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As esports continues to grow in popularity, Oliver Niner, head of sales at PandaScore, analyzes how the industry fared in 2022 – and says the best is yet to come in the year ahead.
There’s been a lot of talk about esports over the last few years, that there will be this moment of critical mass where esports will just explode into what all of this potential speculation suggested. Back then, much of that communication was driven by the wave of excitement that comes with esports being at the forefront of modern entertainment, a melting pot of sports, gaming, pop culture and more.
In 2023, the e-sports sector is experiencing a market correction. Staff cuts, reduced advertising spending and some project closures suggest that esports has moved beyond the age of hype and easy money – the companies that value substance and sustainability are here to stay.
These changes also affect esports betting. In particular, it is not about promoting some big-bang growth theory that has dominated the discussion, with big and bold marketing, a lot of pomp and a lot less substance. Gambling itself is generally a recession-proof industry, and this year esports betting will take stock of what the true nature and measure of growth is.
Grow the cake sustainably
Going into 2023, we are confident that esports betting will continue to grow through the steady, sustainable growth that has become an integral part of PandaScore. Rather than chasing this big growth or relying on tournaments to do the legwork, it is critical for operators and suppliers to offer a comprehensive, robust product from the ground up.
We found that operators who joined PandaScore in 2022 benefited from an average overall revenue increase of 33% for their esports betting product. Looking at this on a primary and secondary market basis, the composition has not changed significantly, but overall sales have increased. Across our customers, total revenue in winning and core markets increased 61% in 2022 compared to 2021 numbers.
Bets on secondary markets also grew by 54% while maintaining a similar share of total revenue, suggesting that interest in these markets and products such as player props are not being diminished by the influx of new players playing only in the main markets becomes.
From small operators to Tier 1 companies, 2023 will be about consistently increasing overall revenue and developing high-quality products based on customer feedback. Looking at the esports sector itself, there are several strong indicators of sustainable growth this year.
Esports calendar is stabilizing
With this first wave of capital investment and the professionalization of esports, consistency across teams, competitions and the entire calendar has been challenging. Teams came and went, as did tournaments, leading to franchising (for better or worse) and the introduction of more structured, recurring competitions throughout the year.
Greater consistency across more game titles across the esports calendar means it is easier for operators to guarantee content to bettors.
The highest tier competitions have largely found consistency for a number of years, and we are now seeing that same consistency developing in lower tier tournaments as well, filling the gaps left by your S-Rank and A-Rank competitions have left behind.
The Champion of Champions Tour gave Counter-Strike a non-top division tournament where teams can compete in a professional environment, running over an extended period of time with a global reach. The first Central Europe Finals on February 16th and 19th in Malta will be a litmus test of the popularity of CS:GO at this level among bettors.
Valorant continues to make great strides as an esports and betting product. Riot Games-supported competitions are obviously leading the way, but we’ve also seen an increase in regional and locally supported tournaments over the last year. Bettors followed this with great enthusiasm: total betting volume on B, C and D competitions tripled from 2021 to 2022, while margins remained at almost 10%.
The restructuring of the Valorant Champions Tour and the introduction of the Partner Program will also lead to a more consistent calendar of high-profile competition and hopefully the longevity of League of Legends.
Regulation and diversification
Everyone is watching the US market closely, and for good reason. Since PASPA and the gradual legalization from state to state, sports betting has been a dam break for many operators who were first to the market.
The same cannot be said for esports, mainly because it is inconsistently regulated by law and has different parameters that can help or hinder the industry’s performance. Specific legislation for e-sports with an understanding of the structure of the competition and calendar will be rewarded, rather than lumping e-sports in with general sports regulation.
Rather than a dam breaking, esports will likely look more like a steady stream that, under the right regulatory conditions, gains momentum over time.
In addition, we expect to see a diversification in the way data is provided and accessed, be it the way data is collected and distributed, the provision of this data to operators, to the way it is communicated to the bettor the product is presented.
Operators will refrain from making eSports a bargain price. Tier 1 operators are looking for specialist esports operators with products tailored to audience needs, rather than a generic trading tool as part of the sports betting long tail.
The esports audience is still growing
Given the market correction, the actual viewership for esports itself is still growing, suggesting that the subscriber base shows no signs of slowing down. For 2023, equal partnerships based on robust products, research and development will ensure sustainable growth.
Ultimately, we want operators to grow their business. This is why PandaScore works with our partners on a revenue share basis. Instead of profiting from the value of the asset now, we look to grow the industry in the long term. Our success is the success of our customers and the success of the e-sports betting industry.
