e-Sports betting represents the most popular product among e-sports fans. Betting on e-sports is more or less identical to betting on traditional sports, with the caveat that the e-sports betting product is far less developed than the traditional sports betting product.
Business source of income:
For e-sports gamblers, the currency choice comes down to a decision between cash and skins (virtual items from video games).
Cash requires little explanation. The market for cash gambling on e-Sports works identically to the cash-based market for traditional online wagering, such as sports betting or online casino games.
Skins require a bit more explanation. Skins are virtual items that can be used in games like Counter-Strike: Global Offensive (CS:GO). The term “skin” is derived from the typical function of these virtual items: changing the appearance of a player’s in-game avatar, weapons, or equipment.
Market Snapshot:
The global eSports market has been growing at a 32.6% CAGR since 2012, with North America and China leading the charge. Global revenue is expected to top $900 million by the end of this year and exceed $1.6 billion by 2021. Growth of the eSports audience isn’t far behind, nearing almost 400 million viewers and projected to reach half a billion by 2021.
Over 75% of eSports enthusiasts are males and almost half of that group fall between the ages of twenty-one and thirty-five years old — a notoriously difficult demographic for brands to reach. This fact explains why sponsorship fees paid to teams and organizers will account for the largest share (40%) of this year’s total annual revenue.
Prize pools have also grown significantly, with the largest tournament prize pool in 2017 reaching nearly $25 million. High schools and colleges across the country are creating teams and leagues for their students to compete. Some even offer scholarships to the most gifted players. Furthermore, the International Olympic Committee is considering including eSports as an Olympic event in 2024.
Investment Opportunities:
Venture capital firms have noticed this activity and are investing in the space at increasingly rapid rates. Venture investment in U.S.-based eSports startups surged by roughly 1,125% over the past five years, putting nearly $160 million to work across roughly 40 deals in one year alone. With very few major eSports bookmakers, the larger gambling category holds the most opportunities for growth in the U.S.
Opportunities to support the eSports gambling ecosystem include: Real Estate, Analytics and Performance Measurement Tools, Video Production Software, Transaction Monitoring Systems
Industry Business Model:
A microtransaction is a business model where users can purchase virtual items for small amounts of money. Microtransactions often appear in free-to-play games, meaning there is no cost to download the game, just a cost to buy the online virtual products.
Game developers have learned to take advantage of this new revenue source. It is estimated that only 5 to 20% of game communities take part in microtransactions, and the amounts they spend vary. However, this is still a significant amount, as the revenue generated is enormous for free-to-play games. Executives at these companies aim to monetize the player base that is not partaking in the microtransaction community for driving further growth.
Companies That Benefit from Microtransactions:
The video game industry reached a record of $36 billion in revenue for 2017, according to data from the Entertainment Software Association (ESA) and the NPD Group.
