Esports in a pandemic desert - oasis or mirage?

23 July 2020

The absence of live traditional sports during the pandemic forced many through the open gates of esports, but while the surge in activity is now over for many sportsbooks, the phenomenon is no bubble, argues Hai Ng

It was a typical day near the end of October 2019. I had just started working on a new project to develop an esports strategy for an impressive stadium complex located in an up-and-coming major city in China. They had secured a series of traditional events but were looking to future-proof their calendar; like most cities around the world, esports was a natural idea.

The team and I had just started to do our basic background research when my ground sources started sending me information about a potentially new respiratory condition that seemed to be spreading in that city. As we were in the process of scheduling our ground visits, I sent out an email flagging the reports and raised a caution on travel to the site.

That city was Wuhan, and that respiratory condition is what is now named Covid-19—how the world has changed since.

Interestingly, esports hasn’t changed that much in the shadow of the SARS-CoV-2 virus, and that probably comes as no surprise, or at least quickly becomes obvious, to many who are endemic to the industry or have come to understand it.

As an activity that was born in technology and found a home in the ether of the Internet, like streaming media, video games and esports have become the refuge for many. Even for many critics and sceptics, the total absence of organised physical sports forced many through the open gates of esports.

Motorsports quickly turned to esports as a way to continue fan engagement. Within the first three weekends, Nascar encountered everything from troublesome, and occasionally funny, disconnections during a race, to drivers “rage-quitting” and toxic behavior leading to sponsorship withdrawals and firings—a quick but harsh lesson that organizing esports tournaments aren’t just fun and games.

To their credit, they did a great job recovering and registered very respectable viewership numbers, all things considered.

Meanwhile, the traditional esports side of things wasn't unscathed. ESL’s Intel Extreme Masters event in Katowice, Poland, the largest live esports event in the world, was told they couldn’t have any spectators inside Spodek Arena less than 12 hours before the doors were scheduled to open—organizer ESL showed their mettle and the show went on safely and in compliance.

Esports, in general, has not only found a way forward, but is thriving during these uncertain times.

Player and viewer numbers have gone up and things are even looking positive for the resumption of live esports events. Riot, publisher of the largest esports game League of Legends, has secured an exception from the Chinese government to go ahead with their  League of Legends World Championships in Shanghai as scheduled.

The plan is to create a bubble with fully managed quarantine, testing, and safety measures in place—this in the shadow of the Chinese government’s decision to cancel all international sporting events in 2020.

As the world continues to be blanketed by this Pandemic Desert that is changing how life and business is done, esports is looking like an oasis.

For the gaming (yes, that would be gambling, the other gaming) industry, esports have also turned some eyes and kept some operations moving. With many physical sports trying out esports options and esports continuing pretty much business-as-usual, many sportsbooks that have already embraced esports as a product have managed to continue revenue operations in the absence of physical sporting events.

The spike was significant enough that even mainstream media jumped on to report on it. A Forbes article covered a report from the GB Gambling Commission stating that esports betting jumped a massive 2,992% (and yes, that’s two-thousand and not a European decimal point) year-on-year, going from £50,000 in March 2020 to £4.9 million in May. Even Las Vegas noticed an uptick in esports wagers with sportsbooks more actively pushing what previously offered as something more exotic.

This action was certainly boosted by the fact that many television channels, including sports networks, started more extensive coverage of esports in their need to fill air-time vacated by the lack of physical sporting events. Many who may have never considered esports as a viewer and a wagerer were now given motivation to give it a try.

Almost all igaming sportsbooks were reporting gains on their esports products, with articles quoting all the usual suspects including Isle of Man-licensed Luckbox and Unikrn. Sharing an online panel with global esports book leader Pinnacle, it was quickly apparent that they are not only doing well with esports but growing their industry lead and further enhancing their product offerings in esports.

But the question becomes, “is this a bubble?”

Let me start by saying that esports itself, unequivocally, is not a bubble. That said, this current surge is definitely fueled by variables that, when removed, will not make esports irrelevant, but will very likely cause esports to return to its original rate of growth; perhaps with a slight residual boost.

Sports bettors, like many other activities, can be generalized into two categories: casual and experienced. If we remove the customers that are already wagering on esports prior to entering this Pandemic Desert, I would hazard anecdotally that the bulk of the new converts belong to the experienced category of customers.

These are customers that enjoy sports wagering or even engage in it professionally as a practice of statistical skills and experience. These customers would be able to take esports like any other sporting event, analyse the available statistics and odds, to make a calculated wager.

For these experienced customers, the potential for them staying with esports after we exit from this Desert will be much higher. If not for the simple reason that they now have first-hand experience with the product and an objective measure of their performance with it.

With the casual customer, wagering is often an event-enhancing experience or a social one where they are supporting their favorite team, player, or some other sense of identification.

These relationships take more time to form, and as physical sports are already starting to reappear, there may not be enough time elapsed to form them. With the casual customer, an exit from the Desert will remove much of the motivation to continue on with an esports product unless they have developed a taste for it.

Conservatively, if I was a betting man, I would hazard that as a whole, 2% will stay, but 20% would move to a “very likely” category to try an esports product in the presence of other products, as the seed has been planted.

As the adage goes, “you’ve got to be in it, to win it.” This rang true with esports betting in the Pandemic Desert. Generally, operators that already had established esports products saw the most gains, while those that jumped on the bandwagon opportunistically were more varied in their numbers, especially if they depended on their usual customers to transition to wagering on an esports event. However, since many physical sports were going virtual, that transition became far less jarring.

The unofficial consensus among operators that are already providing esports products agree, esports customers are different enough that an esports product requires its own face and treatment. In addition, crossover bets between physical sports and esports customers are minimal, with the larger movement going from esports to physical sports.

What the pandemic provided was a mechanism where everybody got shoved into a room where you could participate or do nothing at all, and clearly enough people decided they would do something. That removed the “own face and treatment” criteria, since the new bettors are not ones that prefer or expect experiences acclimated to video games. While dropping esports products into the regular mix now will fly, it will not drive esports-centric customers as much as placate physical sports customers with additional product options.

The harder answer to predict is whether customers that have discovered esports through this entry point, will eventually demand the face and experience preferred by esports-regulars, or would operators have in essence normalized a customer-base that will consume esports products through traditional experiences. This will certainly be an interesting situation to study.

Ultimately, timing, as always, is everything. While the world continues to grapple with Covid-19, much is unknown about how long the pandemic will continue to occupy our lives. A decision to embrace esports now without a long-term strategy, but as a clutch, may not be a wise decision.

My typical advice when it comes to embracing an esports strategy has not changed—do not chase after the ball, instead get ready to be where the ball will go.

For sportsbooks, the need for esports products is inevitable. The timing to develop and launch such a product may vary for each operator based on their existing and evolving customer demographics, especially if resources are limited, but if you start developing a strategy now, you could find yourself in the right place when the next right time comes along.

Oasis or mirage? If you’re already basking in esports, it is an oasis; if you are seeing it from a distance, running towards it now may simply reveal it to be a mirage. Where will you be when the next Desert strikes?

Let’s keep our wagers at the books; don’t bet your health; stay safe; stay sane; wear a mask.

Hai Ng is integrity ambassador for the Esports Integrity Commission (ESIC) He is also co-founder of Neomancer, a unique technology strategy and management firm. Hai has more than three decades of experience in the technology sector, with a decade in igaming.

Image by alasta_webdesign from Pixabay