Esports Entertainment Group (EEG), the global conglomerate listed on the US’ NASDAQ stock exchange, is inviting investors to put their money on its ambitions to be the world’s most engaging and trustworthy esports betting operation.
EEG raised US$15.2m from its IPO in April under the appropriately named stock symbol GMBL. This gave it a capitalisation value of almost US$50m, according to analysts at Singular Research. It has since embarked on a series of mergers and acquisitions designed to make the company the most driven, but also safest, betting enterprise focused on organised competitive video gaming; the most entertaining esports-content provider for gamers; and a significant contributor to the still nascent esports sector.
“We listed on NASDAQ to set us apart from our competitors and institutional investors only invest in listed companies,” explains Magnus Leppäniemi, EEG’s Executive Vice President, Esports.
“Our competitors are doing what you find on the more traditional sports betting sites. What we are building is something that is more like a destination site where you actually go to spend more time you enjoy,” added Leppäniemi, an experienced esports executive who joined EEG in June.
What is esports betting?
You can bet on esports for real money in the same way that people bet on the outcome of a horse race, football match or basketball tournament. Esports betting is similar. You can bet on the overall winning team in a tournament, based on the odds published at the start.
Bets can be placed on the outright winning player in the different rounds during the tournament, or on the players you think will progress to the tougher rounds, or even the teams you predict will be eliminated by a certain round. Stats-obsessed individuals might prefer live betting on the number of points or rounds a team or player will need to win a game, a qualifier or the whole tournament.
But while traditional sports bettors know the duration of a physical football match is 90 minutes long, an esports competition is unpredictable. It can last for hours in many cases. Consequently, traditional sports bettors who are not gamers (a myriad migrated to esports betting websites when the pandemic forced all physical sports tournaments to shut down) tend to prefer only sports-themed video games like EA’s soccer-themed FIFA franchise.
EEG wants both traditional sports bettors and gamers to wager on its VIE.gg site to fulfil its esports betting goals.
“Because the threshold for understanding video games like League of Legends is high, we need to educate the sports bettor on how gaming works,” Leppäniemi says. “If you are a gamer, on the other hand, you are not attracted to offers of 200 free spins and the best odds. Gamers have knowledge they want to display, which requires a different type of marketing and that is what we’re trying to do with VIE.gg.”
EEG also wants to explore gamers’ penchant for microtransactions as seen with esports viewers who donate cash to admired streamers on platforms like Twitch. “In the UK, for example, the traditional sports bettor spends around £60 a month. I don’t see an esports bettor at that level yet. We are fine with you betting one dollar here, one dollar there, the kind of microtransaction that you are familiar with as a gamer,” Leppäniemi adds.
Furthermore, EEG has to convince regulators that esports betting can be a trustworthy service aimed at today’s young Millennials and Gen Z globally. All the more reason to get it right now by offering betting in a transparent and safe environment with all the required regulatory licences, Leppäniemi argues: “As one of the companies that are NASDAQ-listed, we need to comply by the rules and that makes us reliable partners to work with.”
Esports and sports betting businesses
Various analysts predict the global esports betting market will be worth up to about US$17bn this year’s end. But in the current uncertain economic climate, EEG is working within the more conservative and realistic value of US$3.6bn because, like the esports sector itself, esports betting is still young and evolving.
It is much smaller than the juggernaut that is international traditional sports betting, which is estimated to have had a value of US$85bn last year by ResearchandMarkets.com. Another analysis firm Technavio predicts sports betting will grow by another US$134bn by 2024.
It is that colossal gap between esports and sports betting that EEG feels best placed to help fill with its licensed flagship esports betting platform VIE.gg.
The esports betting pillar
EEG’s overall strategy is supported by three pillars: esports betting, online gambling (also known as iGaming) and esports entertainment.
The company’s esports betting segment centres on VIE.gg, which has a potential US$180m in revenues should it successfully snatch 5% of the US$3.6bn esports-gambling market. It currently offers esports betting on the following video games: Counter-Strike: Global Offensive (CS:GO), League of Legends, Dota 2, Call of Duty, Overwatch, and PUBG, among others.
The targeted users will be among the 590 million global esports audience forecast for 2022, 42% of whom will be between the 25 and 34-year-olds sponsors crave. More than 30% of the total have annual salaries of US$90,000-plus.
The required legal licences are in place. Being Malta-registered has given EEG licences that cover 149 jurisdictions worldwide, including many EU markets. In July, it nabbed licences from the gambling commissions in the UK and Ireland after acquiring LHE Enterprises, the holding company of Argyll Entertainment, which owns authorised permits for online traditional sports gambling and casinos. The award-winning Argyll offers loyalty rewards that encourage its 100,000-plus registered paying subscribers to stay engaged.
