In Play: Is Regulation KICK-ing in? (Esprouts x Esports Insider)
Turkey, lootboxes and eSoccer...
A rehash of my blog for Esports Insider, the leading business to business platform in esports. The original mailer is here.
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Good afternoon, and welcome back to another sweeping look at this month’s activity at the intersection of esports and gambling, as well as a glance at the emerging trend of eSoccer.
Last month’s analysis looked at the continued growth of sponsorships in the space, and highlighted the opportunity for regulated UK operators in what’s set to be a gargantuan year for UK-hosted esports events.
February followed a similar trend, with gambling companies bucking the trend of the infamous ‘Esports Winter’ with continued new collaborations, and self-run tournaments to boot.
From a regulatory perspective, the heat on the UK government to regulate lootboxes has increased, and Turkey’s regulator has issued a blanket ban on Twitch.
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Welcome to the jungle
Amazon-owned live-streaming platform Twitch has reportedly been banned by the Turkish National Lottery Association.
Per reports, the ban has come as a result of the platform’s streaming of gambling-related content, which is prohibited in the European country. Access for Turkish users has been completely removed, impacting all Turkish streamers and removing access to live esports streams for Turkish users.
Twitch has doffed the quasi-regulator cap several times in recent years, following the crypto-casino (Stake.com namely) led boom in slots broadcast. With the growing impetus on responsible gambling, having Curacao regulated crypto-operators broadcast through seismic influencers to a global audience (often from jurisdictions where online casino is outlawed), the platform succumbed to significant community pressure.
Following initial action in September 2022 to ban the streaming of gambling sites that have ‘slots roulette or dice games that aren’t licensed in the US or other jurisdictions which provide significant consumer protection’, broadcast of gambling content reduced 76% to August 2023 after which it was further expanded.
Here’s the Kick-er: Kick, the live-streaming platform created following the gambling broadcast clamp-down, also had its access blocked. The company then added geo-specific restrictions on gambling content for its Turkish site, and access has since been regained.
Twitch, however, has not (at time of typing) done the same. Twitch remains the home of esports content. With Turkish regional League of Legends being one of the most popular, plus esteemed Counter-Strike players such as XANTARES and woxic hailing from the country, ability to watch both grassroots and accomplished Turkish esports is under significant threat should Twitch not address the issue.
The company’s recent exit from South Korea, and slow-paced response in Turkey could finally show a waning in the company’s power. But we’ve said that before…
In other regulatory news, Callum ‘Cal’ Dornan, CEO and Founder of UK-based esports and content organisation, has shone a spotlight on UK policies (or lack thereof) addressing lootboxes, specifically FUT packs.
It’s been what seems an age since the UK government’s call for evidence. There are policies being tried across the world, but all of the evidence continues to suggest they simply don’t work. Microtransactions are prevalent throughout the video games industry as a whole and free-to-play models with RNG lootbox mechanics are extremely commonplace. It’s an absolute minefield, and I would continue to attest it ultimately must come down to consumer protection practices first — regulation under gambling authorities who struggle to regulate their own incumbents would be completely ineffective.
Meanwhile, in sponsorship news, Rivalry has been busy announcing a LAN event, a sponsorship renewal and an influencer partnership. 1XBet has picked up the sponsorship of the CS:2 Major in Copenhagen, and ThunderPick has continued the trend of betting-operator-run tournaments with a $1 million CS:2 competition. Business as usual…
Esports virtuals: A margin driver but regulatory headache?
eSoccer, and the broader emergence of ‘round-the-clock’ esports offerings from suppliers, continue to grow. Some suppliers have suggested the product operates at a 6-8% margin, and can help drive sportsbook revenue up by as much as 10%.
eSoccer, or the equivalent in other sports vary from company to company — and some are pushing IP and regulatory boundaries a lot harder than others. Taking SIS as an example, the company has physical players playing FIFA from a base in Milton Keynes with matches overseen by ‘ESIC Sanctioned’ referees.
The SIS product is very much a realistic extension of virtuals, but offers a fast-paced betting product for a sports bettor in a format that they completely understand. A FIFA match replicates a football match; the betting markets are simple and the content digestible. This bridge between sports and video games makes sense, and it’s little surprise that the product is popular and driving margin.
Other offerings, however, could come under significant regulatory and publisher scrutiny:
Offering virtual matches utilising intellectual property without permission
Offering AI versus AI matches with no human interaction at all
I have seen offerings of Tekken, Street Fighter, Cricket 2007, FIFA, Madden and NBA (but to name a few). The permissions for thousands of games to be broadcast and pushed through for monetary gain are, I would suggest, rarely sought from the likes of EA or Bandai Namco.
The second is perhaps a more interesting point that could cause regulatory trouble down the line. By having an AI versus AI game, it could constitute a casino product and as such under various gambling legislations, the RNG mechanics of the AI need to be explained and made clear.
The engines behind FIFA AI and the difficulties (eg Amateur, Semi-Pro etc) will vary significantly and given the length of a game development cycle, be incredibly complex. Should the RNG and AI fall under gambling scrutiny then it could open a huge, ugly regulatory box of worms. Does the RNG of the end-zone in battle royale games need to be regulated? Opening a chest in Fortnite to acquire weapons is based on RNG; does this mechanic also need regulating?
It’s clear that video games titles similar to traditional sports can offer solid ‘virtual-esque’ betting products. But as with every potential profit-driving product, some suppliers are being given an inch and taking a mile. It could all get very messy, very quickly.