was quickly replaced by a legitimate and trusted service with many of the bigger names in the industry getting on  board.  

The big change had largely come with sponsorship involvement in bigger events and with the teams themselves, as seen across  other sports many betting operators were quick to start sponsoring major events and individual teams increasing awareness of their  involvement within Esports with some even getting what would essentially be prime time spots on analysis parts of the broadcast  during every game – even with a huge amount of support the early betting industry was still quite small however. Numbers at the time were quite conservative – but they did tally up quite nicely given the market was still seeing tremendous growth.  In 2016, it had been predicted that the Esports revenue number was just shy of one billion, sitting at an estimated $892.4m, with the  betting market being much smaller at just $58.9m – smaller even than the prize pools that were offered throughout the year which  totalled $78.3m – for contrast the total prize money in esports had increased to $228.8 million in 2019, just three years later.

CURRENT ESPORTS BETTING 

Things have changed very quickly since 2016 however and the current esports betting market is enormous – the global esports betting  market in 2020 has been forecasted to reach $23.5 billion by the end of 2020. It is often difficult to get a completely accurate figure  for this too and the number could in fact be much higher – as with viewership, the audience split falls heavily in to two regions. The  western audience which incorporates Europe, the US, as well as including other regions such as the Oceanic region are often the  numbers that are followed, but in certain games in particular the Eastern market primarily consisting of China and South Korea are  enormous, and where larger viewership and betting numbers are quoted it is often suspected that numbers are much larger in the  East. 

regional-breakdown-of-lobal-esports

Whilst the big three continue to be the most best esports events currently, there are suggestions that other titles which fill a  more normal genre are starting to catch up. The two biggest by far are in both FIFA, and the NBA2K League. FIFA has been finding  widespread success for a number of years – the gameplay is simple for enthusiasts and the casual viewer alike, and to those who  may not have been an esports viewer previously, it provides some level of familiarity. NBA has also found success here for similar  reasons, but also had a bit of an advantage as it has been directly supported and endorsed by the NBA. 

It’s difficult in some measure to judge the success of either, neither are able to generate the same interest through viewership as  previously mentioned titles do, but their successes may instead be found in the fact that they have been able to generate viewership  from a more casual audience that may not have been interested in esports prior, and also allowing these casual fans to place bets on  something that’s a little more comfortable for them.

This same period of time also saw the average betting value rise – whilst betting as a whole has seen an increase following the lockdown period ending, the numbers also suggest that esports betting average values are similar to what had been seen in  traditional events pre-lockdown with further suggestions that up to 10% of those surveyed who were bettors on traditional sporting  events prior to the lockdown had made the adjustment to esports betting, with 41% of those asked who weren’t bettors on any sport  prior to lockdown now finding themselves betting on esports titles.

ESPORTS VIEWERSHIP

A good indicator of how successful esports betting can become is within the viewership numbers and how quickly they’re rising –  perhaps the biggest esports title in the world is currently League of Legends which has a huge representation across every region in  the world. Whilst these games currently can’t compete with other huge international events such as the Olympics or the World Cup,  the figures are starting to beat out larger regional events. In 2019 figures suggest the Superbowl was able to capture around 99.4  million viewers, but the highest concurrent viewership was suggested to be around 3 million – for comparison, the 2019 League of  Legends World Championship had been suggested to capture a similar maximum of around 100 million viewers, but the highest peak  recorded concurrent viewership on the final day of the event had been a suggested huge 44 million. The ongoing currency World  championship event could be set to break those records too, as early figures from the group stages look promising 

Current trends show that as the worlds event moves forward, the interest in betting on games continues to increase too – whilst  the group stages are usually viewed much less than the knockout and final stages, google trends suggest that interest in league of  legends betting for example is certainly increased. 

One of the more important statistics within esports is certainly within the viewership numbers too – it directly supports the investor  and advertising interest and is what allows for the events to grow bigger. Betting operators took advantage of this early on –  sponsoring a number of events and different teams meant that the name was out in the community as the services began to pop-up,  and itself has had an impact on the success of the sites for many.

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ONGOING PANDEMIC FIGURES

This year may have also seen a much sharper rise due to the ongoing global pandemic, where other sports were heavily impacted by  cancellations and postponements many online events were able to continue – this also led to player numbers increasing as platforms  such as Steam hit record numbers with a peak of 23 million users during the start of the pandemic in March. 

