Marketers see ‘tsunami of money’ in sports wagering
Editor’s note: This story is revised from the print edition.
For those selling and marketing sports media and sponsorships, the imminent legalization of widespread bookmaking is like a map to buried treasure.
“This will be a tsunami of money for teams and TV rights holders,” said MKTG Canada President and CEO Brian Cooper.
“Gambling will be a top-five sponsorship category almost immediately,” said a chief revenue officer for an NFL team. “I’m bullish enough that I would even take a percentage of the gross.” Like many other team and media sales types, the team CRO requested anonymity, since bookmaking is illegal outside of Nevada.
“When it becomes legal, it will be much better to be a seller of sports media and sponsorships than an actual sportsbook operator,” said David Goldberg, former president and CEO of Youbet.com, now an independent consultant. “There’s not going to be enough media and sponsorship supply to meet demand.”
After years of pretending illegal sports betting didn’t exist, the very mature sports industry is starting to come to terms with its last big domestic revenue opportunity — legal sports gambling. It’s a market every estimate places at hundreds of billions of dollars, enough to buy every NFL team.
In Nevada, legal sports wagering hit a record $4.9 billion in 2017. How much illegal wagering is there across America?
“Believe whatever numbers you want: 10 times, 20 times, 100 times the legally wagered amount,” said Monumental Sports Chairman and CEO Ted Leonsis, owner of the Washington Wizards and Capitals. “It’s unregulated, untaxed, untended, and whenever you have that associated with a huge revenue stream, you’ll have bad behavior.”
The industry awaits a Supreme Court decision that could end the federal prohibition on gambling and leave regulation up to states. However, across the business, the feeling is that if sports betting isn’t deemed legal after this case, it will be soon after. As the CRO of a top Premier League team put it, “When it comes to the U.S. and [legal] sports betting, by now, surely it seems like when, not if.”
So, sales types are already penciling out profits.
“You’re going to see a mad dash,’’ said Sean Barror, the chief commercial officer at AS Roma from 2013-15, who now heads property sales at Excel Sports Management, “so you’ll have people overpaying.”
That scenario is reminiscent of the 2015 marketing battle between fantasy brands DraftKings and FanDuel, which prompted consumer fatigue and calls for regulation.
“The biggest thing that hurt daily fantasy was that it didn’t have any guard rails,” said Optimum Sports President Tom McGovern. “All that marketing noise created an annoyance factor and raised the discomfort levels with those who didn’t like it in the first place.” McGovern expects a limited number of TV ads for gambling, along the lines of the limitation that the NCAA has for beer marketers. A prescribed amount of “responsibility” messaging is also expected.
Nonetheless, “gambling will be a top sponsorship category immediately,” Barror said. “The wild card will be what sort of balance the leagues will strike between consumer sensibilities and teams’ ability to monetize.”
League or team opportunity?
Since it appears that it will be states regulating sports wagering, the question of whether national advertising or league sponsorships will be important is intriguing.
As demonstrated by the NBA’s lobbying efforts for a 1 percent “integrity fee” from regulators, leagues want a piece of the action. They will also incur new overhead in policing gambling. It’s hard to fathom that teams will profit without a league tithe.
“The winners will be the ones making the new rules across sports,” said Premier Partnerships President and CEO Randy Bernstein, “and that will be the leagues.”
The tidal wave of demand in advertising and sponsorship will be the most immediate opportunity. Leonsis sees legalized bookmaking having an impact across many of his businesses.
“The more gaming and gambling, the higher the engagement level of fans, and the more valuable our media rights will be,” said Leonsis, an investor in DraftKings and sports data supplier Sportradar.
“There are two ways to increase ratings,” said Howard Levinson, senior vice president of ad sales at YES Network. “You can have more people watch or you can have the ones already watching to watch more. Anything that will add to engagement will help ad sales.”
Leonsis also expects an ESPNews-like channel centered on gaming and gambling, and for betting parlors to someday set up shop in NBA arenas.
“You could envision one day that our building is open 18 hours a day,” he said. “MGM built a billion-dollar casino near us [in Maryland] and they advertise in our building for people to go there. I could see a day where there’s partnership and we bring part of MGM across the river into our building.”
