One video game’s vir­tual weapons are now a cur­rency for gam­blers

▶Teens and oth­ers are bet­ting bil­lions on video game matches ▶“Noth­ing about Counter-Strike is about the game any­more”

Bloomberg Businessweek (Europe) - - NEWS -

The video game Counter-Strike: Global Of­fen­sive, in which play­ers break into teams of ter­ror­ists and coun­terin­sur­gents to shoot one an­other, is a fa­vorite of the pro gam­ing cir­cuit. A tour­na­ment that con­cluded on April 3 sold out its 10,000 seats at Na­tion­wide Arena in Colum­bus, Ohio, where the NHL’s Blue Jack­ets play, and gen­er­ated 71 mil­lion on­line views over four days. In May, TBS and WME/IMG will launch their own league for CS:GO, as the game is called, stream­ing matches on­line and broad­cast­ing them on TV on Fri­day nights.

Valve, CS:GO’s de­vel­oper, owes the game’s suc­cess to “skins,” dec­o­ra­tive vir­tual weapons bought through a lottery-like process run by Valve and traded among play­ers or sold for real-world cash. Valve added skins to CS:GO in 2013, about a year af­ter its re­lease, and the game’s pop­u­lar­ity soared. (It’s sold 21 mil­lion copies, tak­ing in $567 mil­lion in rev­enue, since its de­but.)

Zynga, Riot, and other game mak­ers also sell vir­tual goods for use in their games. While those com­pa­nies

“Ever since I have been bet­ting, I have been play­ing less, since I want to fol­low the matches.” ——Sven, 16

have put up bar­ri­ers to pre­vent peo­ple from cashing them out for real money, Valve has cre­ated soft­ware that helps in­de­pen­dent web­sites fa­cil­i­tate skin trad­ing and sales. When­ever CS:GO skins are sold, Valve col­lects 15 per­cent of the money. Partly as a re­sult of Valve’s sup­port, the skins have be­come the cur­rency of choice for a thriv­ing gam­bling mar­ket. A slew of in­de­pen­dently run web­sites now ex­ists to let peo­ple wa­ger skins on the out­comes of pro CS:GO matches or on casino-style games and lot­ter­ies.

“Noth­ing about Counter-Strike is about the game any­more,” says Moritz Mau­rer, head of e-sports in­tegrity at gam­bling watch­dog SportIM. “It’s all about bet­ting and win­ning.”

Re­searcher Eil­ers & Kre­j­cik Gam­ing es­ti­mates that more than 3 mil­lion peo­ple wa­gered $2.3 bil­lion in skins on the out­come of e-sports matches last year. Un­reg­u­lated gam­bling on sports is il­le­gal al­most every­where in the world, and some lawyers say this cer­tainly qual­i­fies. Valve didn’t re­spond to re­quests for com­ment for this story.

At any given time, there are about 380,000 peo­ple play­ing CS:GO. Sven, a Dutch 16-year-old, is typ­i­cal. He and his friends play and watch pros play on­line. Sven says he tried skins gam­bling af­ter a friend told him peo­ple were mak­ing tens of thou­sands of dol­lars do­ing it, and his in­ter­est in CS:GO has shifted. “Ever since I have been bet­ting, I have been play­ing less, since I want to fol­low the matches,” he says. “You’re re­ally hyped and hop­ing that your team will win. Ev­ery kill they get, ev­ery round they win, you get way more ex­cited.”

Sven gam­bles skins on an in­de­pen­dent web­site called CSGO Lounge, which Web an­a­lyt­ics com­pany Sim­i­larWeb ranks among the 700 most pop­u­lar web­sites in the world. (Thirty-eight mil­lion peo­ple vis­ited the site in March, al­most five times the traf­fic of pop­u­lar bet­ting web­site Bo­vada.lv.) Like most skins sites, CSGO Lounge pro­vides scant in­for­ma­tion about its own­ers, user pro­tec­tions, or how it com­plies with gam­bling laws. Sven says he’s un­per­turbed. “I fully trust this site since ev­ery­one in the com­mu­nity uses it,” he says. “It’s even been rec­og­nized and helped by Valve.”

