Rivalry's FY22 shows the power of esports
Solid numbers from the listed operator provide concrete evidence that operators should be integrating esports properly.
There has understandably been a lot of noise around the publication of the UK Whitepaper, so I’ve not published this until key stakeholders have had time to digest the paper and can hopefully start to think about other things once more.
Key Rivalry financial highlights:
FY22 handle1 was CA$232.8m (£136.2m) up 198% from CA$78.2m in FY21
FY22 revenue2 was CA$26.6m (£15.5m) up 140% from CA$11.0m in FY21
Net loss for the year was CA$31.3m (£18.2m), up from CA$24.3m in FY21
Points of interest:
Rivalry launched casino in Q322, with its proprietary platform Casino.exe launching in Q422
12% of Rivalry’s revenue was generated through iGaming in FY22
Esports sportsbook betting represented ~90% of handle (CA$209m, £126m)
User registrations grew to 1.5 million, with millennial and Gen-Z consumers representing 97% of users (2021 AR suggested average age of customer to be 263 )
Rivalry holds Isle of Man, Ontario & Australian licenses
The overall industry?
It’s lazy to group Rivalry in with ‘all the other esports companies’ that are public and have, if we’re honest, had fairly grim years.
It’s undeniable that macroeconomic headwinds, a crypto-crash and an obscene franchise fee correction have hit the industry hard.
If your son’s a gamer, you’ve got millions to burn and an ATVI4 executive turns up and shows you a familiar franchise model, along with dubious statistics parroted by reputable entities such as Morgan Stanley telling you "INVEST, INVEST NOW", you’re inevitably going to make a poor investment decision.
Hell, your advisor has told you the average spectator age watching your MLB team ping a home-run weekly is pushing the late 50s - you have to get to the young’uns somehow. What’s US$20m but a drop in the ocean?
The recent Overactive Media impairment charge on the Overwatch League slot says it all. The franchise fee and supposed media rights dubiously attracted by Overwatch League Season 1 were akin to investors sponsoring my overweight, often half-cut 5-a-side football team for £20 million with no proof of concept because a pal at an investment bank said “fuck it”.
Dare I say “Shrimply The Best” would be much better bang for your buck in entertainment value, too.
“Pivot big man”
Rivalry is a beacon of hope for those of little faith
While the industry undergoes a needed correction, the betting proposition need not wait
Rivalry, on the other hand, is almost a beacon of hope in the mire that is the esports industry of late.
Strong handle growth within Rivalry’s target demographic is exactly what the betting industry has needed to see, and should serve as a wake-up call for those not considering esports as a key strategic pillar in an age of sky-high CPAs5.
Rivalry’s financial results for 2022 and managerial comments show the value of esports as a betting proposition, substantially more so than other ‘disruptors’ in the past.
Substantial handle growth
I shan’t do the maths for you, but £136 million in handle, of which the company suggests is 90% esports wagers goes to show that the TAM6 for esports is likely higher than most operators had even considered.
I’ve had operators tell me “I can add a new Pragmatic slot and it’ll generate more revenue than an entire esports book”.
Sure, but there’s only so long before Fishin’ Frenzy fails to resonate with your crowd, regulation continues to tighten and you find yourself looking for alternate revenue streams with an audience you’ve neglected for an instant top-line boost.
LATAM (namely Brazil) and SEA are two regions absolutely bonkers about esports. Rivalry is operational in both, and thus there’s little surprise that they’re attracting customers.
Established operators in Europe continue to plough head-first into regulatory headwinds, with the iGaming grey-market becoming ever smaller. Esports Entertainment Group’s acquisitions of LuckyDino, BetHard (etc) to pad revenue are predictably unravelling as regulation tightens (and it’s been a long time coming).
Esports is integral to the future
Esports is huge. As much as you don’t understand it, thousands of young people pack arenas to watch other young people sit at a computer, stationary, and play video games competitively.
