Despite its meteoric rise during Covid-19-induced lockdowns, esports betting seems to have fallen from grace among most operators, given the news that Luckbox is shuttering its B2C operations and Entain is scaling back its Unikrn product. So, are the days for this vertical numbered or is this all a natural correction
Let’s wind the clock back to March 2020 in the UK as Covid-19 began to take hold. The then Prime Minister Boris Johnson has just informed the nation to stay at home to prevent the spread of the virus to protect the NHS, while pretty much all sport worldwide has been cancelled for the time being. So, where does the sports betting industry turn when there is no live action to bet on? The answer was esports. With people confined to their homes and the sporting calendar decimated, gaming rose in popularity and esports became one of the only forms of live ‘sport’ people could watch.
Suddenly, there were additional eyeballs on this niche vertical, and bookmakers had to pivot operations to provide more esports markets and odds for customers. Revenue figures released by the Gambling Commission (GC) in October 2020 showed how much of a spike in interest there was in esports betting that year. In March 2019, esports betting gross gambling yield (GGY) for that month was £50,223 across the licensed industry. Yet in March 2020, GGY had soared 2,922% to £1.5m, with the next month rising again to £3.4m before the vertical reached its pandemic peak in May 2020 with GGY of £4.6m. However, there was a drop-off after that following the return of British horseracing in the summer and a number of football leagues around Europe, albeit behind closed doors.
Although the pandemic provided a springboard for esports betting, Adam Savinson, former head of esports at Betway and now co-owner of Valorant news site thespike.gg, explains this surge may have put too much pressure on the vertical early on. “Esports betting got a lot of extra press during the pandemic. It got so much attention, people pivoted to it and it overinflated esports betting numbers further than the reality of the interest in esports.
“After the pandemic, traditional sports betting started to come back and esports betting numbers started to stabilise. In turn, those that in any other timeline would never have bet on esports went away and understandably so.”
The vertical’s rapid GGY rise and fall had some calling it a blip, however Savinson retorts that this attitude lacks any sort of foresight. “What lots of people saw was a spike and then a drop-off, and because that drop-off was so significant, people thought, ‘Okay, it was a fad. It was something that just came and went due to the pandemic’. That distracted them from seeing what was long-term esports betting growth.”
Take the L
Esports betting was thrust back into the limelight in recent weeks following updates from Unikrn and Luckbox. On 6 October 2023, Luckbox’s parent company, Real Luck Group, announced that it would be immediately closing its B2C operations as the Canadian company looks to “transition to a more capital-effective B2B strategy”. Three days later, Entain said it would be scaling back its B2C esports betting product, Unikrn, as the FTSE 100 firm aims to restructure the business. The move came less than a year after Entain soft-launched Unikrn in Brazil and Canada, excluding Ontario.
Recently, Entain CEO Jette Nygaard-Andersen explained the decision to change gears was mainly due to the costs associated with supporting Unikrn. “We’re really excited about esports. But rolling out a direct-to-consumer brand globally, we knew that would be capital-intensive and it will take a long time before that business would become profitable. So, there we’ve pivoted. The products that Unikrn has built are brilliant and built for gamers, [but] we’ll take that product capability and we’ll use it for our existing brands.”
What happened at Unikrn may have come as a surprise to some in the industry, especially given the timeline surrounding its acquisition by Entain and the money the operator spent to try and propel the business. Originally founded in 2014 by Rahul Sood and Karl Flores, the firm was picked up by Entain in August 2021, with the acquisition being completed two months later for an undisclosed fee and a further £50m earmarked to be invested into the business.
Entain also appointed Justin Dellario, who had spent five years at video gaming streaming platform Twitch as VP of global esports, to oversee the project. The operator further backed its esports ambitions, spending $13.25m to acquire esports betting provider Sportsflare from Tiidal Gaming NZ in June 2023.
Luke Cotton, COO at esports agency Code Red Esports, finds recent developments at Unikrn quite puzzling. “I haven’t understood what the decision-making at Unikrn has been for quite some time,” he says. “It is surprising that Entain shuttered something so soon after they made acquisitions. At the time of the acquisitions, Unikrn was operating at such a small scale that I’m not sure Entain could have measured its performance; so, holistically, it’s somewhat strange what Entain has done.”
When it comes to Luckbox, the turn of events is slightly different. Real Luck Group announced that it would immediately be suspending its esports betting platform as part of an update to an M&A letter of intent issued in September 2023. That letter noted the potential for the Luckbox B2C arm to continue, but the firm could not garner the required capital injection due to “persistently challenging conditions” in the capital markets, and upon thorough examination and assessment of the merger proposal, the parent company decided the proposed terms were no longer “viable”. As part of the update, the Calgary-headquartered firm stated that it intends to restructure its operations to focus on B2B activities. This shift away from B2C operations may have turned some heads, given the arm had generated all of the company’s revenue to date.
Commenting on Luckbox’s decision to move away from B2C, Gianfranco Capozzi, director of esports at Catena Media, says: “Luckbox’s failings are likely due to capital rather than being indicative of any failings within the esports market in general.”
