Esports is a $1 billion market at the moment, but conventional sports are worth $388 billion

Is Sony’s Esports Betting Patent A Game-Changer, Or Much Ado About Nothing?

The internet is abuzz this week since it became public that Sony has filed a patent for esports betting technology. The patent is broad in scope, but could for instance allow players to place real money bets, either on themselves or other players, while playing or watching a round of Call of Duty on their PlayStation. It even contains provisions for betting with cryptocurrency or in-game items.

It’s unlikely that anyone will be doing that very soon, however. For one thing, the patent hasn’t actually been approved yet; it’s merely on the docket. Sony filed the patent way back in 2019. It came to light now because patent applications are kept private until either they’ve been approved, or 18 months have elapsed. In this case, it’s the latter that happened.

Even if it receives approval soon, the patent is more likely speculative in nature than something Sony intends to put to immediate practical use. Esports is a major phenomenon, but monetizing the craze has proven tricky. Betting on esports is available in a few forms, including in the US, but has yet to take off.

Sony’s North American press contact did not respond to a request for comment.

Online Poker Report spoke instead with Reset Vegas owner Christopher LaPorte about Sony’s patent application, and esports betting in general.

From 2011 to 2014, LaPorte operated a video game-themed Las Vegas bar called Insert Coins. Although it closed down, the extent of the informal wagering on video games he witnessed at the bar was what led him to start Reset Vegas. This new business is a boutique consulting agency with video gaming, esports and nightlife as its focus. LaPorte is also a member of the Nevada Esports Alliance.

Esports has potential, but is also overhyped

In a nutshell, LaPorte’s stance is that esports at the moment is a victim of its own hype. He sees it as an industry with the potential to grow. At the same time, he sees a lot of risk to newcomers who buy into the idea that esports is a giant industry.

The reality is that it both is and isn’t, depending on what you mean by the term. Video games are huge, but people can’t even agree on what does or doesn’t constitute an esport. Moreover, the fact that the games themselves are huge doesn’t automatically imply that the crowd treating them as sports is equally huge.

LaPorte says:

Esports has done a very good job of letting people know how big they are, but that’s from a global perspective. You see it in Asia, in Eastern Europe. South America has been generating a lot of talk because of the CS:GO community in Brazil. That’s all fine and dandy, but if Call of Duty has 100 million players monthly, and there’s only 330,000 who watch their big event, that’s peanuts.

Learn to walk before you try to run

LaPorte’s solution is that monetization efforts for esports have to start small and build up. Treating it as if it’s already a big thing and trying to monetize the whole industry at once is a recipe for failure. Investors get excited by the companies that try it, but they never pan out.

How well has esports done for big venture capital investors trying to ‘go big or go home’? Luckbox is an esports betting company. I think they raised $20 million. They made $75,000 revenue. I mean, come on.

Another one just came out, Esports Entertainment Group. They’re not making money from esports, they’re making money from their social casino.

If the global sports market is worth $388 billion, and esports is one billion… what inning are we in? We have a lot of work to do before we can make a perceptible impact on mainstream audiences.

He points to some European companies that are doing things right, in his opinion. The bookmaker Rivalry (unavailable in the US) is at the top of his list. Even so, he thinks that video game companies like Sony may have a better shot in the long run than those coming by way of the sports betting space, precisely because of the viewership issue.

Viewership has to come before betting

As LaPorte pointed out, there can be an orders-of-magnitude difference between the number of people playing a game, and the number watching it. That’s compounded by the fact that only a minority of those viewers also bet on the events. At the moment, he says, there’s just no comparison between esports and traditional sports on those fronts.

Especially from the North American perspective, esports is something we haven’t quite figured out. When I go to a bar in Las Vegas, and I hear people talking about their favorite sports teams, they’re not saying Team Liquid, they’re not saying FaZe Clan, as much as the esports world like to believe.

That’s what everyone in esports is trying to figure out: How do we make it relevant to North American audiences?

Not all esports are equal

The trouble with starting from the sports side is that not all esports are very sportslike. Traditional sports betting companies might have some success persuading their users to check out digital adaptations of real-world sports. Other genres, like fighting games, real-time strategy, arena battlers and card games would be a much bigger lift.

For evidence of this, LaPorte says you have to look no further than the events of the past year:

During COVID, sports bettors went to ping pong, and all these other minor sports in other countries. And when it was esports betting, it was on sports they understood. It was on FIFA, for instance. Even e-NASCAR saw a huge rise.

This is why you saw fantasy companies like DraftKings jump in on that space. Your traditional sports bettor understands their sports. They’re not going to understand League of Legends.

It’s on that front that companies coming at it from the other direction could have more success.

If Sony gets into this, why can’t we see, say, a Madden Casino Edition or Street Fighter Casino Edition? You have every other edition when these things come out.

We can develop games that are 21 and up, that you can bet on. You can do it on your computer, why not your PlayStation? It’s speaking the language of gamers, and other people have a hard time having that conversation.

The three pillars: familiarity, trust and immediacy

Another aspect of the problem, according to LaPorte, is that sports betting is an old business, stuck in old ways of thinking. It may be new in the US, Nevada notwithstanding, but the business uses the same model as in Europe, where it’s been going on for decades.

