Delivering sustainable growth during esports’ market correction

The esports industry continues to achieve remarkable milestones, and as we look back at 2022, Oliver Niner, head of sales at PandaScore, provides a comprehensive analysis of the sector’s performance and shares insights on what lies ahead in 2023.

In recent years, much speculation surrounded the potential for esports to reach a critical mass—the point at which its popularity would dramatically soar, backed by a fusion of sports, gaming, pop culture, and modern entertainment. As anticipated, the excitement surrounding esports has permeated various sectors; however, the landscape is evolving beyond mere hype.

As we move into 2023, the esports sector is currently experiencing a market correction. Indicators such as workforce reductions, decreased advertising budgets, and the closure of certain initiatives highlight a transition away from the era of hype and easy revenue. The companies that prioritize sustainability and long-term value will be the ones that thrive in this new phase.

This shifting dynamic also bears significance for esports betting. The conversation has moved past high-octane growth narratives fueled by extravagant marketing. As a historically recession-resistant industry, gambling will focus this year on identifying genuine metrics of growth and the intrinsic value within the esports betting market.

Achieving Sustainable Growth

Heading into 2023, we recognize that esports betting has strong potential for steady, sustainable growth—a philosophy that is central to PandaScore’s operations. Instead of pursuing explosive growth through large tournaments, operators and suppliers must deliver a comprehensive, robust product that caters to bettor preferences.

Our data indicates that operators who partnered with PandaScore in 2022 experienced an impressive average increase in turnover of 33% within their esports betting offerings. Notably, both main and side markets displayed robust growth. Overall turnover for Winner and Main markets surged by 61% compared to 2021, while side markets increased by 54%, showcasing sustained interest in alternative betting options such as player props.

Throughout 2023, both small operators and Tier-1 companies will focus on fostering steady overall turnover through quality product iterations shaped by customer insights. In assessing the esports ecosystem, several indicators point toward sustainable growth this year.

Stabilizing the Esports Calendar

Despite the substantial capital invested in esports and its gradual professionalization, establishing consistency among teams, competitions, and event schedules has historically posed a challenge. The volatility in team presence and tournament organization has led to franchising, resulting in a more structured and recurring calendar of competitions.

With a more reliable timetable across a range of game titles, operators can now ensure consistent content for bettors, facilitating a more engaging experience. Over the past few years, top-tier tournaments have stabilized, and we are seeing similar consistency emerge in lower-tier competitions to complement the main events.

The Champion of Champions Tour has introduced additional opportunities for Counter-Strike teams to compete professionally outside of Tier-1 events, culminating in the inaugural Central Europe Finals scheduled for February 16-19 in Malta – a crucial test of CS:GO’s appeal among bettors at this level.

Moreover, the burgeoning popularity of Valorant as both a competitive title and a betting product continues to flourish. Riot Games has led the charge with high-profile competitions, but there has also been a notable rise in regionally-supported tournaments. Enthusiasm among bettors has soared, resulting in a tripling of overall bet volume on B, C, and D-tier events from 2021 to 2022, while maintaining margins close to 10%.

The recent restructuring of the Valorant Champions Tour, bolstered by the introduction of a Partner Programme, is expected to foster a more consistent and enduring competitive framework for this popular title, mirroring the longevity seen with League of Legends.

Regulation and Diversification

The U.S. sports betting market has attracted widespread attention, especially following the repeal of PASPA and the subsequent state-by-state legalization of sports betting. This legislative shift has opened floodgates for several operators eager to establish market presence.

However, the landscape for esports is markedly different, hampered by inconsistent regulations that can both support and stifle vertical growth. Specific regulatory frameworks that address the unique nature of esports, rather than conflating it with traditional sports, are crucial for harnessing the sector’s full potential.

Rather than experiencing a rapid surge, esports is likely to see growth manifest as a consistent stream, gaining momentum as supporting regulations mature over time.

Additionally, we anticipate advancements in the way data is gathered, shared, and presented—from how data is captured and distributed to how it is showcased within betting products. Operators are shifting away from treating esports as a secondary consideration in sportsbook offerings, seeking partnerships with specialists who provide tailored products designed for specific audience needs.

A Growing Esports Audience

Despite the current market corrections, the viewership for esports continues to grow, indicating a robust and expanding customer base. For 2023, establishing equitable partnerships grounded in strong products, alongside comprehensive research and development, will be vital for achieving sustained growth.

At PandaScore, our commitment to our partners is unwavering. We collaborate on a revenue-sharing model instead of cashing in on immediate asset value. Our focus lies in fostering long-term growth for our partners and the success of esports betting as a whole. By prioritizing shared success, we aim to elevate the impact and sustainability of the esports landscape.