And via a partnership with US-based Twin Rivers Worldwide Holding (now called Bally’s Corporation), EEG picked up its first authorised US gambling licence for the state of New Jersey. That deal made EEG the first iGaming company to list on NASDAQ and gave it an initial step into the tough US market, where wagering ventures need to apply state by state for the permits. As Twin Rivers also operates in Colorado, Delaware, Mississippi and Rhode Island, EEG has gateways to apply for licences in those states too. The technologies and expertise that come with these deals will be used to enhance the betting experience on VIE.gg.
“We want to have the tech in-house so that we can control its developments. It is increasingly important to have good tech stacks for when you go into different markets,” Leppäniemi says.
The platform’s infrastructure will equally be boosted by the technology that came with the August acquisition of assets belonging to FLIP Sports, a mobile-games studio offering interactive multi-screen services for fans to watch sports, and interact with each other while playing fantasy-sports games; it also enables micro-betting and in-game betting. EEG is confident of using its acquisitions to generate revenue from competitive gamers, esports fans, traditional sports fans and betting enthusiasts who love to gamble responsibly.
The traditional sports/iGaming pillar
As it gradually builds its worldwide esports betting empire, the company plans to generate immediate steady income via the long-established and more mature traditional sports gaming industry. This will be achieved by its ownership of Argyll Entertainment and FLIP Sports’ resources.
Also, the company will benefit as more territories worldwide, especially in the US, legalise sports gambling online and offline.
The esports entertainment pillar
The third pillar that will glue together the other two (esports betting and iGaming) is original esports entertainment and content. EEG will have this by sponsoring tournaments by big-name professional esports organisations and teams that accept betting.
It plans to access more eyeballs via a multi-year partnership sealed in June with top US esports organisation Dignitas. The agreement gives Dignitas fans a secure environment in which to bet on esports tournaments featuring Dignitas teams. VIE.gg’s betting offering has in-built formats that discourage fans from overspending and enable Dignitas fans to always win something.
To prove further that strategy works, VIE.gg sponsored the two-week CS:GO Legend Series tournament produced by esports organisation Allied Esports, an affiliate partner, in September. Broadcast on Twitch and on the Chinese platform Huya, the event enabled viewers to bet on outcomes in real time. VIE.gg saw the number of registered users grow 400%-plus during the two weeks compared to the previous month.
There are plans to sponsor monthly Allied Esports tournaments starting in January. As Leppäniemi observes:
“People always want to bet on different things, on football games, the English premiership, the IEM Katowice and the ESL Masters tournaments…” He continues: “The difference with us is we want to provide something that is more tailored to the video-gaming audience, something that has not been done before.”
This explains why EEG agreed to buy Esports Gaming League (EGL), a UK-based venture that sets up and manages online and offline esports tournaments for third parties, in August. It will give EEG additional revenue from competition sponsorship, advertising, streaming broadcast rights, ticketing and merchandise. High-profile international endemic and non-endemic sponsors of EGL events have included fast-food brand KFC, energy-drink maker Red Bull and video-games publisher Activision.
Moreover, via EGL, EEG will collaborate with traditional sports organisations seeking to access the young digital-first consumers that esports is a master at reaching. In October, it announced a major breakthrough to provide esports tournaments for NHL team LA Kings and Major Soccer League club LA Galaxy, which belong to AEG, the US-based sports-and-live-entertainment behemoth. And we can expect more in the future.
“You will see a lot of partnerships with traditional sports teams that want activations in esports because they see that is something that engages people in the age group they are looking for, the golden 18-to-35,” Leppäniemi states.
“With the deals, we create fan engagement for them that can be monetised. The sports teams will market the tournaments to their fans through players they have in esports teams.”
Fans can bet to win signed jerseys, season tickets, and experiences like being invited to hang out in the player’s lounge after a game and play video games with their favourite athletes. “For EEG, this acts as a customer acquisition tool for the different products that we have.”
Giving back to the esports community
Leppäniemi says it is imperative that EEG’s investment in digital gambling supports the growth of professional and other organised competitive-gaming activities.
It hopes to win the trust of video-game publishers, whose intellectual properties form the core of most high-end esports tournaments, via revenue-sharing schemes.
“We would share that Net Gaming Revenue with publishers. And the publishers would share it with the leagues and teams. This would build a strong esports ecosystem. We want to work closer with them and that is also why we listed on NASDAQ,” he offers.
“We have regulators like the SEC and the gaming commissions in New Jersey, in Malta, UK, Ireland, all checking on us. We want to comply with all the rules so that we can talk to the publishers.”