[toc]In Nevada, Seth Schorr is at the cutting edge of the esports betting revolution. As the CEO of Fifth Street Gaming, he is the first to experiment with bringing his casino experience, and Las Vegas hospitality expertise to the development of esports as mainstream entertainment.
Fifth Street Gaming has applied to the Nevada Gaming Control Board (NGCB) for permission to offer wagering on a live esports tournament to be held in July this year.
If permission is granted, the company, which owns the Downtown Grand Casino in Las Vegas, will be the first to offer such esports wagers legally in the U.S.
The Downtown Grand is already home to a specialty esports venue which sits alongside, but not inside the casino itself.
ESBR talked to Schorr about his plans to offer esports betting, and how he sees the industry becoming a part of the live casino offering in Nevada.
Fifth Street Gaming’s journey to esports
Schorr first became interested in esports towards the end of 2014. The venture capital company with which Fifth Street Gaming has partnered to develop the Downtown Grand (DTG) also has an interest in the popular esports blog IGN.com.
Schorr explained the history of their involvement in esports from the perspective as a casino operator:
“About a year and a half ago we decided to wrap our arms around esports and see if it would integrate well with the casino experience, because we really weren’t quite sure to be honest.”
“We spent most of 2015, till about September, October, really just studying the industry.”
“I found that the industry itself was incredibly open, it was not a closed industry, and they were certainly open to potential collaboration. We just weren’t quite sure exactly what that should be.”
Sponsoring the Renegades
At an esports conference in California in 2015, he met the owner of the Renegades esports team. The decision was quickly taken to invite the Renegades to come to Las Vegas and live and train at the DTG.
It turned out to be an excellent opportunity for learning about the nature of esports, its demands and opportunities.
“It wasn’t really intentional that the first thing we would do was have an esports team live and train with us, but looking back, it’s the best thing that we did, because it forced the hotel staff to buy in to the concept of these esports athletes, being professional athletes with very specific needs,” Schorr said.
“We very quickly learned about this segment, so that when we were actually catering to their fans, three or four months later, as an organisation, esports quickly was embedded in our culture.”
Esports tournament contests and an esports lounge
The sponsorship relationship began with holding viewing parties and has since developed to the DTG hosting its own tournament contests in a newly-developed facility located alongside the casino.
“We had viewing parties, and now we have contests where aspirational sports players go to the casino floor and pay a cash entry fee to play in a tournament, play for a cash prize, and that happens every Friday and Saturday night,” Schorr told ESBR. “Once we saw that happening and working really well, we realised we were on to something.”
“We’ve created an esports lounge, although we’re about to close it for about six weeks as we put some real money into it and make it really nice—give it the Wow! factor.”
“I knew what I didn’t know, so I wanted first for us to get the functionality before we spent money on the wow factor, make sure it was set up right, make sure it worked, make sure that there was enough room and that the room worked well,” he said.
As a boutique casino the Downtown Grand has advantages over larger casinos
Schorr believes that it will be more difficult for the larger Vegas resorts to follow the same path.
“It’ll be a little more challenging for a five star luxurious resort to make an esports environment that is authentic,” he remarked. “The DTG is uniquely positioned for many reasons, it’s a boutique, small, hip hotel, but it’s also priced well. Our average daily rate is half that of a resort like Wynn or Aria.”
“But we were also rated two years in a row the best value in all of Las Vegas, so that’s what the millennial audience really wants. Not that they want cheap, but they want something that has good value for their money.”
Applying to take wagers on a live esports competition
Through its bookmakers William Hill, the DTG has applied to the NGCB to take wagers on this summer’s EVO competition. The Evolution Championship Series (EVO) is based on fighting games.
The July 15, 2016 event will include tournaments for games such as Street Fighter V, Super Smash Bros. Melee, Super Smash Bros. for Wii U and Mortal Kombat X. It is being held at the Las Vegas Convention Center, while the Sunday finals will take place at the Mandalay Bay Events Center.
