A lot of people like to watch esports. Gambling on them might be the next big thing.
At least, that’s what Rahul Sood is betting on. Sood, who created Voodoo Computers in 1991 (which was acquired by Hewlett-Packard in 2006), now runs Unikrn, a gaming company that allows esports viewers to bet on matches.
Esports have really blown up in the past several years, largely thanks to popular PC games like League of Legends and Dota 2, both of which focus on competitive, team-based matches that require a lot of skill. Just like with baseball or football, they can be just as much fun to watch as they are to play.
Still, creating a site that lets people bet on these matches is a tricky endeavor, especially with all of the legal issues involved. Esports is an international sensation, but countries have different laws regarding sports betting. Rood talked to GamesBeat about some of these difficulties, how his site works, and the emergence of esports.
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GamesBeat: Who do you guys compete with? Is it gambling sites or streaming sites like Twitch?
Rahul Sood: We don’t really compete with anyone. We use Twitch. We use YouTube. Basically, you come to our site and you watch a stream from one of them that comes from a sanctioned tournament. The other thing is, we’re not really competing with gambling sites, either. Traditional gambling sites, you’re betting on football or hockey, all those things. I wouldn’t call them competitors as much as, people, especially in this space — there were 205 million people watching esports last year. Most people haven’t heard of it. It’s crazy to think this thing is as big as the NHL, yet the mainstream hasn’t heard of it yet. It’s just started to break out. So there isn’t a lot of overlap. There is some. Many of our customers are both super fans of football and big fans of the LCS (League of Legends Championship Series) and different esports. But the majority of them just watch esports and could care less about hockey or football.
GamesBeat: Is it a complicated or dangerous prospect trying to figure out the betting odds on an esport, where you don’t have as much data to track as in baseball or football?
Sood: No, we have a ton of data to track. Our secret sauce is our oddsmaking. We put a lot of effort into it. Our people know the games really well. We look at player history, game history. We look at data that you can electronically get — gold farming, average kills. We look at a whole bunch of things. We built an algorithm based on the Moneyball algorithm to come up with our odds. We come up with the opening odds, and then we built an API (application program interface) connected to Tabcorp. When we open the odds up the betting starts and Tabcorp takes over from there. Like any betting market, as bets come in the odds fluctuate. That’s how it works. Like any other oddsmaking thing, whether it’s in football or any other sport, the odds fluctuate as bets come in.
GamesBeat: What games are people betting on?
Sood: They’re betting on League of Legends. They’re betting on Counter-Strike. Those are the two that we’ve launched so far. We plan to launch more. For the moment those are the two. We just opened this thing up. We launched in Australia, and then we just got our license for the U.K. We’re opening in the U.K. this week.
GamesBeat: Are you eventually hoping to get a U.S. license?
Sood: Yeah. We’re obviously looking to expand beyond just the regions we’re in. Our goal is to open up a new region every month. The U.S. is a little complicated. It’s strange. It has a lot to do with lobbying and protectionism, but skill-based betting is allowed. When you’re watching a sport and you bet, though, that’s not considered a skill unless you bring in a fantasy element to it. It’s just weird that they do that. So, eventually, I’m confident that betting on sports will be legal in the U.S. It’s a massive missed opportunity. We’re a big proponent of responsible betting. We also want to make sure it’s safe and legal. The amount of revenue the U.S. government misses out on, and the fact that people are going to bet regardless — it’s pretty high. We think it’s going to happen. Even Adam Silver from the NBA was quoted as saying he’s a big supporter of it and it’s going to happen. A number of people support this. It’ll happen sooner than later.
GamesBeat: So you said you have Counter-Strike and League of Legends now. Are there any other games that are on the near horizon?
Sood: We’re looking at Dota 2 and Heroes of the Storm. Heroes of the Storm is relatively new, but Blizzard’s doing a lot to make it into an eSport. They had it on ESPN recently.
GamesBeat: [Multiplayer online battle arena games] are the hot thing in esports, then?
Sood: Yeah, but even Hearthstone is hot. It’s really strange, but it is. You’re right, though. MOBA is what made esports explode. But there are other games as well. Halo is big. Call of Duty is a big one, people playing in tournaments. I’m certain that Microsoft wants to get in on this space as well, bigger than they already are. Microsoft has a huge investment in these franchises. There’s a lot of console gamers that have gone professional and play for a living.
