Gambling Is A Safe Bet For Sponsorship But Not For The Reasons You May Think
BY ADAM GROSSMAN
Arguably the best bet to make on the legalization of sports gambling in the U.S. was its impact on the growth of sports sponsorship revenue. In the past week alone, the NHL, New York Jets, New Jersey Devils, and Philadelphia 76ers have all signed new betting partnerships.
What is more surprising is the structure of these deals and what they do not include. In particular, many of these new deals are not exclusive to a particular company, not exclusively focused on sports, and not exclusively focused on the U.S.
The NHL’s deal announced this week with MGM Resorts is similar in structure to the deal the company struck with the NBA from a data perspective. The company will have non-exclusive rights to “NHL's proprietary game data generated by the league's state-of-the-art tracking systems.” Data is required for sports gambling to exist with both sides of a betting transaction needing to rely on information to determine the winner and loser for the transaction. This enables MGM to credibly say to sports bettors that it has access to the most accurate NHL information.
However, MGM is not the only company that will have this opportunity because of a non-exclusive agreement. This relationship enables the NHL to maximize its partnership revenue by potentially selling the same data to multiple gambling companies.
This non-exclusive approach is also being used at the team level. Both the Devils and Jets have multiple relationships with gambling partners. The Devils in particular have already sold to both William Hill U.S. and Caesars Entertainment and both will have branded betting hospitality locations in the Prudential Center. The hospitality activations are particularly interesting because on-site gambling at the arena is not legal. Both William Hill and Caesars are using the hospitality locations to facilitate betting on their mobile applications.
MGM is taking a non-sports specific approach when it comes to its mobile strategy in its new relationship with the Jets. The company is sponsoring a game within the Jets official team app that only allows players to win prizes (and not money). As MGM's president of interactive gaming Scott Butera said, "We can promote our app and our casino, which is valuable to us because it could lead to a sports betting customer, even though the NFL won't allow us to have a specific call to action. We love the demographic that Jets fans provide.”
It is atypical for a partner to agree to a sponsorship where it admits that its stated intention (i.e. potentially increasing sports gambling revenue) only “could” result in action because the rights holder does not allow for “a specific call to action.” However, MGM recognizes that its relationship with the Jets can help the company reach its target customer for its non-sports businesses.
More specifically, MGM can leverage a sports betting opportunity to better engage with its demographics for its non-sports businesses. This is a crucial point that gambling companies currently (and likely in the future) make the vast majority of their revenues from non-sports betting. Prior to the legalization of sports gambling, it was very difficult for gambling companies to activate partnerships outside of daily fantasy sports. Sports audiences are lucrative gambling, and not just sports betting, customers. Now gambling companies have better access to these customers.
The 76ers relationship with Caesars requires that it have activations solely focused on “non-sportsbook” activities because sports gambling is still not legal in Pennsylvania at this time. The 76ers arrangement also shows another interesting twist to legalization of sports gambling in the U.S. The team demonstrates that gambling companies do not need to solely focus domestically when it comes to these relationships. Caesars Entertainment Chief Experience Officer Michael Marino “emphasized the global reach of the 76ers as an appealing aspect of the deal. The 76ers, he said, have a large fanbase in China where the team competed in two preseason games earlier this month.”
It may seem counterintuitive that companies would focus on reaching international markets because of the legalization of sports gambling in the U.S. While gambling is illegal in much of China, Macau is the largest gaming hub in the world, generating $3.3 billion in revenue in August alone. Companies have used NBA teams to promote products in China for years with the Houston Rockets being one of the teams most well-known for these partnerships. The legalization of sports gambling in the U.S. and the change in rules by domestic leagues to allow sports gambling partners should continue to enable sponsorships with international reach.
The legalization of sports gambling will continue to have a big impact on sports. The reason that sports gambling sponsorships can be non-exclusive to a specific company, non-exclusive to sports, and non-exclusive to the U.S. is that companies see new ways to generate incremental revenue growth. The organizations that see the scope of the opportunity will be the ones that can best benefit from the growth of sports gambling.