The viewership, the industry, the everything may have been inflated in the past. You may have been promised the finest esports-crypto, the shiniest esports-NFT, or web9 à la esports.
Teams will fall by the wayside.
Legacy brands born out of passion may disappear as the industry continues to professionalise.
The fact is, the audience is there - already. Rivalry’s FY22 handle and consistent QoQ growth shows that with the company’s territorial expansion, more registrations lead to more bets.
What makes Rivalry different?
Rivalry was, or is, born and bred esports. Mr Salz and co have built a brand without aggressively pursuing typical bookmaker or operator marketing strategies, and keeping marketing costs low.
They speak the esports language, and hence they have an average age of 26. I dare say that no other bookmaker can boast those numbers.
Simply investing time in understanding and speaking the ‘language’ of the different demographic has driven handle. Building a brand that is liked amongst gamers is almost the entire battle.
Casino holds the key to profitability
Rivalry’s revenue mix from sportsbook to casino is currently 12% casino and 88% sportsbook.
Contrasting to Kindred, sportsbook is 42% and casino is 58%. Rivalry has launched its casino offering later in the year, and it’s attempting to make casino appeal to a younger audience (not in a malicious way, before anyone starts).
Covid-19 accelerated channel shift from landbased to digital, and with it slot development went through the roof. Rivalry’s “Casino.exe” is unique, and something that gamers will likely identify with more than your typical slots.
Let’s for the moment ignore the huge elephant in the room that is Stake, as issues apply far wider than esports there.
Cross-sell into casino is arguably gambling company bread and butter, and it would be daft to think that for Rivalry to turn a profit it won’t be driven largely by casino growth this coming year, given what we know about the company’s expansion plans.
Don’t do an Entain
Entain spaffed approximately £50m on the acquisition of Unikrn, an ‘esports only’ betting company dogged by bad press around a botched crypto coin launch and various other things.
They then took the entire product off the market, and promised a relaunch.
What they managed to do was absolutely annihilate any brand recognition Unikrn had built up through decent content, through a prolonged period of absence and lack of interaction with the esports community.
I can imagine the board sat and saw Rivalry, an esports betting company doing well in CA and BR and thought — let’s launch in Brazil and Canada.
On Unikrn’s last 20 tweets (at time of writing), there is one interaction. That’s a like from a marketing manager at Entain, focused on esports. The brand has foregone creating content it was once renowned for and is suffering as a consequence.
Unikrn has fallen foul of what executives continue to think ‘is the future of gaming’, whereby Frankstein’s Monster of social video gaming and esports meet in a horrid blurred vision which appeals to no one.
I’ve said it before, and I’ll say it again. Bragging about a new platform where you can bet on yourself in a ranked game is up there with the worst products I’ve seen. But I suspect it’s the brainchild of someone who needs to fuse “gaming and gambling”.
Whoever’s taken Entain for £50m plus whatever else they’ve spent on assembling a team to come up with a pitiful social gaming product where “you can wager against your mates”.
Richard Branson called, he wants his 2011 Virgin Gaming back.
Actually nah, he doesn’t. And for good reason.
There’s an appetite for esports wagering. Esports punters are the ‘coveted age' you’re chasing. Stop throwing pitiful, ill-conceived products at them and take a leaf out of Rivalry’s book and use authenticity.
Esports should be a key pillar in an operator’s future customer acquisition strategy. But there’s a fine line between a Unikrn and a Rivalry.
I have limited consultancy capacity heading into May. If you’d like to have a chat around how you can use esports properly, please reach out on:
oliver.adam.ring@gmail.com
Handle is the amount of money wagered by bettors. It is the amount of money in play across online and in-person sportsbooks. In Rivalry’s case, handle is purely online sportsbook wagers.
Revenue is generally recorded as handle minus winnings (settled wagers)
Activision Blizzard
CPA is short for cost per acquisition, a common metric in the world of online gambling.
Total Addressable Market