Billions Of Dollars Will Soon Be Wagered On eSports Competitions

Is competitive gaming, commonly referred to as eSports, actually a sport?  Is it ludicrous that competitive gamers will be drug tested in a similar fashion to those who participate in the National Football League in order to make sure that no competitive advantage is granted to any individual?  There are many inquiries surrounding the surging eSports industry, but fewer people seem to be questioning its ability to attract participants and spectators.  The most important question that people should be asking surrounds figuring out where there is still value in the growing eSports space.

                             

The eSports industry, whether labeled as a sport or not, is a powerhouse with potential to rival and surpass many established professional North American-based sports.  Arising out of that will be a sector of the industry based on billions of dollars being wagered on the outcome of eSports events.  According to a new white paper published by gaming industry research firm Eilers Research, it is estimated that fans of eSports competition will wager more than $250 million on the outcome of eSports events in 2015.  That amount is expected to exceed $23 billion by 2020.

Part of the equation is real-money fantasy eSports competition.  Eilers Research estimates 590,000 paid actives for real-money fantasy eSports competition in 2015 along with 1.72 million paid actives for eSportsbooks.  Fantasy eSports is similar to more common daily fantasy operations surrounding football, basketball, baseball, hockey, etc., where individuals may submit an entry fee and compete against others for predetermined prize pools.  However, eSportsbook wagering is akin to traditional sportsbook wagering, which allows people to place wagers against the house on the predicted outcomes of individual matches.

Eilers Research provides a “bull case” wherein 32.5 million bettors will wager $42.9 billion by 2020, generating $3.3 billion in revenue for operators.

“The numbers look big, but actually end up being pretty modest in the context of eSports audience/spend.  eSports betting, not fantasy, will drive the overwhelming majority of the growth,” said Chris Grove, Senior Consultant at Eilers Research.  ”I’ll readily admit that this is a largely speculative exercise.  It’s a nascent and opaque segment.  But I believe we have arguments that provide a firm, rational foundation for our projections.”

Millennials’ purchasing power is projected to increase 133% from $600 billion to $1.4 trillion over the next five years.  People born in the early 1980s to 2000s are expected to be spending $200 billion annually by 2017 and over $10 trillion over their lifetimes in the United States.  Those were a few facts delivered during a panel titled, “Tomorrow’s Audience Today — How to attract and retain millennials as content consumers and producers, too,” at the SportsManias Digital Media Summit this past Friday in Miami, Florida.

A large part of the discussion was focused on eSports, and for good reason.  Millennials have demonstrated a proclivity toward fantasy sports and more recently eSports.  Fantasy sports operators are the talk of the sports industry as of late after serious fundraising rounds by FanDuel and DraftKings.  Investors believe that millennials will increasingly gravitate toward such games and spend more on play-for-cash competition.

In July, FanDuel closed $275 million in Series E financing, which brought its total capital raised to $363 million.  That same month, DraftKings raised $300 million, valuing the daily fantasy sports operator at over $1.2 billion.

The aforesaid raises are exciting for the sports industry as a whole, but the valuations attached to FanDuel and DraftKings may be deemed nominal in comparison to the potential for entrants and established companies in the world of competitive gaming. However, it is likely that operators such as FanDuel and DraftKings expand their services to offer eSports game play.  If they do, then they will compete against companies that have already gained a leg up by currently offering fantasy eSports platforms.

Fantasy eSports is dominated by Vulcun and AlphaDraft, which have each received substantial funds from outsiders.  Separately, there are eSports betting platforms like Unikrn, backed by Dallas Mavericks owner Mark Cuban.  Other eSports betting operations include Pinnacle, Betway, Bet365, William Hill and Bodog.

Fantasy and betting operations surrounding eSports have a lot to be excited about.  The Dota 2 championship, called The International, was recently held at Seattle’s Key Arena in front of a sold out crowd of 17,459 and over 400 official simulcast events were attended across the United States.  The total online attendance is believed to be roughly 30 million, surpassing most major U.S. sporting events, including Game 7 of the 2014 Major League Baseball World Series.  Furthermore, there is known interest in eSports fantasy participation.  It is estimated that players will spend a total of $20 million in entry fees for eSports fantasy competition in 2015 alone .

Darren Heitner, Forbes