Esports Entertainment Group Inc boss sees New Jersey permit milestone as a very big opportunity 

Esports Entertainment Group Inc achieved a milestone on January 24, 2022, with the launch of its first esports wagering offering in the United States following news the firm had become the first esports-dedicated operator to be granted the right to commence business in the state of New Jersey. 

The NASDAQ-listed company’s VIE.gg proprietary betting exchange platform will allow bettors across New Jersey to wager on their favorite esports teams, such as Call of Duty, CS:GO, League of Legends, and DOTA 2, in real-time as part of a seamless and immersive experience. 

A number of online publications have noted that the global esports betting market is estimated to exceed $205 billion by 2027.

Proactive sat down with Esports Entertainment CEO Grant Johnson to find out more. 

Proactive: Esports Entertainment has become the first esports-dedicated gambling operator to be granted the right to commence business in the state of New Jersey. How big is this opportunity for the company? 

Grant Johnson: Well, it’s big for a couple of reasons. It’s big, because, as you already pointed out, we’re first. Being the first of our kind, esports-focused gambling platform in the United States is a major milestone for us. We were committed to doing this so it’s good for our shareholders and clearly we are enjoying some of the enthusiasm out there. We’ve had a lot of red days in the market and now we’re trending green, so I’ll take that as a win. 

From an actual revenue position, again, being the first and the only legitimate site that gambling can take place on is always better. Just being able to benefit from people who do want to wager legally and from the position of New Jersey as the biggest sportsbook betting site state in North America, partly obviously because of Atlantic City. Of course, Nevada and New Jersey are the two main homes for gaming, however, New Jersey has the additional geographic benefit of being right beside the massive New York and Philadelphia markets.  

Because the licenses in the states are geocentric, a New York citizen can go over the border into New Jersey, which is a five-minute train ride away, maybe less, set up an account on their mobile phone, place a bet then go back into New York. I bet if everybody who’s a fan goes to Penn Station on game day they’ll see thousands of people doing just that. They come off the train, they place that bet, and they go back over. It’s the same thing in the south of the state. So it benefits from a larger audience than just the population of New Jersey, which is why the numbers are huge. 

So for us it is big having the first legitimate and only legitimate site that people can gamble on. We believe a lot of esports fans would choose to put their money on an accredited site that is licensed, where a regulatory framework is in place versus putting it with a site offshore. Currently, that happens right now, as you can imagine, people work around the system in place. Now we can allow them to bring that traffic home and they know that there’s protection for them. They not only have just the SEC overseeing our public company, but they also have the Gaming Commission. Consequently, we feel that there are tens of thousands of fans that will have the position of us being the only option for them.  

So we’re excited about that revenue-wise. We’re going to give some guidance after the first quarter of operation, once we have a better feel for it because we can’t compare it to anything else because nobody else is doing it. 

Esports betting is a huge growth market and being the only and first is where I want to be. I’d rather lead than follow.  

The landmark NJ permit comes as the company in partnership with the Hard Rock Hotel & Casino Atlantic City in the state prepares to host the first sanctioned esports skill-based wagering event in the US on March 18, 2022. Another big opportunity? 

That was supposed to happen last weekend but because of the ongoing COVID-19 concerns, we discussed with the game’s publisher EA and with our partners at the Hard Rock that it made sense to be prudent and push it out a little bit. So we rescheduled for March. But, yes, it is the first of its kind – in the USA, in the state of New Jersey, and also in a casino.  

What’s particularly interesting about the product is that we have had the software run through the Gaming Commission’s testing labs. No other esports skill betting platform has bothered to go through that process. There was a method to our madness because that is an intense process. We wanted to be able to prove to casino operators that we had a betting product that would be interesting to them, which is why we’re also hosting this event at a casino.  

So we’re expecting to have a huge turnout. As soon as we announced the event, 70 people immediately signed up on the site, we hadn’t even started marketing it. We then had to push the pause button, but come the 18th of March, we are looking forward to a very exciting event. 

This is just me and you playing, we’re going to play a game in this first event Madden, say we’re going to bet five bucks each, the winner is going to take the 10 bucks, and the house is going to take a commission, like a Poker Room concept effectively. Once this product is launched – and it’s an 18-plus product, not a 21-plus product – we’ve already got 29 legal opinions, where we can roll out that product into other states that do allow betting on a prize purse for skill play. So we expect that to be a big, big product for gamers who are very competitive by nature.  

