In ESPORTS WEEKLY 011, I covered Valve’s Counter-Strike and the $7 Billion gambling market that was associated with the game. While gambling on Counter-Strike has been well known in the eSports community for a long time, Bloomberg had the most mainstream coverage in a great overview at the end of April.

However the problem is escalating. Here’s how Counter-Strike’s gambling mess has gotten immensely worse over just the last month:

June 12: Skin gambling site CSGODiamonds was revealed to have colluded with Pro Player moE ensuring that he won every time he bet — basically cheating. This all came to light on everyone’s favorite public judge and jury: Twitter

June 20: moE revealed that he received $90,000 in payment and made $300,000 in affiliate fees — in just the last 6 months from CSGO Diamonds. m0E is also no longer an analyst on Turner’s E LEAGUE.

from CSGO Diamonds. m0E is also no longer an analyst on Turner’s E LEAGUE. June 23: Class Action Lawsuit filed against Valve for being complicit in underage gambling. Whether or not this suit will see it’s desired outcome, Ill leave to the lawyers but it’s never a good thing for your brand (Hello DraftKings)

July 1: Vulcun, which raised $12M just a year ago, is shutting down it’s Fantasy eSports betting business and will be pivoting to “Chat games on Twitch”. This was probably in the works for a while but considering Vulcun’s reliance on Counter-Strike; the timing is probably not coincidental.

July 3: There’s nothing that hits the issue home more than this YouTube video released this past Sunday that exploded across the space. If Jim Jefferies did a 60 Minutes segment on Counter-Strike’s Gambling issue, it may look like this. Yes it’s NSFW but we’re all adults — unlike Counter-Strike’s Gambling issue:

(Video: H3H3 Productions)

If you’re reading this, it shows you have a vested interest in the space and I highly encourage you to watch the whole thing. As always, let’s keep emotion out of it and analyze where the impact is going to matter most: Money.

HOW YOUTUBE AND TWITCH MAKE MONEY OFF OF COUNTER-STRIKE’S UNDERAGE GAMBLING PROBLEM

(Photo: YouTube)

While a lot of the coverage has focused on the two streamers and underage gambling — rightly so — the more interesting potential media impact is on Twitch and YouTube. An Australian TV report that looked into Counter-Strike’s gambling problem interviewed several players, including 18-year old Jordan Bruce, who stole his dad’s credit card and lost $1,800 (Note the legal Gambling age in Australia is 18). Just like I covered previously, look at one part of the report:

(Photo: ABC News Australia)

Ethan from H3H3 Productions in the Counter-Strike Gambling video brings up a similar point to YouTube stars Tom “Syndicate” Cassell and Trevor “TmarTn” Martin, who also happens to be co-owner of Team EnVyUs:

(Photo: H3H3 Productions)

You’re seeing that correctly. On both of their YouTube channels, they have a combined 16M+ Subscribers.

So how much does YouTube and Twitch actually make off of Counter-Strike gambling? That’s a very tough number to gauge for the following reasons:

1) What videos are considered “association” with Counter-Strike Gambling

2) Exactly how much Brands are paying for Video Ads

3) YouTube and Twitch’s overall Sell Through Rate

With that being said — I did it anyways. Even taking into educated guesses on a few of the metrics, I think I’m in the ballpark. While I can’t share that as it’s for Clients, I can share the following public info. Let’s start with TmarTn:

[Update 1] I began compiling the data but because of all the blowback his videos are now Private — wonder why he would do that?

Let’s just use Syndicate’s YouTube channel to start:

1/ What are gambling associated videos? That’s tough but let’s just use his CSGO Crate Unboxing videos as that’s closely tied to Counter-Strike gambling. Here’s a quick snippet of the type of content in those videos so you can be the judge:

(GIF: Giphy — Title eSports Daily)

Here’s the full playlist (Views total incorrect):

(Photo: YouTube)

2/ Based on this report from the NY Times, the Video Ad CPM rates on YouTube were $9+ in 2012 and $7+ in 2014 (CPM is what a Brand is willing to pay per 1,000 Video Ads). Let’s use $5 as an estimate for 2016

3/ The Sell Through Rate is based on the number of Ads shown per each View. So if you have 1,000 Views and you show 1,000 Ads, thats a 100% Sell Through Rate. I looked at every one of the 28 videos in this YouTube playlist and saw a Video Ad every single time — the most was from Verizon:

(Photo: YouTube)

Here are the total Views on this one Playlist as of Tuesday AM:

(Source: eSports Daily)

Now that we have the total Video Views, we can estimate the Revenue:

(Source: eSports Daily)

Based on 45/55 revenue split between YouTube and creator, 1 Counter-Strike Gambling related Playlist would generate $128,000 — $58,000 for YouTube and $70,000 for Syndicate (Remember, this is the Max amount estimated and there are factors like International Viewers, various CPM rates, Frequency Capping and Ad Blocking to factor but this gives you a sense)

Another revenue generator? I haven’t even included the Banner Ads or the Sponsored Videos I saw either:

(Photo: YouTube)

Based on the current rates for Influencer Sponsored Videos, Syndicate’s overall revenue is probably much higher than the $70,000 from just the Video Ads. Further, that probably pales in comparison to the money generated from the Gambling sites themselves from all these viewers. While Syndicate has plenty of Non-Gambling content, there’s still a clear connection.

What about Twitch?

With the challenges of getting accurate viewer counts post Streaming and limited viewer metrics, it’s challenging to estimate Twitch’s Counter-Strike Gambling related revenue. Twitch is even harder than YouTube to estimate — but I’ve analyzed those numbers as well. Here’s what I can share and let’s again start with TmarTn:

[Update 2] There only seems to be 1 VOD now from 2016 on TmarTn’s Twitch channel.

Syndicate’s Twitch channel also had only 1 VOD related to Counter-Strike gambling and there isn’t enough data on that 1 VOD to provide a reliable estimate. But I did find this when I viewed the video twice:

(Source: Twitch)

However you want to skin this cat — there’s money being made by both YouTube and Twitch off of Counter-Strike gambling.

[Update 3: Another Twitch streamer has come under fire for similar allegations. I’d definitely expect even more fallout. Even Team EnVyUs owner Mike Rufail provided a hint]

(Photo: Twitter)

WHY I CARE

Do I have an agenda against Valve or these two guys? No. Stir up Reddit? No. Am I trying to advance eSports and build a business? Yes.

This line from Ethan in the video sums of perfectly how I feel about Counter-Strike’s massive gambling issue:

“As someone who loves new media. I love eSports. I love YouTube. When this kind of thing is allowed to go on, it cheapens everything we do.”

TL/DR: Valve’s Counter-Strike underage gambling issue is a big problem, it’s only going to get messier; which tarnishes the burgeoning brand of eSports and if you want it to grow: Regulate and Fix It.