To succeed, esports betting needs to look forward, to what younger generations want:

We need new ideas. If you look at how many more people are playing videogames in this Gen Z market than my Gen X… I was the nerd for playing video games. These guys are superstars. When they turn 21, they’re going to want something that’s more akin to what they like. That’s why you see these craps tables in the casinos these days that look like video games.

He also said that transparency is a generational value for Gen Z, and that young people have been accustomed to expect instant gratification. Along with the aforementioned issues with viewership, most of the challenges LaPorte describes could thus be placed in one of three broad categories: familiarity, trust and immediacy.

Familiarity

Familiarity is perhaps the biggest problem at this time, and the one LaPorte focuses on to the greatest extent in his own work.

When he says to start small, he means really small. Even if it’s Sony or an equivalently large company doing it, there’s no sense trying to run before you can walk. For esports betting to get traction, he says, it needs to present itself in a very limited fashion, in a familiar context.

I really preach normalization. That’s why we call ourselves Reset. What if we put PlayStations in a casino where you can really monitor what’s going on. Now this is a place where people can bet on esports, legally, with this trusted partner.

Or if you look at Twitch, they have a platform called Predictions, which pops up these yes-or-no questions. It gets a lot of action. So, gamers like to gamble. If I turn on my PlayStation some given day it and says, ‘Hey, this game is coming up, do you want to watch? Do you want to bet?’ I’m going to say, ‘Hey, thanks so much, click, let’s watch that.’

He stresses that you have to bring the product to the consumer these days. Waiting for them to come to you isn’t going to work.

Esports isn’t going to be discovered by what it shows on YouTube on any given day. Did you know there was a Call of Duty tournament last weekend? I bet you didn’t.

Trust

Naturally, bettors want to feel assured that everything is above board. They want to trust the bookmaker, of course, but LaPorte sees an even more fundamental problem with the games themselves.

There’s a lot of hurdles we have before we can break out and win this race. We need to do things to fix match fixing, visas, poaching, tampering… There’s no player protections! Every professional sport has a player’s union. And we’re talking about betting already?

There’s regulatory work that has to be done. We’re working right now with Senator Ben Kieckhefer to make an esports regulatory body, no different from what the UFC and boxing have. Let’s put some rules in.

Once the games themselves are on par with traditional sports in terms of integrity, then who do we trust to take bets? That’s a more complex question, says LaPorte.

There’s a case to be made that betting should only be conducted by fully independent entities, to avoid corruption. On the other hand, a company with skin in the game might have more incentive and ability to ensure the integrity of betting.

When it comes to esports, LaPorte sees more value in the latter argument, especially if the company is large enough that betting is secondary to its business, not the primary revenue stream.

We are seeing betting just explode in North America. It’s everywhere. And everyone has a gaming platform in their pocket, that is, their phone. I would much rather have a trusted company involved, like Sony, which understands the value of regulatory bodies. They understand that they have to protect their end user as much as their shareholders.

He points to recent scandals with skin betting, and says that the industry has learned that there’s a high reputational cost when it looks the other way.

Immediacy

Familiarity and trust are precursors to get esports betting off the ground in the first place, according to LaPorte. Within that space, however, he thinks that the products that come to the fore will be those that leverage immediacy.

Just betting on the outcome of a match, he sees as being mostly a thing of the past, due to declining attention spans. Even when it comes to traditional sports, he believes, like many in the industry, that in-play betting will increasingly become the norm.

That’s good news for Sony, as its patent includes provisions for just such a concept. The example it gives is a player preparing to throw a grenade which could wind up killing one, two or three opponents. The proposed technology would examine the situation and the player’s historical record, and provide live odds for spectators to bet on the number of kills in the moments before the player throws the grenade.

The future

There are a lot of things that have to go right for esports betting to become a big thing. As positive as LaPorte is about Sony getting involved, he doesn’t think anything concrete will come of it in the short term.

Asked about where he sees esports betting five years from now, he says:  “Same place we are now. I think this is a ten-year journey.”

That’s perhaps not a bad guess, looking at other novel products. Online poker sites first appeared in the late 1990s, started to take off in a big way in 2003 and were already peaking before the events of Black Friday in 2011. Live dealer casino products first appeared in 2007, and have really come to the fore in recent years.

So, how big could esports betting be in 10 to 20 years? That’s anyone’s guess. Asked for his, LaPorte says that he’d bet on esports collectively being a second-tier market. He wouldn’t expect it to be quite on par with NFL or NBA betting in the US, but perhaps something like MLB or NHL.

Even that would be a goal well worth pursuing. Looking at New Jersey’s regulated market, baseball usually makes up at least 5% of sports betting revenue when it’s running, and in the 10% to 15% range during the postseason. The industry could function without it, but it’s a big enough revenue stream no operator would simply choose not to bother.

Thus, even if Sony’s patent is purely speculative at the moment, we should expect to see more companies follow suit. The road is long, and it may or may not lead anywhere, but no one wants to risk being left behind.

- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for OnlinePokerReport, he has been writing about poker and the online gambling industry in various capacities since 2014.
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