Based in Belle­vue, Wash., Valve

is revered in the video game in­dus­try. It makes a hand­ful of pop­u­lar games, in­clud­ing the De­fense of the An­cients (DotA) se­ries, and runs Steam, an on­line mar­ket­place that’s to PC gam­ing what Ap­ple’s App Store is to smart­phone apps. The pri­vate com­pany doesn’t re­lease its sales, but re­searcher PrivCo es­ti­mates it made a profit of $325 mil­lion in 2013 on $1.6 bil­lion in rev­enue.

At Valve’s 2014 devel­op­ers’ con­fer­ence, em­ployee Kyle Davis said the com­pany had de­ter­mined the best way to get play­ers deeply en­gaged was to give away vir­tual items of ran­dom value and en­cour­age ex­changes. “This is not an ac­ci­dent. This is by de­sign,” Davis said. “We see more blogs pop­ping up and more and more e-mails from our play­ers say­ing, ‘I’m not re­ally sure what hap­pened, but I’ve been play­ing DotA for the last week or two, and I made $100 sell­ing th­ese items that I got.’ This is hugely suc­cess­ful for us.” He de­clined to com­ment for this story.

On the gam­bling sites, users with names such as Bul­let­point and Ravenouskilljoy stake skins on pro matches. A typ­i­cal match draws about $134,000 in skins wa­gers on CSGO Lounge, ac­cord­ing to SportIM; a March con­test be­tween teams Lu­mi­nos­ity and Fnatic drew al­most $1.2 mil­lion. There are also ways to wa­ger skins that have noth­ing to do with CS:GO con­tests. One web­site runs mul­ti­ple lottery-style con­tests per minute, where a player’s odds of win­ning rise with the value of the skins wa­gered. An­other web­site op­er­ates a sim­i­lar game that looks like roulette, ex­cept that play­ers are paid in skins.

The sites are run in­de­pen­dently but use Valve soft­ware. Valve em­ploy­ees have given CSGO Lounge tech­ni­cal sup­port, says Court­ney Timp­son, a Lounge com­mu­nity ad­min­is­tra­tor and spokesman. The Valve logo is promi­nently dis­played on the gam­bling site, and in one post on its fo­rum, a mod­er­a­tor tells users—es­pe­cially the “younger au­di­ence”—what to do if they think they’ve been scammed: “If some­thing is wrong, don’t post on the fo­rums,” the mod writes. “Con­tact Valve/Steam.”

The growth in skins gam­bling tracks the pop­u­lar­ity of e-sports. Mil­lions of peo­ple, es­pe­cially boys and men un­der 25, spend their free time watch­ing other young, head­set-wear­ing play­ers fu­ri­ously type and click their way through on­line bat­tles. Fans of tra­di­tional sports should rec­og­nize the ba­sic struc­ture. There are teams, leagues, spon­sor­ships, me­dia deals, and, in­creas­ingly, money. Turner Broad­cast­ing and its part­ners, which didn’t re­spond to re­quests for com­ment, are look­ing to e-sports to at­tract an au­di­ence that typ­i­cally isn’t watch­ing much ba­sic ca­ble. They’ve built their strat­egy around CS:GO.

Skins bet­ting has the po­ten­tial to un­der­mine the in­tegrity of pro gam­ing com­pe­ti­tions. Last Jan­uary tech web­site the Daily Dot broke the news that a CS:GO team named iBUYPOWER threw a match it was heav­ily fa­vored to win. Play­ers were paid in skins, via CSGO Lounge. Valve con­tacted CSGO Lounge to fer­ret out the bad ac­tors, ac­cord­ing to Timp­son. In the end, Valve banned seven play­ers from events it spon­sors and for­bade pro play­ers and staff from gam­bling on matches, as­so­ci­at­ing with high­vol­ume gam­blers, or shar­ing in­side in­for­ma­tion. It didn’t take any pub­lic ac­tion against the gam­bling sites.

In the U.S., sports bet­ting is il­le­gal in 46 states. So far, Valve and the skins sites have avoided le­gal scru­tiny. CSGO Lounge tells play­ers to ad­here to lo­cal gam­bling laws but does noth­ing to en­sure they do so, and more peo­ple visit the site from the U.S. than any other country but Rus­sia. “There’s no doubt that reg­u­la­tors will catch up with them, and

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