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We sat down next week with some of Europe’s brightest minds to discuss Esports and the potential it holds for the CEE region.
We interviewed Peter Rippel Szabo, Associate at Bird & Bird and Amir Mirazee, Managing Director and COO of Bayes Esports. Dimitris Panageas, Group General Counsel at Kaizen Gaming, was also present in one of our most insightful interviews.
This one is not to be missed. It covers everything: Ukraine, localised regulations, market demographics, state licensing, taking on traditional sportsbook spending, and more!
Let’s start by talking about the demand in Esports in CEE. How does it compare to other regions in terms of growth potential, such as Scandinavia or Western Europe?
AM:It is a unique environment. We can gauge it from a good position with over 100 clients worldwide and 200 in our extended network. Our major partners on the CEE side are GG.bet and DATA.BET, and we are seeing significant volume. Counter Strike is a great example of this – players love new titles.
We are facing one problem right now: the changing political dynamics. The equilibrium between Russia and Ukraine used to be great for Esports, and also served as an anchor for the satellite nations (Poland and Baltics, etc). However, this equilibrium has changed and needs to be restored. This is particularly true for Ukraine, the epicenter of Esports in the CEE region. Russia is now out of the market. Operations will need to be reestablished to ensure the development of the vertical. The Czech Republic is likely to be a key component.
PRS From my base in Hungary I can confirm that CEE-organised tournaments are extremely strong. Growth has been organic and even spontaneous. Although there isn’t much money in the prize pools of most tournaments, they are filled with passionate amateur players who are extremely plugged-in online. This applies to both the entertainment and the products. It is also worth noting that Esports has been embraced by more established clubs in Hungary, with strong foundations in various sports. Through the establishment of dedicated esports departments, and professional training. Esports has been studied by universities and non-profit organizations.
A clear regulatory environment is essential for growth (as it deals with esports). It should be clear whether it is a normal sport or a special one, and cover issues such as tournament organization, player safety, integrity, and safeguarding. This would help to alleviate certain aspects that are negatively perceived by the public, such as lack of exercise, abuse or addiction. Talking about Scandinavia and Western Europe, the only variable in comparison to CEE is consumer spending and the resulting market size. This will probably never be the case in the East.
DP Based on our vast experience at Kaizen, I believe the demand is there. This is not a new method of betting but a new type. There are many markets you can enjoy. It’s still in its early stages so it is not yet considered a ‘traditional’ vertical such as sportsbook, lottery or live casino.
When we look at demographics, they are clearly smaller than established verticals. We need to break down these sub-segments into micro segments to understand the whole picture. When you consider how rapidly the CEE market is evolving, particularly with Hungary (which used to be a state monopoly), it’s clear that Esports has the potential to explode in the next 5-10 year.
Regulating Esports is the biggest growth obstacle that must be overcome on a macro-level. To make Esports a viable vertical, it must be properly and precisely regulated both as a sport and as a betting option. It’s growing fast and is gaining popularity, but there are still many steps to go.
What is the main driver of Esports betting in CEE countries? Do you think CEE jurisdictions are more open to Esports betting from a regulatory standpoint?
AM:According to Peter’s first answer, I would definitely say that it’s a distinct generation in CEE. That’s why Esports has grown so rapidly here. The generation we see now is a result of online gaming and video gaming. It also provides them with an opportunity to connect to Europe and the rest. We can easily say that the “internet generation” in their 20s, 30s has been heavily influenced by this culture, including memes, Call of Duty, and all other forms of online gaming. Again, I agree with you on the regulation aspect – Esports must be regulated as a sports. Germany doesn’t recognize Esports as a sports, so it cannot be bet on. This must change.
PRS It’s a complicated question, but there is a lot of potential in CEE. While gambling, betting, and general games of chance share similar legal concepts in Europe, national regulatory frameworks may vary. CEE jurisdictions are therefore open to Esports betting. The key driver of Esports’ popularity is how popular they will become in the future. Esports betting will increase in demand if certain Esports titles are more popular. Esports should be explicitly recognized as a sport, and/or it should be regulated in a CEE country. This would help to increase the demand for Esports betting.
DP: Indeed. To drive demand, let’s take a look at a few of the major CEE countries. Let’s say that none of them have yet to regulate Esports. Peter mentioned that Hungary is part of this change and we are seeing the potential for it to be a favorable environment for development. My view is that the regulatory framework for CEE is still unclear. As long as it is primarily viewed as a betting marketplace rather than a sport discipline, it will remain as such.
To put it in a wider context, any law or regulation will take at least 6-12 months to become effective. After that, you’ll need to invest heavily in marketing and communications to push Esports into mainstream. However, it is clear that the CEE demographics have a lot of potential. It is unique because, while it is niche in a product or sport, it is not as popular as traditional niche sports like handball in Germany.
Instead, you have a product that is rapidly growing and can easily be integrated into the mainstream. It can transcend borders and can penetrate primarily via social media. This is where it is most popular. Esports can become a major vertical if it is properly promoted and invested in.
Esports can be viewed as a complement to traditional sportsbook spending.
PRS I believe that Esports can and do complement traditional sportsbook, particularly if traditional traditional sports like basketball or football are played via video games (FIFA and NBA2K) and in organized Esports competitions that traditional sports fans can easily understand and perceive.
