VR: Game on?

Local gaming operators recently laid their bets on e-sports as a new non-gaming offering for the younger demographic - but it remains to be seen whether these competitive video games can be real game-changers.

Despite the fact that Macau is often referred to as China’s answer to the Las Vegas Strip, the city’s tourism boss recently acknowledged that Macau might not reach the heights of Uncle Sam’s most famous gaming enclave in terms of non-gaming revenue contribution.  

Speaking to industry executives and insiders at a conference in May, Maria Helena de Senna Fernandes, Director of Macao Government Tourism Office, remarked that the city’s gaming operators might not achieve a 60 per cent contribution of non-gaming revenue in sector-wide revenue, but rather a possible 40 per cent.  

“We don’t only focus on gaming . . . but the development of non-gaming elements [in Macau],” she said at the time. 

Her remarks were no surprise to the gaming operators, as the Administration has been actively manoeuvring the city’s economy to be less reliant upon casinos, which still account for 90 per cent of revenue in the gaming sector. Despite years of promoting non-gaming offerings, which have yet proven to be substantial, local gaming operators have put money on their latest bet – that of e-sports. 

In late July – in collaboration with Hong Kong and Macao parties Kowloon E-Stadium Ltd. and ALL-IN E-Sports Ltd. – casino operator Melco Resorts & Entertainment Ltd. launched the Macau EStadium in Studio City, an integrated gaming resort in which Melco owns a 60 per cent stake.  

Describing the venue as the ‘first ever e-sports venue’ in Macau, which could seat up to 274 guests in a floor area occupying some 10,000 square feet (929 square metres), the gaming operator said in a statement that the venue will host various e-sports tournaments and virtual gaming leagues throughout the year, as well as live-streaming e-sport events from other parts of the world. 

‘E-sports has become a global phenomenon which particularly appeals to younger players, with the majority of players being below 30 years old,’ the operator noted, adding that the main patrons of the city’s casinos, Mainland Chinese, account for over half of the global e-sports audience. 

China’s rise  

‘This EStadium will attract this younger generation of players and fans to Macau, further promoting Macau as a diversified entertainment destination for tourists in Asia and globally,’ Melco claimed regarding the perceived advantages of the venue.  

Prior to launching the e-sports venue, Melco organised a number of e-sports events, including a partnership with Asian-based Internet platform provider Garena to host the 2018 League of Legends Master Series (LMS) Spring Final in Studio City earlier this year, attracting over 3,000 people. The casino company said at the time it was always looking for ‘fresh ideas to diversify the entertainment experience offered to our guests’.  

‘This EStadium will attract this younger generation of players and fans to Macau, further promoting Macau as a diversified entertainment destination for tourists in Asia and globally,’ says Melco Resorts of its new venue dedicated to e-sports. 

E-sports, a form of video game competition, has gained popularity and become more professionalised in recent years, in particular in the Asian and Greater China region. According to Newzoo, a global intelligence firm specialising in e-sports and games, the industry will generate some US$905.6 million (MOP7.31 billion) this year, representing growth of 38 per cent from a year ago, with revenues possibly cresting US$1.5 billion in 2020.  

China was the second largest source of revenue in the sector last year, accounting for 16 per cent of the total take, trailing the 36 per cent contribution from North America, according to Newzoo data. The 2018 China E-Sports Sector Report co-published by Chinese entertainment-cum-Internet conglomerate Tencent earlier this year highlighted that the number of e-sports users in China totalled 250 million last year, accounting for nearly two-thirds of the number of global users, currently standing at 390 million.  

US$905.6 mil 

Global e-sports revenue forecast for 2018

Besides lucrative revenues, last year the Olympic Council of Asia announced a partnership with Alisports, a sporting arm of Chinese e-commerce giant Alibaba, ahead of the e-sports events for the 2018 and 2022 Asian Games, with e-sports elevated to a medal event in the latter edition. 

Strong backup  

Roy Kwong, founder of Macau EStadium and Kowloon E-Stadium in Hong Kong, believes that the Macau e-sports industry could help bridge the e-sports world in the Mainland with elsewhere: while Macau EStadium could help promote Mainland e-sports culture to other places, it could also help young international e-sports players crack the Mainland market.  

“Macau EStadium . . . could garner interest from the Mainland and around the world,” he predicts. 

Compared with Kowloon E-Stadium, Kwong said Macau EStadium has one of the biggest advantages – the support of the gaming operator.  

“With the back-up of Studio City . . . many local youngsters could benefit from the rapid development of e-sports here,” he added. 

Apart from Melco, several local gaming operators have jumped on the e-bandwagon over the last two years to develop e-sports. Galaxy Entertainment Group Ltd. and SJM Holdings Ltd. have run several e-sports tournaments and events since last year on their properties. Describing the e-sports industry as having great potential across the globe, SJM claimed in a statement that running major e-sports tournaments could ‘further benefit the development of the city’s tourism and leisure business.’ 

Mario Ho, one of the sons of Angela Leong On Kei, Executive Director of SJM, established the Macau E-Sports Federation this year to facilitate the development of the sector, taking advantages of the city’s abundant MICE and hotel facilities.  

The Federation plans to organise several major international events here a year. For example, an e-sports carnival was held in SJM property Grand Lisboa Hotel in June, attracting the attendance of Mainland players and celebrities. 

