In this week's edition of "Game On," The Fly spoke with Jeff Cohen, vice president of Strategy and Investor Relations at Esports Entertainment Group (GMBL), an online esports entertainment and gambling company. In the interview, Cohen discussed the growth of esports, partnerships with traditional sports leagues, and more.
EEG: Jeff Cohen told The Fly that Esports Entertainment operates in "a number of different areas," though broadly it is an esports online entertainment and gambling company. "On the esports side, we operate in a couple of different areas across the ecosystem, but primarily we have three consumer-facing platforms," he said. "First, we have vie.bet, which is our esports betting platform. You can think of that as DraftKings (DKNG) but vertically-focused and tailored for the esports market. The second platform is called LANDuel, which is a skill-based player-vs-player betting platform. That product hasn’t officially launched yet, but we’re launching a pilot platform this summer here in New Jersey. You can think of that like Skillz, but for PC and console games rather than mobile games. The third platform is EGL, which is our tournament platform. That’s the one you’ve seen in our press releases. We’ve been partnering with large traditional sports organizations to help them engage their fanbases and hold tournaments for their fans on that platform.”
SPORTS PARTNERSHIPS: Esports Entertainment has been active lately in securing partnerships with professional sports frnachises, including the National Football League's Denver Broncos, to host esports tournaments involving the pro teams themselves. Cohen said that such partnerships can be useful engagement tools for teams, as it allows them to remain involved with fans even outside of seasonal competition. “I think there’s two ways you’re going to see professional sports teams get involved [with esports]," Cohen told The Fly. "I think there is an opening for some of these teams, like the NBA 2K league (TTWO), to create their own version of a league within esports. That’s the most hands-on approach. A second approach is a lot of these teams have players who stream on the side as a way to get engaged with their fans, who are mostly 18-30 old people, and gaming is their passion. So they’re already doing it. We’ve seen a big trend during the pandemic of athletes streaming on the side and using that as a tool. Those are two areas that EEG is not really involved in, however.”
“During the pandemic one of the things that teams found is that it was really hard to engage with their fans when they weren’t able to have fans in the stands," he continued. "The demographic that gaming attracts is a very coveted demographic for these pro sports teams, that 18-35 male [demographic]. So what we’re trying to do with [pro sports franchises] is basically host tournaments for their fans using our current platforms. And fans will play for prizes from the teams, anything from signed jerseys to season tickets to unique “money can’t buy” experience, like sitting in the owner’s box for a game. I think it’s a really great engagement tool for the teams, and it’s a really great business model for us.”
GAMES PUBLISHERS: When asked if big gaming publishers have a responsibility to get actively involved in promoting esports growth, the Strategy VP said that "responsibility" wouldn't be the word he would use, though he thinks engaging in esports would be beneficial to major video game companies overall. "We got to a point five years ago where a lot of publishers would use [esports] as a marketing expense and engagement tool, and now a lot of them are starting to look at it as more of a revenue driver and something that can be just as big as the game," he told The Fly. "If you look at Twitch (AMZN) and streaming, you’ll see viewership of games is almost eclipsing actual playing of games. Right now on Twitch, there’s really no way for publishers to monetize it. But if they do it in a structured league, there’s a lot of easier ways for them to sell media rights to get people involved. And I do think you’ll see more and more of that. Activision (ATVI) is really leaning heavily into it. EA (EA) has been pretty active as well recently.”
“Some publishers, like Nintendo (NTDOY), are still a little bit in the dark ages about [esports], but they’ll come around eventually,” Cohen added.
When it comes to concerns publishers may have around online gambling, Cohen noted that every company has a different willingness to embrace gambling. "Historically, Valve has been pretty hands-off and not that concerned about gambling on their games, whereas Riot (TCEHY) has always shied away from it," he commented. "That said, from what we’ve seen in the U.S. since 2018 with the mainstreaming of gambling, I think it’s going to become more accepted for these publishers to be involved with gambling around their games.”
GAMBLING: When asked if the company is concerned about the potential for any potential additional regulation in the gambling space, Cohen responded that different states are taking different approaches to esports betting. "Most of the states are pretty much lumping it in as another sport," he said. "I’m of course talking about when a person bets on a professional esport, not when you’re betting on yourself. Skill-based player-vs-player betting is carved out under a skill-based exemption, so that way DraftKings can operate in 41 states because it’s skill-based, it’s not technically gambling. DraftKings daily fantasy, that is. So those are two separate issues. But in terms of professional esports betting, like the vie.bet platform that we have, it’s sort of rolling out state by state just like traditional sports betting regulations are. But most states have just included it as an additional sport. It’s the same way hockey and football are covered under the same law, which makes sense, that’s the way it should be.”
IN-PERSON EVENTS: On the subject of the risk surrounding in-person events amid the pandemic, the VP said that the pandemic did actually help with the transition to more online-oriented events, which helped create more of a market for esports viewership. “COVID-19 really benefitted the gaming world and esports to some extent, even though it’s sad to see in-person events canceled when they were," he said. "Esports events were able to take the mantle because [they’re] able to be done digitally.”
“Having said that, I do think there is a tremendous amount of pent up demand for in-person activities, just broadly," Cohen added. "Here at EEG, one of the things we own is a chain of LAN centers called Helix eSports that we are looking to expand. Right now, there’s three of them, and we’re looking to expand this year to several more. We’re pretty confident about what the demand is going to look like for local in-person tournaments and leagues and events as [everything] opens up.”
"Game On" is The Fly's weekly recap of the stories powering up or beating down video game stocks.