Is the tournament likely to be the springboard for more esports betting events and permanent installations in the future at the casino and hotel venue and elsewhere? 

One hundred percent we expect to offer it widely. Keep in mind that we own ggCircuit, which is the software platform that on the current count, I believe, 680 esports and gaming centers run on. So we intend to offer that product out to all that huge infrastructure of gaming centers. It’s another product for them, it’s another interesting way for them to make additional revenue. We’ve got that footprint and we plan to roll it out in all the states where we have those legal opinions. So by the end of this calendar year, we expect to have a nationwide footprint with that product. 

The company has also been ratcheting up other contract news over the past few months such as a renewal of its partnership with Take-Two Interactive’s NBA 2K League and team-ups with two NFL teams, what more should investors expect like that? 

Well, that just shows you the strength of the technical offering we have. That’s our EGG Labs product. They do all the analytics for the NBA 2K League, as you pointed out, and they are in discussions with other issuers and leagues to bring the analytics offering to them. We’re the go-to company for a lot of these issuers and leagues but that just reaffirms to the shareholders the quality of the product. These are major leagues and they are putting their signature on pages with us as a corporation.  

As for the Pro-teams, frankly, we have, I’m going to say, at least 20-30 more Pro-teams that want to sign up on our platform. At this stage, though, we have enough with the 12 Pro-teams signed with us. We’re going through making sure we hone our model property so that we get it down clearly with the teams what our expectation of them is, what their expectation of us is, and what the experience of their fan base is. We want to make sure before we add more teams that we have a profitable model for a substantial number of additional teams. 

After reporting strong first-quarter results in November 2021, the company reaffirmed its full-year revenue guidance of $100 million, pointing to 490% growth. Will the latest news change that guidance? 

Well, one thing’s for sure once we have a quarter under our belt with VIE.GG, and with the LandDuel product, and some of these big tournaments with the Pro-teams, we will certainly message the market.  

As you know the thing about the gaming and gambling industry is, outside of death and taxes, you can count on change. Some of that change is good, like in the United States where there are more and more commissions allowing online gambling, and there are more and more adding esports to it.  The same thing is taking place in the European markets, with more and more esports, and more and more approvals from regulatory bodies. But that comes with the other edge, like in the Netherlands where you have to cease marketing until you get the licensing process done. So we’re gaining in many areas and we’re stalled in some areas. 

So when we get some solid numbers, instead of just guessing, which we won’t do, we will let the market know that we are either on track or if we may come in a bit below. COVID has had an impact on our physical locations, there’s no question of that, but that’s not unlike any other company that has physical plants anywhere in the world, actually. It has had a detrimental effect on our Helix operations, most definitely. So we’re assessing, and we expect that when we do the presentation in the next quarter that will give an update to that guidance.  

So what should investors expect overall for the rest of 2022? 

Well, we will continue to grow. Absolutely, that is happening. Because of the numerous brands that we have, some brands are underperforming, while other brands are overperforming. So I think investors could expect to see additional major news as we progress because of the products we’ve just talked about. 

We expect to get other licenses in the North American market. We’ve made no secret of the fact that we’ve been in deep discussion with the state of Ohio for some time. In fact, we presented at the Ohio Senate to get esports into their regulatory framework, and we’re the main reason they got it in. So it would be no surprise that we are aggressively pursuing a license in that jurisdiction, and we have two other jurisdictions in the United States and one in Canada that we’re also looking at. 

From a business partnership side, once the LandDuel product launches we expect to open a whole new vertical, which is providing esports and gaming to the casino market. We’re partners with IGEA, which is a subset of NIGA, which represents 50% of the North American casino market. We expect to have a big display at the NIGA tradeshow in Anaheim, California, April 19-22, 2022. Also we expect to have a number of casino partners over the course of this calendar year.  

So investors should anticipate continued growth. Clearly, we are working now more on consolidation and organic growth. We have made seven acquisitions and now we’re focusing on the efficiencies and cross-marketing between the various platforms, as opposed to growing through acquisition. But we’ll get back on the acquisition train, probably late this calendar year. 

I think those are the salient points: that investors can expect more growth, they can expect continuous new product offerings, and they should expect to see a great deal more effort into consolidation and organic growth. That’s what we’re focusing on right now.  

Contact the author at jon.hopkins@proactiveinvestors.com