Late arrival 

“The gaming operators have only taken an interest in e-sports events in very recent times – a few parties asked some of them to co-host e-sports tournaments a few years ago but the proposals were turned down,” says a local e-sports industry figure, who declined to be named due to the sensitivity of the matter.   

“[The operators] cited a tight budget and doubts about whether such events could attract visitors as the rationale behind the rejection,” the figure added. The tight budget at the time was due to the monthly decline in gaming revenues for 26 straight months in the 2014-2016 period, given an economic slowdown and an anti-corruption campaign in Mainland China that kept high rollers at bay. “They are late to the party but it’s better than no-show,” the figure added.  

“It’s still difficult to say whether [e-sports] will bring substantial growth to local gaming operators, as non-gaming elements like catering and accommodation still account for a very small share here,” says gaming scholar Wang Changbin. “E-sports events might boost revenue in the relevant segments but the contribution might not be conspicuous given the dominance of casino revenue.” 

The interests of gaming operators in e-sports events also come at a time when their licences, which will variously expire by 2020 and 2022, are up for renewal. Despite the current lack of detail from the government on how it will handle future gaming licences the promotion of non-gaming elements and the support of local small and medium-sized enterprises by gaming operators are some of the factors the government says it will take into consideration. 

According to the latest official data, non-gaming made up 9.39 per cent of overall revenue for gaming resorts here by 2015, or MOP23.91 billion, paling in comparison with about two-thirds in Las Vegas. 

For the long run 

Scholars and analysts have been positive about the development of e-sports, whose events usually last for days and could help attract traffic, thus enhancing the performance of other businesses conducted by the gaming operators, particularly non-gaming offerings like accommodation and catering. 

Wang Changbin, Director of the Gaming Teaching and Research Centre at the Macau Polytechnic Institute, said it was a good direction for gaming operators to develop e-sports to enhance their non-gaming offerings.  

“E-sports has been a global trend in recent years and could help casino operators attract a young demographic,” the scholar said. “But it’s still difficult to say whether it will bring substantial growth to local gaming operators as non-gaming elements like catering and accommodation still account for a very small share here,”.  

“E-sports events might boost revenue in the relevant segments but the contribution might not be conspicuous given the dominance of casino revenue,” he added. “But I think it is praiseworthy for gaming operators to try different things to strengthen their non-gaming portfolio in the long-term.”  

Legal betting in Las Vegas 

While e-sports has been plugged as a non-gaming offering in the city, this format of video game competition has recently been legalised for wagering in the state of Nevada, having been an online betting favourite for years. 

Last year, Nevada, home to the Las Vegas Strip, passed amendments to its pari-mutuel wagering rules, allowing wagering on non-traditional events like e-sports tournaments as well as horseracing and athletic sporting events.  

“As far as I’m aware Nevada is the only place accepting legalised wagering on e-sports tournaments,” said Jenifer Roberts, Associate Director of the Centre of Gaming Regulation at the University of Nevada, Las Vegas, quoted by a subsidiary of U.S. broadcaster ABC in a report this year. 

Following the enforcement of the bill in July last year, a casino on the Strip -Downtown Grand Hotel & Casino – became the first casino to accept wagering on an e-sports event last November for a tournament held in Beijing, according to media reports.  

While Las Vegas casinos have had a history of hosting video game tournaments for more than a decade, Luxor Las Vegas – operated by MGM Resorts International – has lately transformed its former nightclubs into space for e-sports. The Esports Arena Las Vegas opened earlier this year.  

“[The arena] is the first facility of its kind to be dedicated to this form of gaming,” said gaming analyst Chris Grove quoted by Las Vegas Review Journal. “To try something like this and build an e-sports arena and wrap a marketing and event concept of this around a destination for gaming is unprecedented; there are a lot of people waiting to see how it plays out.” 

According to a report this year by gaming research and consultancy firms Eilers & Krejcik Gaming and Narus Advisors, global betting on e-sports amounted to only US$649 million (MOP5.24 billion), mainly via online bookmakers, in 2016 . . . but it could grow to US$5.88 billion this year. The size could hit US$11.53 billion by 2020 due to a dramatic increase in the number of e-sports events, which will generate a surge in both the demand and supply side for cash betting, the report concluded. 

Fast-growing industry 

The e-sports industry is expected to generate a whopping US$905.6 million (MOP7.31 billion) this year with a major proportion coming from sponsorship and advertising, according to Newzoo, a specialised global intelligence firm in e-sports and games. 

Sponsorship alone, which accounts for about 40 per cent of total industry revenue, will help the industry create US$359.4 billion this year, growing 53.2 per cent from a year earlier, the data show. Advertising is the next biggest source of revenue, raking in US$173.8 million this year, representing a growth of 23.8 per cent-year-on-year. 

Media rights and content licences, game publishers’ fees, and consumer spending on merchandise and tickets will generate US$160.7 million, US$116.3 million, and US$95.5 million, respectively, for the segment. 

Besides the lucrative revenue, the e-sports audience is expected to grow more than 13 per cent to 380 million this year, comprising 165 million e-sports enthusiasts and 215 million occasional viewers, Newzoo said, with projections of 557 million two years later.