North America’s first two specialist esports betting platforms launched last week in New Jersey and Ontario, but the structure of the U.S. market and an intense marketing environment means neither operator is expecting to quickly expand across the dozen-plus states that expressly permit esports wagering.
As the province of Ontario launched its online gaming and sports-betting market on April 4, a dozen familiar online gambling brands from Europe and the U.S. were joined by Toronto-based start-up Rivalry, whose esports-centric sportsbook is geared towards a particular type of gamer.
Steven Salz, co-founder and CEO of Rivalry, said the company has had no issues since launch and customers are finding registration pretty fluid.
With European and U.S. heavyweights doing battle for market share with Canadian media companies, Salz admitted that Rivalry was never going to compete within the first week with the bonuses being offered by the likes of FanDuel or PointsBet.
“We would kill ourselves if we tried to compete with them on bonuses and promotions,” Salz told VIXIO GamblingCompliance in an interview on Monday (April 11).
“We care very little on bonuses because we don’t philosophically align with excessive bonuses as a way to acquire customers,” said Salz, adding that they tend to “create negative behaviour loops that forces the customer into doing things they normally wouldn’t do to gain the bonus.”
Rivalry does offer specific esports bonuses but shies away from the $1,000 or $2,000 free bets that have become popular among mobile sportsbook operators in North America.
“We don’t think it works,” Salz said. “We do have specific esports ones. The most [money] bet on an esport is League of Legends and there is something called a Pentakill, which is basically when one player kills all the players on the team, which is five. It is fairly rare, but we do offer that promotion.”
Salz said the growth potential for esports betting in Ontario is the same as the global opportunity.
“You have a generation that grew up on the internet,” he said. “People under 30 are 40 percent of the world’s population. It’s significant. They have a higher propensity to watch esports in most countries now than they do than the most popular sports. In some cases, they watch both.”
“We just think it is generational,” he added.
U.S. Market First In New Jersey
Rivalry’s debut in Ontario came one day before the full launch of Esports Entertainment Group’s VIE.gg esports betting platform in New Jersey, following a successful soft-launch period overseen by the state’s Division of Gaming Enforcement.
Bettors in New Jersey can go to VIE.gg to place wagers on professional esports events for games such as Call of Duty, Overwatch, Counter Strike: Global Offensive, Dota 2, or League of Legends.
Grant Johnson, CEO and chairman of Esports Entertainment Group, agreed with Salz on the potential for esports, saying esports fans number about 600m globally but the number of people who play Xbox, PlayStation, or other video games is estimated to be as high as 3bn to 3.5bn.
Although China and Europe are larger today, “the U.S. in terms of growth is massive plus the disposable income is higher than other markets on average,” Johnson told VIXIO in an interview. “The U.S. is relatively untapped. By growth potential, it is far and away the biggest.”
According to VIXIO GamblingCompliance research, esports betting is currently expressly permitted by law or regulation in Arizona, Colorado, Connecticut, Louisiana, Maryland, Nebraska, Nevada, New Jersey, Ohio, Tennessee, Virginia, Washington, West Virginia and Wyoming.
Lawmakers in Iowa and Pennsylvania are considering legislation to facilitate esports betting, which is expressly banned by statute only in Indiana.
Johnson testified twice in Ohio and said he was confident Esports Entertainment Group was instrumental in getting esports into the state’s regulatory framework. He also testified last month before the Esports Technical Advisory Committee that is tasked with recommending regulations of esports competitions in Nevada.
Still, in terms of future U.S. expansion, Johnson said given the economic realities of dealing on a state-by-state basis, those states that have a “skins” regulatory structure requiring a partnership with a local land-based casino are economically prohibitive to 99 percent of esports operators.
“We did it in New Jersey to make a statement,” Johnson said. “We play with the big boys; it’s a credibility play. It was expensive and that’s why there is not other esports companies that have applied.”
Johnson admitted that going forward the more intriguing jurisdictions for Esports Entertainment Group are those where a brick-and-mortar operator is looking to do something in esports that it does not currently offer as a product.
“We have our software, our tech stack, that gives us the opportunities to partner with these operators or sports teams,” he said. “We are prioritizing revenue-share opportunities and deals with casinos, both commercial and tribal, as part of the initial rollout of our product.”
As for Rivalry, Salz said the U.S. is not top of the company’s list when it comes to expansion plans, although Rivalry has been having conversations about licensing its product and brand in the U.S.
“If you have a Venn diagram of addressable sports bettors in almost any market, the demo we hit does not really overlap with the one that is being targeted and approached by specific sportsbooks,” Salz said. “So any operator that is in multiple states would find a lot of success working with us to target a demographic … they definitely don’t have.”
Salz said Rivalry is specifically looking at international expansion, citing the cost of entering U.S. markets such as New Jersey, which he estimated at north of $10m factoring in direct licensing costs as well as market-access fees.
As well as Ontario, Rivalry is licensed in Northern Territory in Australia as well as the Isle of Man and is looking for licensure in specific Scandinavian counties, according to Salz.
“To our knowledge, the fee cost of all of our licenses plus potential markets in Europe in aggregate would be less than New Jersey alone,” he said.
Where Next in Canada?
Regulators in Ontario last year included both esports and fantasy sports in its standards for online sports betting and internet gaming, meaning wagering on those contests may be offered provided operators can be assured that the events in question meet the same integrity criteria that would apply to traditional sports.
In terms of future expansion in its home country, Salz said there are “lots of rumors” of other provinces considering how to reform their own online gambling markets.
“I wouldn’t be surprised if in the next 12 months you saw another province come forward like British Columbia or Alberta,” Salz said.
“It may not be the exact same model, but people want to see what happens in Ontario and how it plays out.”