Even though audiences may be very different, there will still be crossovers in interest. The state-owned lottery and betting operator Szerencsejatek Zrt. is an example. Because there were no traditional sports events due to the Covid-19 pandemic, esports betting was launched in 2020. It quickly became one of the most popular betting options.
It is possible to convert players to other verticals and increase engagement and incremental spending. This is an interesting point. You might have a millennial customer who uses football as a platform to introduce the product. After waiting for the match to finish, or after the last whistle, he/she will give Efootball and other Esports activities a shot.
AM From my perspective, FIFA and other Esports worked brilliantly during COVID as a replacement product for those who were looking to duplicate the missing sporting schedule. There was nothing except the Belarusian Premier League, which I remember. You have a different audience with Counter Strike and League of Legends, and they will be found in different locations than traditional sportsbooks.
Therefore, you should consider offering something new to players. Bet365’s Esports offer is an example of this. It works very well considering it has a UX that clearly draws from traditional sports. There is still much to be done in the next few years. This is a great opportunity. It’s obvious that there’s a use case for it.
Also, we are seeing rapidly changing demographics. Esports used to be only for those aged 20-25, but it is now available for everyone. This means that you can close the monetisation gap. You must reformat your UX to attract this rapidly-growing audience. Esports, which is now a viable product, can drive traffic through new audiences without having to compete with traditional sportsbook spend.
DP It all depends on where cannibalisation begins from, according to me. While new products can drive interest and increase engagement, it is possible that they will also lead to a decrease in engagement for existing alternatives, as the overall sportsbook spending will be finite.
Esports has the advantage of complementing traditional sportsbooks. Tournaments that take place around the world (for instance in Asia) are held in the evening. This means it takes place during the day in Europe. Esports can boost sportsbook spending both before and after matches like the Champions League midweek.
If we look at the long-term, cannibalization is more likely if there are more European Esports tournaments that take place in the evenings (at the same times as major football matches). This will most likely happen within the next 5-10 year. This will make it more popular than betting on evening football matches.
Can operators take the Euro 2020 delay last year’s standout success in Efootball to encourage more players during the weekend’s sporting fixtures?
DPEsports have a lot of potential to be a complement product at major events like the Euros where there is increased betting activity and more overall spending. The challenge will be to make this a mainstream product and have it accepted as a fixture every week. It is possible, in my opinion, that this could be a complement product that fills in the gaps between sporting fixtures. This would especially appeal to those who prefer to watch pre-match rather than during play. You have plenty of time to fill the 90 minute gap between pre-match and match bets. A football match is 90 minutes long. I believe that there is great potential for long-term success if you can identify and reward this opportunity.
AM : Also, Efootball’s audience is different from League of Legends, Counter Strike and other games. So, we are only talking about half of the potential Esports audiences.
Let’s consider Europe as a global market and then place Efootball alone. It is crucial to regulate the product, so that it is readily available and is acceptable. This is something we would need to see in Germany, where the Bundesliga is not yet regulated as a betting market. The overlap is less due to differences in player preferences and audience composition. If we go back to the CEE, I believe there is plenty of opportunity for operators to test this as the new generation of players is very open to it.
PRS To add, I think we are looking at an area that is traditionalists in terms of football spend. The new generation is shaped by a different world to football as their primary source of entertainment.
We will see a shift in the Esports landscape over next decade, and it is certain. Esports will become a major area of traditional sports engagement in the next decade, regardless of whether it’s as a complement or an individual product. This is particularly true if Esports are regulated clearly and tournaments organized regularly. Online gaming operators can follow this lead and invest in technology, commercial communication, and Esports-related communications.
Finally, let’s look at the bigger picture. What do you think about Esports in CEE? How will it develop over the next five year, and how can it gain more popularity?
DP I believe it is developing, and it will gain traction. It won’t be a success right away, however. Esports will continue to be a complement product for operators that will allow them to diversify their offering and improve it over the next few years. This new generation will be the engine, and it is capable of scaling quickly, thanks to the wide range of events it offers and the 24-hour betting it provides.
To make this happen, however, more investment is needed in the vertical to ensure it becomes more established. To attract more players, we need to have more sophisticated trading models. Already, we are seeing this happen in real time. Even in the last three year, there has been a significant increase in managed trading services for Esports as well as the provision of data. We are seeing companies that specialize in this type of provision start to dominate the market. This will undoubtedly lead to exponential growth with a ‘hockeystick’ adoption curve.
AM: I agree. There is a lot of potential. Outside of the current conflict between Russia and Ukraine we can say there is a steady trend towards growth. This is despite the recent Parimatch/Ukraine news this week. It’s going to continue growing for all of the reasons that we have covered.
This is all due to the unique audiences in the region and their desire for entertainment. Comparing the potential of Western Europe versus Eastern Europe, it is clear that CEE will be the continent’s most important player. Because we are one of the most prominent Esports providers in the world, I believe Esports can be whatever you want it to be. If you have a proactive approach and take the right steps, you will get the market share.
PRS I agree with Dimitris and Amir, and believe it will grow. All the foundations in CEE are there to make that happen: demographics, interest and increasing awareness of brand values. I don’t think we will see any major shifts in market trends or displacement of traditional sports. As exponential growth begins to emerge, we will see more adoption in the long-term.
