The Potential Limits To Growing Sponsorship Revenue From Gambling, Cannabis
BY ADAM GROSSMAN
If you were to say that there were organizations that would benefit from sports gambling and cannabis even a few years ago, you would more likely be thinking of organized crime rather than state governments. Not only are both achieving legalization throughout the U.S., but also governments are making them important parts of their strategies for how to generate new tax revenues. For example, two of the primary components of new Illinois governor J.B. Pritzker’s budget proposal to help address budget deficit and pension liabilities are legalizing sports betting and adult recreational use of marijuana.
The increasing number of states approving one or both of these items should be a boon for sports partnership revenues. We have documented the impact of gambling on sports sponsorships that include that new companies that can partner with sports organizations for the first time and the overall increased fan engagement with lucrative demographics for corporate partners.
Cannabis oriented products (including marijuana) would seem to be following a similar path. More specifically, sports organizations often compete where a cannabis-based product is legal and athletes often use these products. As of March 2019, “a whopping 82 percent of [MLB, NBA, NHL, and NFL] teams (101 of 123) are playing in areas where their employees can legally purchase either medicinal or recreational marijuana.”
The Toronto Wolfpack became the “first pro sports team to launch a line of cannabis products.” The rugby team launched CBD aka cannabidiol products in part because its chairman claims “Rugby is a gladiatorial sport. You have your fair share of bumps and bruises and for recovery and inflammatory pain management CBD products are very, very effective.” The UFC also recently announced a new “exclusive, multi-year, multi-million dollar, global partnership to advance CBD research” with Aurora Cannabis Inc.
Authenticity is critical to successful partnerships. There are a growing number of current and former players that use cannabis-based products for pain management and are willing to publicly talk about these real and/or perceived benefits even though these products are still largely considered banned substances by most major professional sports leagues. It is difficult to think of a more authentic endorsement for a product or company than continuing to support something that could get you banned from playing the sport you love.
Yet, gambling also demonstrates one of the potential hurdles to cannabis-based products becoming ubiquitous to sponsorship. The primary goal of B6A’s Corporate Asset Valuation Model (CAV) is to determine the fit of partnerships between sports organizations and sponsors based on the specific return on investment (ROI) for these companies.
Both gambling and cannabis-based products could be “too good” of a fit with sports fans and deliver “too high” (pun not intended) of an ROI to these companies. More specifically, gambling companies became one of the largest sponsors of European sports teams because this is one of the best ways to target fans and increase use of their products. This can increase the probability of fans becoming addicted to gambling particularly younger audiences that are attracted to teams and athletes.
The United Kingdom, Belgium, Italy, and Austria all instituted or are considering laws to restrict gambling sponsorships in large part to address this concern. Even before sports gambling is officially legalized in most of the U.S., the American Gaming Association (AGA) has already issued its “Responsible Marketing Code for Sports Wagering” to provide guidelines for “marketing content” to proactively address these issues.
Many people both inside and outside of the sports industry, including NFL Commissioner Roger Goodell, believe that marijuana also has an “addictive nature.” He also stated, “I want to make sure that the negative consequences aren't something that is going to be something that we'll be held accountable for some years down the road.” While CBD products appear to differ from marijuana in that “CBD is purported to provide certain health-related benefits, such as pain relief, while lacking the psychoactive properties of THC,” they are still on the banned lists of most major sports leagues’ products lists because many perceive them to also be addictive.
This does not mean that both gambling and cannabis will not have a long-term significant impact on domestic sports sponsorship. However, the efforts to restrict gambling partnerships abroad have already had and will continue to have an impact on gambling partnerships domestically as demonstrated by the AGA report. Similar types of efforts will potentially be applied to cannabis-based products as well. It is important to note that increasing legalization of both items does not mean instant or unlimited new partnership revenues.