GamesBeat: It’s a lot of MOBAs and a lot of shooters. Do you think we’ll see fighting games and sports games?
Sood: Yeah. There are actually tournaments doing Street Fighter and games like that. I do see it happening. FIFA is huge in Europe. The issue with FIFA is it’s one-on-one play. It’s harder to put odds on that. There are other ways we can do it, but for the moment, it’s MOBAs and FPS. It’s rapidly emerging now. There’s more and more interest. Big brands are already in, and they’ll start to get bigger in their placements. Companies like Coke, Red Bull, Razer, these are companies that have been in for a long time. Razer especially has been in there since the beginning. It’s always been consistent. HP revived their gaming products, the Voodoo Omen. They just launched a new Omen notebook, a beautiful notebook. They’re going heavy on investing in gaming again. Even Lenovo is investing in gaming. Dell is still going with Alienware. All of these guys are trying to get back in because it seems to be exploding again. We’ll see where it goes.
GamesBeat: Do you see any pushback from developers about this system?
Sood: No. That’s a good question. If you look at what developers really care about, they care about their community first and foremost. If it’s good for the community it’s good for them. When you look at trends in esports — the reason it wasn’t as big before was because you’d go to an arena, and you might get a sold-out arena somewhere in South Korea or something. I went to an event here in San Jose at the Shark Tank and there were maybe 10,000 to 15,000 people in the arena. Pretty cool. We’re sitting in the stands watching the game. It’s a big, elaborate game-show type environment for the people watching. But the most interesting part is the fact that 300,000 people are watching online around the world. They’re all super engaged.
So when you look at that and you think, if I’m a game publisher, how amazing is that, that I can get exposure from not just players, but spectators, people who are watching the game — 40 percent of the people who watched esports last year don’t even play these games that much. They just watch. They enjoy it. For publishers, if we can help increase engagement through betting, that’s a big thing for them. There hasn’t been a lot of pushback. It’s like the NFL or the NBA. They have their own opinions on it, but they’re not pushing back against people betting on their product. It just increases the adrenaline and the enjoyment of watching the game.
GamesBeat: I assume you’ve looked into the esports trend a lot generally. Are there any signs that this could just be a fad, or are the signs saying this is a growing part of the reality around gaming, with the technology we have now?
Sood: Esports has been around a long time. It’s been growing and growing year on year. It’s anything but a fad at this point. It’s a potentially multi-billion-dollar industry. It’s a generational thing. You have these pundits always talking about how the living room is dying. They come up with all these theories as to why it’s dying. There’s really one reason. It’s because a new generation of kids are in their rooms watching YouTube, watching Twitch, watching their favorite gamers stream and playing a lot of games. They do everything on their PCs or on their iPads or whatever. And they watch a lot of esports. If you get involved in what your kids are doing, you’ll probably see there’s a thing happening here. What’ll happen is, as this generation gets older, they’ll continue to watch, and younger folks will come in to make it more of a mainstream thing at that point. It’s an emerging industry. Probably in the next two to five years it’ll be much bigger and more mainstream.
GamesBeat: How about you? Do you play competitive games yourself?
Sood: Yep. I’m a hardcore League of Legends player. I play Counter-Strike too, but I’m a big League of Legends player. Everybody here plays games, except for our GM of finance and operations. We hired this guy because he’s incredibly smart. We’re weaning him onto games by getting him to play Hearthstone. But we all play games.
GamesBeat: Since you’ve worked at Voodoo before, I’m sure you had deep connections to the PC gaming community. It’s interesting how different it is now. It used to be about pushing graphical boundaries. Now the most popular games aren’t necessarily these graphical powerhouses anymore. They’re just fun free-to-play experiences.
Sood: It’s exactly that. They’re overall experiences. So how can you make the experience more enjoyable? I think Razer has done a good job cracking that nut. Logitech is coming back into the space. If you look at how Razer has built their business, they started with accessories. Now they’re refining their accessory model and they came up with laptops as a way to create a halo product for their portfolio. While everyone else was running away from gaming, Razer was doubling down and reinvesting. They ran away with the market. They have significant market share around the world, including China, with their devices. It’s pretty phenomenal. When you look at the premium notebook market, people are now jumping back in. They realize this was something they missed on and they have to get back in.
GamesBeat: It seems like 10 years ago, all you would hear is about how PC gaming is dying.
Sood: I always chuckled every time somebody said that.
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