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Esports Explosion

How the casino industry can tap into the esports phenomenon today

Esports Explosion

What do Arthur Ashe, Evander Holyfield, Randy Couture and Richard Tyler Bevins (aka “Ninja”) all have in common? They are all athletes that casinos partnered with to drive traffic to their properties.

Las Vegas and sports have gone hand-in-hand for decades. This relationship has evolved from dating (sponsoring one-off boxing or UFC matches) to marriage (sponsoring full seasons of NHL and NFL).

When thinking about how to monetize esports, it is best to first think about esports as another sport. Then we can see a clear path forward: tested, trusted and proven. With a loyal, rabid and large fan base, esports has complemented, and in many instances, replaced traditional sports fandom. Esports fans spend time, money and wagers on their favorite teams and players, just like traditional sports fans.

Of course, esports has advantages over its “stick-and-ball” brethren. First, the fan is also the player. This gives the casino an opportunity to create a truly interactive experience: an esports fan makes a trip to a property to watch an esports tournament, bet on a match, participate in an amateur tournament, go to the nightclub to meet the pros, then play the esports-themed skill-based slot machine on the casino floor.

Far-fetched? Not at all. Is any casino executing this vision on a regular basis? Definitely not. Esports is intriguing to casinos due to its large, young fan base. But, two issues have stopped efforts from showing results. First, executing an esports strategy takes a multi-year commitment of time and resources. Second, casinos must change their understanding of how to monetize the esports fan, a younger demographic whose revenue channels are different—and potentially more lucrative—than traditional casino guests.

Getting Authentic

Many casino operators (and this is controversial) believe the generation of video gamers will eventually evolve into slot customers enjoying pure games of chance just like their parents and grandparents. There is a chance that some do… but, as an industry, do we want to miss the mark like our counterparts did in retail and media?

While movie theaters and shopping malls have fallen victim to Covid-19, it is safe to say they were dying well before the pandemic. Will traditional brick-and-mortar casinos follow the same path? YouTube, Twitch and Netflix have dominated much older and established media companies in viewership and valuation because of their understanding of this up-and-coming generation. Why will the casino industry be any different?

A major accelerator of change is the digital marketplace. Esports was born and lives online. So esports fans are uniquely positioned to digital products and services. Casinos must redouble their focus on their digital efforts to reach the esports demographic. Casinos can leverage their current digital expansions due to Covid-19, legalized online sports betting and mobile iGaming, using these efforts to expand into esports.

The idea is simple: Go to where your target market is already gathering and bring them to your core products. We are seeing this play out in the traditional sports industry, with Penn National Gaming acquiring an online sports property, Barstool Sports, to build its online and brick-and-mortar sportsbook. Other partnerships that are unlocking the sports fan are Bally/Sinclair Broadcasting and MGM/Yahoo!. These are three major examples from 2020 of casino operators making a multi-year commitments to bring sports fans into their marketplace.

Recently retired esports League of Legends superstar Yiliang “Doublelift” Peng

If we apply this same strategy for esports, we will see success. It’s the operator who strikes a deal with Twitch that will have the greatest advantage. Today there are no fewer than a dozen international sports betting operators who take wagers on esports matches and tournaments, and many that now take wagers on Twitch streamers. If this isn’t evidence enough that there is a rapidly growing audience of esports bettors, then the fact that the Twitch platform itself recently (November 2020) launched a feature that looks and smells a lot like gambling should certainly get your attention.

The “Predictions” feature on Twitch enables viewers to bet on various outcomes during a stream using their channel points. While this isn’t full-on real-money wagering, it certainly is a step in that direction by Twitch and its parent Amazon. Further, if securing a leading position as the esports betting platform by partnering with Twitch isn’t compelling enough, then the fact Twitch is now streaming NFL Thursday Night Football should make investing in this type of partnership a real win for any sportsbook operator.

While there are a dozen operators taking esports wagers in Europe, we can count the number of events where U.S. sportsbook operators took wagers on both hands. Is this because the market doesn’t exist in the U.S. or because sportsbook operators haven’t yet figured out how to market to this audience?

Making the Commitment

The casino operator who is willing to commit time, energy and resources to building an online esports audience will benefit by having a large database of young adults who they can encourage to wager online and ultimately drive to their properties.

For nearly two years (2016-2018), the Downtown Grand held a series of esports events. These included cash tournaments, viewing parties around tent pole events such as LCS (League of Legends) Finals and Intel Extreme Masters, to “meet-and-greets” with professional esports teams including Team Liquid. While each activation had varying levels of financial success, the learnings and experience were invaluable.

For example, food-and-beverage spend was tracked in the point-of-sale system and analyzed by game type or genre. The data was undisputable that sports games (Madden and FIFA) and fighting games (Mortal Kombat and Tekken) attracted a gamer that spent more money on alcohol and food than MOBA (multi-player online battle arena) games such as League of Legends or Dota 2.

There was also success in “old-school” games from the 1990s such as Nintendo 64 Mario Kart and GoldenEye, which attracted gamers in their late 30s and early 40s. Using casino marketing tactics such as midnight raffles and having loser brackets during tournaments kept the gamers on property longer and spending more money while also maintaining a fun and active atmosphere.

Other larger Strip resorts have held various esports events over the years such as the EVO Finals at Mandalay Bay or Call of Duty World League at Hard Rock in late 2018. Based on who you ask, these events did not yield revenues that met property expectations, but instead of disqualifying these events as not having value altogether, we may want to question whether current operators had strategies in place to optimally monetize this audience.