William Hill has applied for a license to take wagers on the events based on the “Other events” option available under Nevada’s gaming regulations. Schorr explained that he and his team are working closely with the NGCB to help process the application, which is the first of its type in Nevada:
“We’re taking a very proactive and personal role working with the GCB getting them comfortable with the nuance of the culture and understanding how this is being facilitated in regulated markets today.”
The recent Nevada Gaming Policy Committee meeting provided an opportunity for the Nevada Gaming Commission and NGCB to take evidence on the wider issue of esports, and Schorr was one of the witnesses.
Second application for 2017
He is also looking at filing a second application which will allow the casino to offer wagering in direct competitions to be held in the casino. Schorr discussed how there is a big difference between wagering on professional competitors in a major competition, and offering a casino experience where players can wager on themselves as they play each other.
“I’m very much focused on creating an experience on the casino floor similar to a poker room, where anybody who feels they have some skill in esports can enter a game and bet against another player and the house takes a rake,” Schorr said.
Under the current tournament rules, the DTG can run competitions where each tournament has a fixed entry fee and fixed prize pool, but Schorr wants to expand the casino’s ability to offer a wider range of options to his customers.
“Ultimately, I want to get to a place where more than two people can sit down at a table and can have a lot more flexibility in terms of the rules and the type of betting.”
The DTG is developing new internal controls
Establishing strong internal controls and satisfying regulators that these meet or exceed the standards is critical to convincing the NGCB that the games should be offered.
“Over and above the specific internal control standards imposed by the regulator each property has its own and we are writing them for an esports, poker-style room.
We’ve just started, a couple of months ago, but really we wanted to allow the contests to play out for a little while and we’re not in a huge rush to get approval. We believe that hopefully sometime next year in 2017, we hope to have submitted the application and work with the Gaming Control Board to get it approved.”
Risk management is easier in the live casino environment
As the operator of a Las Vegas casino, Schorr is naturally an advocate of the environment’s ability to manage risks.
“Personally, I think there are two totally different issues, wagering on a live event versus wagering on an online event,” Schorr told ESBR.
“Clearly to me it’s undeniable that there’s potentially more risk [online]. When you have an event in person, especially when it’s a highly regulated event, like a League of Legends event, like any ESL, CoD or CS:GO event, where there’s referees right there, there’s hardware that’s been tested, they’re on a local network, there’s none of these DDoS threats–it’s different.”
“Online opens up other issues, which I do believe can be overcome, but I’m a fan of taking baby steps,” he said.
The preference is also for taking a cautious approach to what events are right for launching a wagering operation. Big events are inherently less risky than smaller events.
“There’s less likelihood that somebody’s going to throw a big event. They ruin their career, it’s not just the money, it’s their career, and with so many eyes on, let’s face it, it’s a lot harder to get away with something,” Schorr noted.
Doing something new require boldness, doing it right requires caution
When Schorr talks about taking baby steps, he clearly doesn’t mean moving slowly. The DTG has come a long way in the just over six months since inviting the Renegades to take up residence.
Nevertheless, in his approach to internal controls, and to regulation, it is clear that the cautious approach is paying dividends.
This is apparent in the decision to restrict entry to the esports venue to customers over the age of 21. This is a decision which denies the company access to the 18 to 21-year-old demographic which forms part of the potential esports audience, but which doesn’t fit the profile of the casino customer.
“There was no law saying the participants had to be 21, however, we decided six months ago that we would require people to be 21, just for optical reasons. This is about an experience we’re creating in the casino that is an adult experience, we’re urging people to have fun, spend money, to drink, and it’s an adult environment,” Schorr remarked.
“We still turn away on average two dozen people who are under 21, but we’ve had to stick to our guns and we feel that there’s plenty of places for people that are under 21 to play video games and we don’t believe the casino floor is one for them.”
Converting esports players to casino customers
The differences that the DTG has identified between its usual casino customers and the typically millennial males who follow esports has helped the casino to develop its strategy for encouraging esports customers to also become casino customers.
