Competitive video gaming has a long history of ups and downs in Russia. The ups involved the country’s eSports community growing tremendously in the number of its members and their accomplishments, while the hardships were predominantly caused by lack of sufficient funding, heavy bureaucracy, and censorship.

However, despite the challenges over the years, the country’s eSports industry now seems to be in a nice and comfortable position to expand further, and recent announcements about financial support from wealthy investors and recognition from Russian authorities represent developments in the right direction.

And as the Russian eSports industry is performing beautifully and is anticipating even better times, eSports betting is developing right alongside competitive video gaming in the country. In fact, this trend is not limited to Russia and can be easily spotted everywhere else in the world where eSports has taken off.

How has competitive video gaming developed in Russia and what will come next for what now clearly seems to be a lucrative market? Why have investors grown bullish on eSports? And what challenges betting operators are facing in their efforts to create a profitable eSports gambling market in Russia? These are some of the questions Casino News Daily’s team is looking to answer to in its latest industry report.

eSports in Russia can trace its roots back to the late 1990s. Competitive video gaming gained popularity in the country in a manner not that different from other parts of the world. Groups of friends would gather together to play until late into the night. Word would spread about a new exciting pastime until a full-blown industry would eventually be created. And what initially started as a tight community of players would develop into a behemoth network.

According to the latest edition of the Global eSports Market Report, produced earlier this year by Newzoo, the global eSports market was worth more than $650 million last year and is anticipated to grow 38% by the end of 2018 to over $900 million.

A separate study conducted by PayPal and gaming market research house SuperData showed that Europe’s eSports market was worth $301 million in 2016 and was expected to reach $346 million by the end of 2018. Sweden claimed the largest eSports revenue share in SuperData’s report with $40.8 million, while Russia trailed not far behind with $35.4 million.

However, the growth of the country’s eSports industry was preceded by a tumultuous period, during which the organization representing the Russian eSports community was struggling to secure the activity’s status as a rightful member of Russia’s list of officially recognized sports.

The Russian eSports Federation was originally established in March 2000 and was registered a year later. According to official information from the federation’s website it has organized more than 1,000 competitions, including hundreds of national tournaments, since its foundation. Competitive video gaming was included into Russia’s list of sports in the summer of 2001 and was officially recognized as such in 2004.

However, eSports was forced to leave the Russian Sport Register in late 2006. The lack of sufficient funding and support from government institutions as well as the heavy bureaucracy involving a sport’s recognition as such had taken their toll on competitive gaming, despite the rapid growth it enjoyed within the country’s gaming community.

It took some time before eSports was able to reassume its place in the register in 2016. And a year later, it cemented its spot there with its official entry into “the core part of the register” to become “equal” to the other recognized sports in Russia.

As mentioned above, eSports is a big industry in Russia and is showing a great potential for future growth and expansion. Recent developments from the country from the past several years have shown that the eSports hype is real and is here to stay.

While competitive gaming had somewhat struggled to gain proper financing in the past, it has now become a new favorite field for wealthy Russia businessmen. And wealthy Russian businessmen are well-known for their generosity when it comes to something they feel passionate about.

Earlier this year, Russian eSports giant ESForce was sold to Internet services company Mail.Ru for the reported amount of $100 million. Mail.Ru is a subsidiary of USM Holdings, a company led by Russian business magnate Alisher Usmanov. Mr. Usmanov is known to be the owner of a large stake in English Premier League club Arsenal FC and has been making the headlines for his reported close ties with Kremlin. The businessman has been backing financially ESForce since at least 2015, spotting the potential of a company that is now among the CIS eSports powerhouses.

Private investor Nikolai Belykh has also joined the club of wealthy Russians to have felt tempted by this relatively new but quickly growing field. News emerged earlier this year that the businessman has purchased a 25% stake in Winstrike for a reported price of $10 million. The company received the much needed financial backing as it was gearing up to extend its footprint across different jurisdictions and channels.

With the popularity of eSports growing globally, another major trend has emerged in recent years and has showed that it was here to stay. As mentioned above, the global eSports market is expected to generate revenue of more than $900 million in 2018. And where there is huge money to be made, betting somehow always follows.

In other words, more and more players and viewers are ready to pour money into eSports betting, including the so-called “skin betting” and real-money wagering on the outcome of eSports events. Russia has not been slow to keep pace with that trend, as well. Being a nation where betting and gambling, as a whole, have long been extremely popular (sometimes as underground activities), eSports betting has found a place to grow.

According to different data reports, the size of Russia’s sports betting market ranges from between $900 million to $3.5 billion. Those figures include both licensed and unlicensed operations. It is also important to note that only betting on sports events is considered legal in the country and is the only activity for which interested operators can obtain license from local regulators.

While it is absolutely impossible to say how much Russia’s eSports betting is worth, it is important to point out that a number of major international betting companies are targeting Russian bettors with eSports offering, which generally bodes well for the market.

And skin betting, just as anywhere else in the world, has created a whole underground economy in the country with its quite controversial nature. Skin betting has actually appeared on regulators’ radar screen multiple times. Last year, Russia’s super-vigilant watchdog Roskomnadzor, which, among other things, is tasked with cracking down on anything representing unlicensed gambling, blocked a number of Russian-language websites facilitating the provision of skin betting services to local eSports players. The agency justified its actions by arguing that sites of this kind targeted underage players.

eSports betting, that is real-money betting on eSports, possibly has as much potential for growth in Russia as sports betting. However, it faces quite the same challenges. In the first place, the proper advertising of betting services in the country is a major hurdle as there are very tight regulations on how and what can be advertised.

In addition, it can be said that Twitch has probably been one of the biggest channels for the popularization of eSports and betting on eSports in Russia. According to some reports, the country represents the popular streaming service’s second largest market in terms of viewership. However, regulators recently targeted Twitch in their attempts to crack down on services hosted by Amazon and Telegram, which was in turn part of a clampdown on services that were reportedly running anti-government messages. Russia-based Twitch users were thus unpleasantly surprised with the realization that they could not access the streaming platform.

eSports as well as betting on eSports are two lucrative markets that bring investors (and a whole new class of them) into the field. And it is clear that Russia’s eSports market is huge and ready to boom in the years to come. While the local industry might have cleared the financial backing hurdle as it has been drawing major investors, all of them bullish on its success, regulation and censorship are two of the big challenges that are here to attempt to hamper its future growth.

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