Is Sports Betting a New Opportunity for Sports Organizations?

Is Sports Betting a New Opportunity for Sports Organizations?

In 1992 the federal government passed a law, the Professional and Amateur Sports Protection Act, which prohibited state-authorized sports gambling.  The only exception to this law was the state of Nevada, where single sport betting was already legal. The Supreme Court struck down this law on May 14th, 2018.

Since May of 2018, six states, including Nevada which already had legalized sports betting, have fully legalized sports betting in their states.  Delaware was the first state to legalize sports betting on June 5, 2018. New Jersey followed right after making it legal on June 11th.  The other states that have since legalized sports betting are Mississippi, West Virginia, and New Mexico.  Some states expected to legalize sports in the near future are Pennsylvania, Rhode Island, New York, and Arkansas.

The legalization of sports betting will have numerous effects on the business side of sports.  These new laws have the potential to increase revenue streams for professional sports leagues as well as their respective teams.  According to USA Today the NBA and the MLB have pushed the idea of imposing a 1% sports integrity fee.  Even if this measure is not passed there are still other options to get revenue from sports betting.  Teams could possibly set up sports betting stations in their stadiums and arenas. The Prudential Center recently opened a lounge that looks and feels like a sportsbook, with more than 20 TVs where games and odds boards can be observed.  A sportsbook is a place where people can wager money on various sports competitions and these bets can be placed on various outcomes throughout the game or competition. Depending on the sport the types of wagers that can be made and the process of placing a wager can be different.  People could bet on what they think the next play would be, the score of the next period would be, or even who they think would score the next run/touchdown/goal/point. If teams have sports books in their stadiums the opportunities are endless for what the fans in attendance could bet on.

Legalizing sports betting can also increase revenues of teams and leagues by increasing interest around their respective sports.  According to a Nielsen Sports study, which was commissioned by the American Gaming Association, sports bettors made up 25 percent of the NFL’s TV audience in 2015 but accounted for 47 percent of all minutes viewed.  This shows that people who are betting on games watch almost three times as much sports coverage than people who did not bet on the game. This allows advertising companies to take the utmost advantage of their target market. The longer people watch sports, the more time the advertisers have to pitch their product to consumers.  On 101.9, a sports radio in the New York/New Jersey market, FanDuel has already been advertising in between segments. FanDuel started out as a daily fantasy sports service, which operates like other fantasy sports leagues but at a more accelerated pace like within a week or a day time frame rather than over the whole sport season.  Participants compete in these daily or weekly contests and the winners receive part of the predetermined pot which is funded by entry fees. FanDuel has added a sportsbook app where participants can place wagers the same way they would at an in person sportsbook. This could be just the beginning of ways sports betting companies will pour money back into the sports industry.  In turn this will increase the revenues teams and leagues will get from broadcasting rights.

According to the New York Times, for the fiscal year ending March 2017, $20 billion was wagered by sports bettors in Britain.  Britain is home to just 65 million people (compared to over 325 million people in the United States) and has a less diverse sports market when compared to the United States. British betting companies are estimated to put between 20 and 30 percent of their revenue back into advertising, which is mostly on television.  These betting companies even have sponsorship deals with sport teams. Since the striking down of the federal law banning sports betting in May 2018, there have been sponsorship agreements between betting companies in the United States, like casinos, with sports enterprises.

The NFL’s New York Jets announced a partnership with MGM Resorts on October 31, 2018, where MGM is the team's official gaming partner and the two entities will be enhancing the Jets existing in game prediction app,” I Called It”.  The app will now be called “I Called It presented by Play MGM” and will be enhanced to include pre-play options, upgraded in-play features, expanded prizing, and deeper leaderboards. Both MGM and the New York Jets will be working together to innovate this gaming platform, increase their customer base through cross marketing opportunities as well as providing NFL fans with a “one-of-a-kind” entertainment experience.  According to Sport Techie, most other partnerships between teams and gambling organizations have been centered on casino advertisements. This deal between the Jets and MGM have taken it a step further where the two companies will have a co-branded gaming product as well as hospitality options for Jets season ticket holders and Jets Rewards members. This partnership will increase the value of both MGM and the New York Jets brand by working together to create a new interactive entertainment experience that has yet to fully be captured in the sports industry. The legalization of sports betting has opened the doors for many sports teams to create new partnerships and revenue streams in their sponsorship department.

Let’s take this idea one step further.  Fans in New Jersey can already place sports bets on their mobile devices through apps like FanDuel or DraftKings.  Even in stadiums without sportsbooks, it is still possible for fans to have the gambling experience right at their fingertips.  In the future it is foreseeable that the Jets’ “I Called It” app will be used to bet real money. It may be easier and more cost effective for teams to make apps that their fans can use to bet.  The Jets have a great foundation for this and they could be one of the first teams to really capitalize on it in game betting.

Overall, we are in a new territory in sports business.  There are many options that teams and leagues can use to capitalize on the legalization of sports betting.  While states are busy deciding if they are going to legalize sports betting or not it may become a reason teams leave cities in the future.  There are many opportunities to take advantage of the new revenue streams and it will be very interesting to see how dependent teams will become on sports betting revenues and how much it will affect their business models in years to come.


References:

Booton, J.  (October, 2018).   NY Jets Announce MGM as Gaming Partner, Incorporate In-App Betting.  Sport Techie.  Retrieved from: https://www.sporttechie.com/ny-jets-mgm-gaming-partner-betting-in-app/?utm_source=SportTechie+Updates&utm_campaign=635d5b7f75-SportTechie_Daily_News_10_31_2018&utm_medium=email&utm_term=0_5d2e0c085b-635d5b7f75-294520345

Draper, K.  (May, 2018).  How Betting Will Change the Sport Media Business.  New York Times.  Retrieved from: https://www.nytimes.com/2018/05/15/sports/sports-betting.html

Perez, A.J.  (May, 2018). What it Means: Supreme Court Strikes down PASPA law that limited sports betting.  USA Today.  Retrieved from: https://www.usatoday.com/story/sports/2018/05/14/supreme-court-sports-betting-paspa-law-new-jersey/440710002/

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