During his evidence to the Gaming Policy Committee, Schorr gave an illuminating example. Esports players don’t want to get greasy fingers when they eat fast food, so the casino now makes sure it offers plenty of “food on a stick.”
The minor changes to the casino environment seem to be paying off.
“We don’t have enough analytics to specifically quantify it, the conversion rate, but there’s no question that when we have a lot of people at our esports contests we see more people in the pit, we see that crossover,” said Schorr.
As to the games that the new demographic enjoys, there are other differences that need to be catered to.
“We don’t see them play [slots], we see them play mostly blackjack, and roulette,” explained Schorr, adding that as a result, the casino was moving more blackjack tables closer to the entrance.
Educating casino customers to bet on esports
The opposite marketing problem is also being solved with innovation—how to get existing casino customers interested in esports and esports betting.
“A lot of our programming today is based on the theory that we will see the crossover,” commented Schorr. “We see that games such as Madden and FIFA may be more enticing than League of Legends to a non esports enthusiast.”
“Last weekend, this was one of my ideas and I wasn’t sure if it would go over well, … we bought some old Nintendo 64s, which are the Nintendo from the mid-nineties, so catering for more of the forty year olds than the 20 year olds, and we had Super Mario Kart contests and we had just as many people enter as we had for a Mortal Kombat tournament the weekend before,” Schorr continued.
“Like traditional sports, kids don’t stop playing a particular game just because they’ve grown up. It’s not like your toys when it’s time to put down the GI Joes. As I explored this industry, I met plenty of people in their early forties, who have been playing Dota 2 for 10 or 12 years. Maybe they play less, I’d like to think they have a little less time to play as they get older, but they still like to play.”
Internet broadcasting is an integral part of the new product
Schorr also noted the importance of broadcasting to the casino’s esports arm:
“We have been dabbling in broadcasting. We created a small broadcast studio where we have a blogger who broadcasts every Sunday. He does a podcast, and we’ve been streaming our contests, that actually started a few weeks ago.
We think broadcasting is a huge part of this opportunity. It’s the best way to engage our audience when they’re at home, to acquire new customers, to get awareness of the property.
Obviously we know that this demographic watches their sports online. That was one of the reasons why we picked the Renegades early on, they’re a very high profile team with a great media presence.”
Who follows you through the door?
While Fifth Street Gaming may be the first casino in Las Vegas to accept esports bets, it won’t be the last. Schorr explained that esports was a topic that every casino operator in the city was considering.
“There’s no question that every major casino in Las Vegas is talking about esports. It’s certainly a topic in the boardroom. MGM has done a fantastic job producing two large events,” he noted.
Schorr said that one chairman of a large casino group told him directly:
“We’re watching you, you’re the incubator.”
The prospect of the rest of the industry following the DTG into esports is not a negative one for Schorr, particularly if they host large live events.
ESL is coming to Vegas in 2017
“I was with the president of ESL North America, and he made it very clear that they’re looking to do a major tournament in Las Vegas in 2017,” Schorr stated. “We love that. Our model is not to have large 10,000, 15,000 person events. Quite frankly, our resort is not designed for that, so we very much hope and believe that other properties that have large venues will have major events.”
“You know that when the WSOP comes to Las Vegas, every poker room in Las Vegas does well, so any large event that comes to town will be beneficial to everybody.”
DTG will offer esports with the Las Vegas experience
Noting that nobody has successfully created a venue where esports players can go 365 days a year, Seth pointed out what he sees as the critical difference between the few esports bars and venues that are in existence and what the DTG can offer:
“They weren’t created by hospitality people, so that they don’t have hospitality in mind.
There are rows and rows of computers in these dark rooms, and this is where I feel uniquely positioned, being a 39-year-old hospitality professional, that I can bridge the gap between the traditional world of hospitality and the authenticity of the esports community.
And that’s what I hope to do, and hopefully, I’ll get lucky and figure it out!”