Betting on New Revenue
BY ADAM GROSSMAN
The U.S. Supreme Court decision that the Professional and Amateur Sports Protection Act of 1992 (PASPA) is unconstitutional will have a dramatic impact on the sports industry. The ruling enables each state to enact its own sports gambling regulations unless (or until) Congress decides to make its own nationwide laws (which is the preference of most sports leagues).
The most direct way that sports organizations seemingly would benefit from gambling is through what NBA Commissioner Adam Silver proposes as an “integrity fee.” Sports leagues would essentially receive a 1% fee on each bet to “monitor games and ensure they are contested honestly.” Sports leagues also want to make sure that bettors use the same statistics for evaluating games as well. The NBA’s agreement with Sportradar was completed in part to address this issue.
It is estimated that legalized gambling will be a $300 billion per year business so sports leagues could earn $3 billion per year in new revenue just from the fee. It is unclear if sports leagues will be able to charge this high of an integrity fee when casinos typically only make a profit of 3.5%-5% per sports bet. However, sports leagues will still likely see a very substantial windfall as legalized sports gambling becomes more prevalent.
The new revenue is not just from taking fees on the bets themselves. In fact, some of the big winners of the PAPSA decision are sponsorship rights holders. Even before the PAPSA decision, gambling was a large driver of interest in sports teams, leagues, events, and athletes. With more people now having the ability to have “skin in the game,” sports organizations should see even more people attending, watching, listening to, and reading about sports. of
Bettors are also a desirable demographic for many corporate partners. According to the Fantasy Trade Sports Association, the average age of this demographic is 32 years-old while the average income is over $75 thousand per year. Having a larger, more engaged audience of desirable demographics consume sports content is exactly the opportunity that many companies are looking for from partnerships. More specifically, it maximizes the probability of success for companies to use sponsorship to achieve their revenue and brand goals. Therefore, repealing PAPSA should help both buyers and sellers of sports sponsorships generate more money.
In addition, gambling companies themselves have traditionally been large sponsors of sports teams. In the United Kingdom (UK) alone there is an estimated $100+ million dollars spent by gambling companies on sponsorship. In the United States, daily fantasy companies such as DraftKings and FanDuel already spend millions of dollars on sports sponsorship.
The reason that gambling companies want partnerships with sports organizations is fit. We can use in-game betting as an example. In Europe, fans can currently bet on almost anything that happens during a game such as how many goals will be scored in the second half of a soccer match. Having a brand’s logo or call-to-action in front of a customer right as he / she is making a purchasing decision is exactly the type of opportunity that maximizes the ROI of a partnership investment.
There is a significant difference, however, in the current dynamic between the US and European markets. Because legalized gambling will be starting in several states in a very short amount of time, many customers in the U.S. do not have as much familiarity with gambling companies as Europeans fans already have. Therefore, increasing brand awareness and enhancing brand perception is critical. More specifically, sports fans want to know where they can gamble and how they can gamble safely.
Sports organizations have a long history with helping companies achieve their brand awareness and brand perception goals. Using in-venue signage, traditional media, social media, and mobile channels in particular will ensure that the gambling companies’ customers receive the right message at the right time in ways that facilitate having the best experience. This combination can maximize the probability of success for gambling companies in attracting new customers.
The Supreme Court’s decision to strike down PAPSA should greatly benefit the sports industry. However, it is not solely because sports organizations can take a percentage of bets. Buyers and sellers of corporate partnerships should also benefit greatly by having a large, engaged audience consuming sports content in ways that help companies achieve their revenue and brand goals.