Esports is off to a slow start for the casino industry, but industry leaders believe its future has the potential to bring total bets closer to major professional sports, including the NFL.
Truist Securities wrote about the possibilities of the esports and casino industries as part of a call with Grant Johnson, CEO of Esports Entertainment Group, who discussed the further commercialization of the emerging sector.
“Though we’re in the early innings as it relates to betting, esports presents a prime opportunity to introduce the basics of sports betting/gambling to a passionate younger demographic,” said Truist analyst Barry Jonas. “Though the current opportunity to play esports in the gambling-related equity markets is comparatively small, we expect that to change in the coming years.”
The opportunities are there, Jonas said. Electronic sports are organized and competitive video gaming, often for monetary prizes. Esports can be player versus player, team versus team, or in tournament formats, either remotely or at in-person venues. Esports games can range from sports (Madden and NBA2K) to first-person shooter (Call of Duty and Overwatch) and strategy (League of Legends and Starcraft) and anything in between, Jonas said.
“Superer than the Super Bowl and more masterful than the Masters,” was the subhead posted by Truist in its write-up of esports.
“Though traditional sports wagering is farther ahead of esports wagering at the moment, the esports world is not as far behind as some may think,” Jonas said.
While the game publishers have historically been anti-gambling, there now seems to be some open-mindedness about it, Jonas said. EA Sports will attend Johnson’s Madden event in Atlantic City in January and publishers are willing to provide licensing deals.
“Esports has been slow to gain traction in the world of gambling, given the legislative landscape with (the federal sports betting ban) repeal a mere three years ago, but we’ve seen increased action over the previous months in terms of mergers and acquisitions, as well as partnerships being formed,” Jonas said.
The most recent esports-centric headline-grabbing event in the traditional sports betting space happened in November, when DraftKings announced a partnership with FaZe Clan, a leading esports, lifestyle, and media platform, Jonas said.
Citing Johnson’s company as a market leader in marrying esports and gambling, some 61% of Gen Z prefer esports to traditional sports and Truist noted European sports betting operator Entain’s contention that there were almost as many views of esports as the NFL and NBA combined. Some 100 million viewers watched the largest League of Legends tournament, surpassing Super Bowl LV. The $40 million prize pool far surpassed the Masters and U.S. Open golf, they said.
In his interview, Johnson said there’s a significant gray market and estimated the current market size of regulated esports betting is about $400 million in gross gaming revenue within the $150 billion video-game market, Jonas wrote.
“Regulated betting revenues are anticipated to double over the next year, while Mr. Johnson believes global esports could ultimately generate $40 billion to $50 billion in wagers and $5 billion in revenues at maturity, which he thinks could be about 10 years from now.”
There are 2.5 billion to 3.5 billion gamers worldwide today, a majority of whom are younger than a typical casino-goer or gambler (ages 18-35), more diverse, and wealthier (43% have an annual household income greater than $75,000) than a typical American sports audience,” Jonas said.
“This tech-savvy demographic tends to micro-bet on esports more often, meaning more frequent wagers at a lower dollar amount,” Jonas said.
A study from consumer research firm Interpret predicted 52% of esports fans would engage in some form of betting on esports tournaments, Jonas said.
While esports gambling runs on the same tech platform as traditional sports wagering, betting on esports is not legal in every state where sports betting is, due to issues such as the inclusion of players under 18, Jonas said. The legislative environment is evolving and was accelerated by the pandemic to include such states as New Jersey, where it wasn’t included when sports betting launched in 2018.
Esports wagering is also legal in Nevada, Tennessee, and West Virginia and regulated in Arkansas, Delaware, New York, Iowa, Illinois, Michigan, Rhode Island, Montana, New Mexico, Oregon, and Pennsylvania, with more states in the pipeline, Jonas said.