In April 2016, Mandalay Bay hosted a League of Legends tournament and sold over 10,000 tickets. While much credit is owed to the event sales team that got Riot (publisher of League of Legends) to bring this important tournament to Las Vegas, the property was not activated to take advantage of the event. There were no meet-and-greets, parties or tournaments that interested the gamer.

On the contrary, Downtown Grand partnered with Team Liquid (arguably the most popular team playing in the tournament) to come to its rooftop pool deck to meet fans. Over 1,500 fans showed up and waited in line for hours to meet their favorite athletes. The pool generated excellent F&B sales and the event was an overwhelming success. If this same event was held at the property where the tournament took place, surely the attendance and revenue numbers would have been exponentially greater.

It has been hard for many to justify the long-term time and expense required to build and nurture this new segment. During a global crisis when we are simply trying to keep the doors open, focusing on a nascent business segment does seem hard to justify. But I would argue it is exactly this crisis that we are all facing in the casino industry that should encourage those with a long-term view of our industry to allocate some time, thought, energy and a bit of capital to esports.

If the behemoths in our industry don’t develop an esports strategy, an outsider will. We recently saw what happened when casino industry leaders did not have a strong mobile sports wagering strategy. The “newcomers” from the daily fantasy sports space garnished market share in a way that most would not have expected. And now the biggest operators in the gaming space are playing catch-up.

City Strategy

Figuring out the secret sauce in catering to this

demographic should not rest on the shoulders of one operator, but initially should be a collaborative industry effort, and may have to be done on a regional or city level. There are a few cities today that are establishing themselves as esports meccas.

The Atlanta Esports Alliance is a private division of the Atlanta Sports Council, and is comprised of business and community leaders in the esports ecosystem. Atlanta is home to major esports events including Dreamhack, which attracts nearly 40,000 gaming enthusiasts to Atlanta annually.

Atlanta has professional esports teams such as the Atlanta Reign, the Atlanta Hawks and Atlanta United. Both have created esports teams around NBA 2K and FIFA. To further sweeten the pot, the state of Georgia offers tax incentives for game developers and esports businesses. Georgia doesn’t have sports betting (yet), so we won’t see any in-venue wagers happening. But that is likely just a matter of time.

Is there a city better equipped to pull off a similar strategy than Las Vegas? For the record, the Nevada Esports Alliance (NVEA) pre-dated the Atlanta Esports Alliance, and while the founders (of which I am an one) get some credit for having an early vision, I cannot say we have had the same success as Atlanta. But it is not too late.

As Las Vegas is finding itself in a place where we need to come up with new ways of attracting visitors, esports tournaments and events can be one of them. The Nevada Esports Alliance members include the Las Vegas Convention Visitors Authority (LVCVA), and plans are now in the works to recruit major tournaments and professional leagues and teams to Las Vegas in 2021.

Working with the LVCVA to incentivize established conventions such as Activision Blizzard’s BlizzCon or Amazon Twitch’s TwitchCon to come to Vegas is no different than some of our industry’s veteran leaders bringing the National Finals Rodeo to Vegas back in 1984—which for the past 30 years has been a huge boost to our city during early December, which is a terribly slow time of year.

Replace the image of casino legend Benny Binion riding his horse to kick off the rodeo with Matt Maddox playing esports superstar Ninja in a friendly game of Fortnite, and we are talking front-page national news.

Over the past five years, I had the opportunity of catering to this esports demographic. Not all our endeavors were tremendous financial successes, but we learned a lot. And we know there is much more to learn. Marketing to a generation that lives and plays online is simply different than other generations. The casino industry is not alone in trying to figure out this demographic. Brands from Mastercard to Audi all have esports partnerships.

In 2019, Honda became the exclusive automotive sponsor for Team Liquid (that team we brought to the Downtown Grand four years ago). If Honda finds value in selling this demographic cars, then there must be value to our resorts. And if Honda’s marketing choices aren’t convincing enough, let’s look at some numbers. In 2019, the League of Legends Championship Series was the third most popular major professional sports league in the U.S. among 18- to 34-year-olds (behind only NBA and NFL). Brands that have become sponsors of esports are not limited to Honda, but are now including ultra high-end luxury brands as well.

Recently, Louis Vuitton announced a strategic partnership with Riot Games during their Worlds tournament in Paris. And while this may seem like a mismatched partnership, it was reported that Louis Vuitton saw tremendous social post engagement when the championship trophy was carried out in a Louis Vuitton case. Visualize that for a moment. One of the world’s most valuable luxury brands sees value in esports.

Just a few years ago, the idea of video game tournaments brought images of nerdy kids in their parents’ basements to the minds of most people over the age of 40. Today, most admit (even if they don’t understand it) that esports is a force to be reckoned with.

While many have yet to unlock the financial value from this growing market segment, I am confident that if there is an industry that has the chops to figure it out, it’s the gambling industry. Mark my words, we are in the first inning. And no… There are no innings in esports.

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Seth Schorr is a hospitality and gaming expert with over 20 years of experience, specializing in building strategic alliances with organization leaders to align and drive key business strategies. He is currently the CEO of Fifth Street Gaming, owning and operating five casinos and multiple food and beverage concepts. He also serves as the chairman of Downtown Grand Hotel & Casino.