Problems Aside, Skin Gambling Market Provides A Playbook For Mainstream eSports Betting

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Skin Betting

As the overall emergence of electronic sports (eSports) continues with bigger events, more leagues, and more TV broadcasts, individual segments are beginning to define themselves.

One such segment is the Counter-Strike: Global Offensive (CS:GO) video game title, which, in spite of rising popularity, has attracted as much attention for its underage gambling issues as anything else.

How did we get from video gaming to gambling issues? The trading of virtual weapons (skins), backed by real money, has fashioned a digital black market for betting.

While underage gambling is no laughing matter, the dynamics behind skins betting are indicative of the wider eSports betting opportunity.

Players first for eSports

While the number of casual fans, and viewers, is set to increase, eSports is built atop communities of video game players. That means the people who play games are much more likely to watch, support and bet on competitive matches.

Essentially, eSports are a participatory experiencewhere social communities of fans and viewers strongly overlap with segments of video game enthusiasts.

According to the 2016 report by PwC, “The burgeoning evolution of eSports,” 57% of hardcore gamers were aware of eSports. This same group of dedicated gamers is at the heart of eSports consumption, even if they aren’t the entire sum.

This paradigm differs from traditional sports, which are packaged primarily as a casual spectator experience around leagues and other federations.

Furthermore, the growth of CS:GO skins betting is a natural outcome, created by a new channel (digital items) that aligns with the core psychology of its game community, making it a feature, not a flaw.

A closer look at skins and in-game items

To better understand game-mediated betting, typified by markets like CSGO Lounge, it’s important to clarify the role of in-game items.

Valve, publisher of CS:GO, provides the decorated weapons (skins), yet their value is reinforced by:

These two elements are foundation for a form of betting that totaled an estimated $2.2 billion in 2015, according to “eSports Betting: It’s Real, and Bigger Than You Think” by Eilers Research.

It’s not just the money that matters

Basically, players are highly motivated to bet skins on the outcome of professional CS:GO matches as an alternate means of winning/achievement.

It is the challenge involved with acquiring the skins that reinforces actual monetary value. Gambling on matches is just another channel that satisfies the competitive urge to acquire these “trophies.”

So while the cash liquidity of skins is a prominent factor, making money is not the prime mover. Likewise, the unregulated nature of betting with a virtual currency does appeal to wider segments of participants, but it is a direct link to CS:GO ecosystem which accounts for sustained popularity.

Other forms of eSports betting must create equivalent positioning in order to scale similarly.

“I didn’t much care for the new skins, but I did enjoy collecting them…I’ve always been one to have a deep urge to complete something in its entirety.”

— The Dahn, “The Counter-Strike Player Who’s Giving Up A $7500 Gun Collection,” by Nathan Grayson

The reality? Successful eSports betting must resonate with game enthusiasts, who value the challenge of winning and achievement as much, if not more than, making money.

Not just another sport, not just another sports bet

Continued initial penetration of betting into the overall eSports demographic will remain directly related to user acquisition rates among hardcore enthusiasts.

This is affected, to a great degree, by the high level of requisite knowledge required to effectively wager on professional eSports matches; knowledge best gained by actually playing the game.

At the same time, having played a traditional sport is NOT a precursor for understanding, and betting on, the outcome of matches.

Access critical for acquisition

Since markets like CSGO Lounge form a cohesive bond with the related competitive scenes, eSportsbook betting must find ways to similarly integrate into various eSports communities. Otherwise, these betting products are at risk for failing to establish potential economies of scale.

For operators based outside the eSports world, user acquisition can pose a significant hurdle, not only as it relates to cost but also to process.

In the same way that consumer brands interested in reaching eSports demographics must adjust the tone, tenor and pitch of their marketing, betting operators must avoid assuming equivalence with approaches for traditional sports.

One notable difference between eSports and sports is the lifecycle of major games. Whereas sports like basketball and soccer are intractable cultural institutions across the world, the trajectory for currently popular video game titles played as eSports is an unknown.

As much as its name might imply, eSports should not be treated solely as yet another sports betting vertical. The challenge and opportunity lie in its differences.

Defining success for eSports betting

Navigating the unique nature of the competitive video game landscape involves understanding its overall texture; namely, the major hallmarks of its rise as a phenomenon.

Essentially, betting must align with content, culture and community of the eSports domain in order to find success. These three C’s are pillars in realizing the eSports opportunity, and are defined as follows:

Ed. note: Alex authors eSports IQ, an outstanding eSports industry newsletter. Sign up for eSports IQ here.