Although the numbers aren’t directly tied to the esports betting market, it does show increasing interest in the games and platforms  that are a huge part of esports. The increase in numbers wasn’t just for the gaming platforms themselves however as operators also  reported an uptick – one betting platform Luckbox reported a 54% increase in new player registrants following the cancellation of  the English Premier League in football at a similar time in March, and with the growing popularity in crossover games that offer more  familiarity such as FIFA for football fans or NBA2K for basketball fans, esports betting is now becoming more accessible to growing  numbers of players.

FUTURE FOR ESPORTS BETTING

There’s of course a lot of speculation around how much the betting market could change moving forward, but there are also a lot  of variables that can change many of the predictions. A popular figure currently being floated is that the market could continue to  increase it’s growth over the next four years and possibly generated up to $862m in revenue by 2024, but there are suggestions this  could be much higher.  

One factor that has been considered is the possible growth of esports on our mobile devices – the mobile gaming market now  accounts for over 50% of all gaming across every platform and is still a bit of an untapped market in esports – whilst there are some  titles, namely in the Battle Royale category that have gained popularity, the numbers are much lower than both the PC and console  counter parts. There are some titles that are propping the numbers up however, continuing on the popularity of the MOBA genre,  titles such as Arena of Valor had managed to rack up 72.2m hours of esports viewership, and the integration of a betting scene here  could be of huge benefit to the mobile market. 

most-popular-esports-games-2019

Another factor to be considered is the launch of new titles that further wider the audience – this is something that has been seen  recently with the release of Riot Games new title in Valorant which has been pegged as the next big entry in esports – whilst this game  has been able to benefit from a crossover audience of two of the biggest titles in the world in League of Legends and Counter-Strike as  the two audiences merge a little, it has shown that emerging games certainly have the potential to carve out their own audience.  

ALTERNATIVE BETTING

One of the many benefits that has been brought to Esports has been within the alternatives of betting that have been formed within  the games themselves – the most popular of these has been within an integrated fantasy styled league that has taken place in many  of the bigger events. This has been introduced through the “Pick’ems” system, at the start of a big event players can opt in to make  choices on the group and knockout stages of a tournament with varying prizes often being offered, this year for example see the  League of Legends World Championship event offering a brand new gaming system for the winner, with the five million entrants in  2019 only finding a single player making perfect picks.  

At first there had been a paid entry to these challenges, but many since have become free for all players to enter – early forms in  games such as Counter-Strike even involved players requiring the team stickers which held a certain value to take part – it is still a  relatively new form of betting on these games however, and is certainly something that will evolve over time.

CHALLENGES FOR ESPORTS BETTING

Despite the huge growth being seen, there are a number of challenges for the esports betting market as a whole – given the market is  still so young there’s a lot of room for movement, and not all of that movement will be of benefit. 

BETTING DEMOGRAPHICS

Across sporting, research suggests that that younger males are the primary audience for sports betting with up to 70% of core sports  betting being represented by males, with 45% of those core bettors being between the ages of 23-34 – whilst this does support the  growth of esports betting as a whole, it may be damaging to other markets. The previously mentioned possible growth of mobile  betting is one area here that could be important – mobile gamers are primarily female gamers within the same age bracket, if they  may be the primary audience for these titles given the platform then it may see numbers much lower than across other platforms.

sports-vs-esports-age-intervals
sports-vs-esports

REGULATION CHANGE

It’s also important to consider possible regulation adjustments that could have an impact of the market – in 2018 there had been an  adjustment in the US which is one of the smaller markets for esports betting making adjustments to certain regulations that allowed  for more operators to spring up, but it has seemingly had little impact on pushing numbers higher than they’re currently at. Similarly  with increasing efforts to reduce participation options for younger players across Europe with gambling and betting in mind, there’s  the possibility that some services could become restricted. 

SUMMARY

All in all, esports betting is on a very successful path – when keeping in mind that the growth had only really started around four years  ago, things have certainly come a long way for the bigger games that are represented within the market. It’s also possible to see the  future successes as newer esports titles that have arrived over the past few months have managed to gain a large amount of traction  and generate new interest for both existing fans, and the newer fans that have been gained over the course of the pandemic.  

The advantages have been clear too – the ability for players to compete online has allowed for many events to continue without  disruption where many other traditional sporting fixtures have had to either cancel or postpone in recent months – with both online  and offline events not being so dependent on external forces changing the schedule, newer punters will benefit from the consistency  and reliability of this still developing sport.

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