However, Capozzi is quick to highlight that the decisions surrounding Luckbox and Unikrn are not indicative of the wider esports betting market. “I believe what has happened to Luckbox and Unikrn will likely have no impact at all on the future of esports betting. News like this isn’t really surprising anymore. Unfortunate as it may be, when it comes to esports, it’s mostly about survival of the fittest. If you make a few bad managerial decisions, miss funding opportunities or burn through your operational cash flow too much and too fast, you’re out of the game.”
The news of Luckbox and Unikrn are anomaly and not indicative of the esports betting market
The AAA operators
Reflecting back on when the vertical first started, with Pinnacle taking the first ever esports bet of $9.55 on StarCraft in February 2010, a great deal changed in the subsequent 13 years. For one, those that led Pinnacle’s esports division, namely Marco Blume and CEO Paris Smith, have since left the Curaçao-based operator. Now there is a real mix of traditional sports betting operators which have carved their name in this niche vertical and some that have a pure focus on esports betting.
One of the major players in the esports betting space is GG.Bet, which recently made the move to enter the UK market via a deal with Rednines Gaming. The operator already has a presence in Europe, South America and Asia. GG.Bet offers betting on over 30 different esports games and features 400 matches with up to 350 markets daily. Cotton explains that successes like GG.Bet show that what has happened at Unikrn and Luckbox is more of an anomaly.
He asserts: “There are brands out there that are making money in the space and are not shouting about it like GG.Bet. GG.Bet is probably easily making tens of millions of profit per year and could reach the hundreds of millions, and it is purely an esports betting site.”
Cotton does add the caveat that GG.Bet now offers traditional sports and casino but that these are a mere bolt-on to the core experience.
A more traditional sports betting operator that has taken the esports betting market seriously is Betway. The Super Group-owned operator was the first UK-based bookmaker to invest in an esports team when it signed a six-figure sponsorship deal with Ninjas in Pyjamas. Savinson sheds some light on why Betway has been so successful in the space: “I think what is remarkable about Betway is its ability to be pragmatic with a new and undiscovered market. Betway was not afraid to test and try things out, and there was not too much pressure on it to take off. It didn’t want to get as many esports customers and cross-sell them into football or casino; Betway wanted to explore the market over many years. The budget started out small but grew over the years. Betway put time in and learned its lessons, and it succeeded in the space.”
Two relatively new companies in the esports betting arena are having pretty contrasting fortunes at the moment, namely Midnite and Rivalry. Midnite, the older of the two operators having been founded in 2015, has been on a rollercoaster journey since initially securing funding in 2020. The company received a further £12m in additional funding in 2022 and hired more than 30 people last year. Having been focused on esports, the firm is now looking to shift gears towards making casino and sports betting its core focus.
On the flip side, the folks at Rivalry have approached esports betting with a core focus on millennial and Gen Z players. This tactic seems to be proving successful for the firm as in its most recent set of results, the Toronto-based operator saw revenue soar 60% year on year in Q2 2023 and now expects to hit profitability in H1 2024, which shows the fruits of the team’s labour given the firm will have just turned six by that point.
Name of the game
Although the insatiable appetite for esports betting has normalised in the three years since Covid-19 struck, the attraction is still there for bettors. Esports betting needs to be understood as an extension of the wider esports industry, in that the ecosystem is somewhat self-sustaining. The top-watched titles are translated into the games punters are most interested in.
Savinson explains why these particular games reign supreme. “There’s certainly a top three when it comes to esports betting. The game with the biggest betting handle can differ based on country, but it always comes down to League of Legends, Counter-Strike: Global Offensive and DOTA, in no particular order. There are a few reasons why these games are so good. They have been around for a long time and people feel comfortable betting on them. These games also have a long history of high viewership, so in theory, there will be more people betting on them as well.”
While esports betting may not be booming in the UK, with Q2 2023 GGY at just £3.2m, according to the GC, the vertical is seemingly in rude health outside of Europe. Capozzi elaborates: “Brazil has been an emerging market for esports betting, with a rapidly growing audience and increasing interest in the industry from both the igaming operators’ and fans’ side. We can easily expect similar trends in other countries in Latin America as the regulations gradually become more favourable and accessible. Asia, particularly Southeast Asia, is also a significant region supporting the growth of esports betting, as it represents where there is already a strong esports culture and appetite for igaming and betting.”
League of Legends, Counter-Strike: Global Offensive and DOTA are the leading titles for esports bettors
As we look ahead, the future appears brighter for esports as data gathered by Statista Market Insights expects the projected revenue in the global esports betting market to reach an estimated $2.1bn this year. The market analysis company predicts the vertical will have a compound annual growth rate of 10.45% in the next four years, leading to an estimated market revenue of $3.2bn by 2027.
Capozzi consults his crystal ball on next steps for the vertical. “The future of esports betting lies in its continued growth and evolution. With traditional sports facing a challenge with their target demographic getting older, unable to adapt, and declining engagement and viewership, esports provides a fresh and exciting alternative that has a long way to evolve and mature.”
Cotton is also full of confidence that esports betting is the vertical that will only grow further as the years pass by. “Every year, an esports fan is born and someone that will never engage dies, and we are going to have another 50 years of that.” So, instead of hitting quit on this vertical, maybe operators should be pressing ‘continue’?