Wetterhahn and Edwards | Will coronavirus bring esports and gambling into closer collaboration?

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Fladgate partner, Alan Wetterhahn, and associate, Thomas Edwards, lay out the case for how gaming and gambling can combine safely to create new revenue streams.

Wetterhahn and Edwards | Will coronavirus bring esports and gambling into closer collaboration?

Although the Covid-19 outbreak has been devastating for many businesses, certain industries such as the gaming and esports sectors may not be as badly affected as others.

Social distancing means that, whilst many businesses are suffering from a lack of people visiting their bricks and mortar outlets, the gaming and esports industries are seeing record numbers of visitors to their online offerings as people increasingly turn to entertainment from their homes.

Whilst gaming companies will undoubtedly suffer from a lack of footfall through their land-based casinos, and with esports suffering from the cancellation of arena-based tournaments and the closure of team outlets, both industries can counter the effects of these losses with their strong online offerings.

The online gaming industry is heavily reliant on sports betting. However, with the postponement of most of the major UK, European and US sports, the market for such betting has dramatically decreased. However, far from deterring customers from using the online betting services, the industry trends have been leaning towards people either betting on the sports that are still available, or sports punters turning to new areas of online gambling such as online casinos.

This presents an opportunity for the esports industry. For various reasons, the esports industry and the online betting industry have, to date, been reluctant to fully engage with each other. At least in part, this is because the demographics of the online gambling community and those in esports are often very different and the markets have been able to successfully exist separately from one another. However, because of the effects of coronavirus, this may be about to change.

The esports industry has reacted fantastically well to the drastic changes brought about by coronavirus. Many esports industry events have moved to take place wholly online, and with the sophistication of the technology (and users of that technology) involved, the transition has been rapid and fairly seamless. What is more, where the more traditional sports events have been forced to cancel or postpone, esports producers have spotted an opportunity in the market.

There is perhaps no better example of this than Veloce esports’ ‘Not the Australian Grand Prix’ event, which occurred after the cancellation of the Formula One season-opener in Melbourne. Veloce managed to entice McLaren driver Lando Norris to take part (along with a host of other celebrity esports players) and the event led to Norris breaking the Formula One record for concurrent viewers on Twitch, clearing 70,000.

This comes amidst a time of record gaming figures on some of the leading esports titles – CS:GO recently broke the one million concurrent players mark. This has obviously led to opportunities for esports brands to expand their digital content which will likely lead in turn to increased income through online advertising.

Now gambling presents another possible revenue stream for these brands. Although it remains to be seen whether the increased online presence of esports fans will result in sales of merchandise that make up for or even exceed merchandise sales that traditionally take place at esports arenas, with record numbers flooding to esports and plenty of online gamblers looking for new avenues in which to place their bets, it may be that the two sectors are on a collision course in the near future.

Online betting in the esports forum obviously needs to be well regulated. Apart from needing to comply with all applicable legislation – including for starters the Gambling Act in the UK – players and punters alike will demand certain standards of independence and integrity from any esports game wishing to cash in on the betting industry.

Examples of how this has been done in the past include prohibiting betting on esports when the players are in remote locations, having regulated referees in attendance, and having specialist software in place to flag up any suspicious gambling patterns. Coronavirus poses new challenges for industry regulation as players and fans are forced to self-isolate with lockdowns meaning in-person play is almost impossible. However, these are challenges that these sectors can overcome, especially with their use of innovative technology, and could open up very lucrative new revenue streams.

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