Why you should care
Esports is aging into a sports betting savior.
Here’s how you play fantasy esports: Thousands of esports fans build an eight-player fantasy league lineup of professional video gamers, working to stay under a demarcated salary cap in hopes of earning the most points based on said players’ performance in the totally real, not fantasy video game tournament.
If the concept leaves your head aching — or seems a bit depressing, given how far removed esports is from what’s traditionally thought of as actual athletic activity — you’re not alone. But, apparently, you’re either old or straight-up out of touch. The esports revolution has arrived, and it’s not going away.
In a matter of years, gaming and esports has gone from hobby to niche professional sport to full-blown movement, disrupting the sports industry at large and redefining the traditional framework of a career in pro sports. Not only will gaming surpass $1 billion as an industry in 2019 but experts have noticed that the global esports boom is spawning substantial action in daily fantasy sports and sports betting. In fact:
DraftKings’ fastest-growing fantasy sport last year was esports.
At DraftKings, the world’s largest daily fantasy sports (DFS) operator that, as of August 2018, operates an online sportsbook, achieving site-leading growth is no small feat. Between DraftKings and FanDuel, its main DFS rival, the two companies have raised more than $1.2 billion in investments since 2009. DraftKings boasts more than 8 million registered users, with FanDuel a close second at 7 million. For both companies, the NFL is far and away the most popular offering, with the NBA, international football and MLB not far behind. Unsurprisingly, those four sports see the most action in pure sports betting too. At present, esports is still a small percentage of DraftKings’ overall business, but with entry fees for League of Legends fantasy games up 59 percent in 2017 — and tracking at a higher rate for 2018 — there’s reason to expect an actionable surge in the near future. As sports betting wraps its tentacles around an accepting, mainstream America, esports represents not just an alternative revenue streak but also a lifeline for daily fantasy operators that have seen annual growth plateau and an untapped frontier for casino bookmakers.
DraftKings has offered rudimentary esports contests since 2015, but the Supreme Court’s decision last May to legalize sports betting signaled to the rest of the industry that more action is soon to come. Experts like the team at the Action Network, which provides insight and analytics on all things gambling, were quick to take notice. “[Esports] has been at the forefront of innovation as far as how it reaches fans and the way it presents its events,” says Chad Millman, head of media for Action. “I’m bullish on esports in all forms, from its growing audience broadly and the ways in which it can drive betting.”
Millman is so bullish on esports, in fact, that Action hired a writer to cover the space on a regular basis this year. Ultimately, it was a bit early, and the company pulled back on coverage due to a lack of audience demand. Expect that to change in the future, especially when DraftKings enables a full menu of esports options. Since entering into the esports arena in 2015, DraftKings has only offered daily fantasy contests for League of Legends, rather than expanding to games like PlayerUnknown’s Battleground, Fortnite or Dota 2. Likewise, FanDuel in 2015 acquired an esports DFS company called AlphaDraft; that partnership quietly fizzled a year later, and today DraftKings’ League of Legends league remains the only relevant esports action in the daily fantasy space. “We are certainly aware of how fast the sport has grown,” DraftKings chief revenue officer Matt Kalish told CNBC. “One of the reasons we believe esports could be much bigger on DraftKings is we haven’t really penetrated to the full breadth of games.” Despite the fact that 2015’s anticipation may have been premature, esports are becoming more popular — and companies hope gambling will push the industry even further.
After growing from nonexistence into an industry that generated an estimated $3.26 billion in customer entry fees in 2017, daily fantasy companies have struggled to attract new users of late. Between DraftKings and FanDuel, which represent roughly 97 percent of the total DFS market, it’s estimated that entry fees will have grown a measly 2 percent in 2018 — bad news for both of the DFS juggernauts. But while it’s likely that the incessant marketing campaigns of both giants have already reached every willing and able sports betting mark on the planet, that’s hardly the case with regard to esports. When esports DFS gets going, watch for the exponential growth of a customer base with disposable income to follow.
Disposable income, you say?
“More and more people will start speculating with skin in the game,” says Peter Jennings, co-founder of the fantasy analytics site FantasyLabs and a member of the Action Network. “The [gaming] demographic is getting older and the engagement for esports is off the charts.”
Should American esports fans want to place a wager on the International Dota 2 tournament in Shanghai next year, they can head to the FanDuel Sportsbook in East Rutherford, New Jersey, or the DraftKings’ online book to place a legal wager. As Jennings alludes, gamblers will follow any sport so long as there’s money to be made. And as esports fans age into a more mature demographic, expect sportsbooks to offer more fan-friendly betting options to capture the consumer base.
“The betting possibilities are endless for esports,” says Zach Leonsis, senior vice president of Monumental Sports & Entertainment. “There’s an infinite amount of data to bet on. Once the bookmakers’ technology catches up to the gaming industry, esports live bets could be incredibly popular.” To Leonsis’ point, global wagering surrounding major esports titles was estimated at $5.5 billion in 2016 and is projected to approach $13 billion by 2020.
Players, start your Wi-Fi!