Finally, there’s the data backbone upon which the new gambling infrastructure will be built. Data companies and financial verification firms will profit. Assuming in-game “real-time” data is deemed as league owned, so will sports properties.
“Bloomberg has a huge business in licensing financial data,” Leonsis said. “You are going to see a booming business where we not only license our content, we license our data.”
The real-time data imperative will underwrite applications such as ongoing MLB prop bets on a batter-by-batter basis, a scenario envisioned by Bill Squadron, special counsel to sports data provider Genius Sports, who said more than half of all U.K. sports bets are prop bets made after the game has started.
“You’re going to get people betting who never bet before,” said Jim Schwebel, a former NFL senior vice president of corporate sponsorship marketing and now a principal at sports and entertainment agency Apel. “And once they start doing it, I could see a dedicated NFL channel for bettors.”
Without knowing precisely what the laws will be regarding legalized sports bookmaking or what league rules will permit, many selling team sponsorship assets were reluctant to make predictions.
“It will depend on how liberal the leagues are,” said the president of a large-market NBA team. “[Uniform] patch or no patch? Courtside signage or no courtside signage? Betting in arena or not? There are so many variables.”
Asia is the biggest gambling market in the world. The popularity of the NBA in China is one rationale behind NBA Commissioner Adam Silver championing legalized sports betting.
Could gambling be what opens up the world’s biggest consumer market for other U.S. sports properties?
“Betting has driven the rapid increase in popularity of European soccer in Asia, so you have to wonder if it won’t have the same effect for the NFL there and unlock that market,” said Matt Hill, senior vice president of global sports and entertainment consulting at GMR, and a former NFL marketer.
While the U.S. market will be lucrative, Asia is a coveted target. For example, the Brooklyn Nets’ new minority owner is Joseph Tsai, co-founder of Chinese e-commerce giant Alibaba. On his way back from recent meetings with Tsai and potential sponsors in China, Brooklyn Sports & Entertainment CEO Brett Yormark stopped in London to familiarize himself with the legal bookmaking industry there.
“Look at the size of the market in China and our new ownership there,” Yormark said. “We see a real upside on sports betting, and we’re going to take advantage of it.”
Even those overseas are starting to notice something that could grow into competition. “Betting companies will be rushing in,” said the Premier League team CRO, “but I’m interested to see how global that opportunity gets or if it will remain U.S.-centric.”
Yet another factor that will stimulate demand: “This will probably go down as the most quantifiable form of marketing ever, because they [bookmakers] control every end of the transaction,” said Dan Donnelly, executive vice president and managing director of Publicis Media Sports. “It’s much harder to determine ROI for autos or beer, and they are the biggest spenders, so … ”
Some see unprecedented demand resulting in more advertising in and around the field of play. If any opportunity could convince the NFL to put signage between its goalposts, this is it.
“There will be a huge need right away, for these guys [bookmakers] to spend and pick up market share,” said Ron Skotarczak, executive vice president of marketing partnerships for Madison Square Garden. “That will push all the leagues to find as many camera-visible branding opportunities as they can.”
Another untested variable: How will incumbent sports sponsors, especially those targeting youthful consumers, feel about associating with bookmakers, even legal ones? Will NFL corporate sponsors like Gatorade or Campbell Soup want to be the sign next to or in the same commercial pod as Betnfl.com?
“The one thing holding back this rush of gambling money would be if a big sponsor said they don’t like being in that neighborhood,” said Chris Weil, CEO at Momentum Worldwide, whose clients include heavy sports spenders Coca-Cola and Verizon. “I’ve already had one client express concern there.”
San Jose Earthquakes President Tom Fox spent around seven years in the EPL as CEO at Aston Villa and chief commercial officer at Arsenal FC. Having sold marketing rights in a legal betting environment, Fox says the American branding race will be analogous to the competition between Netflix, Hulu and Amazon for video subscriptions — with considerably more marketing noise.
“Digital [bookmakers] are the vast majority of the [U.K.] business now,” he said. “Like Netflix, they want to get you onto their platforms as quickly as possible, and keep you loyal.”
Aside from the branding imperative, data collection and CRM is a big part of every U.K. deal. “These are very sophisticated data miners and marketers so I would also look for an explosion in digital media sales,” Fox said. “The aim is to follow you from bet to bet and game to game.”
Divide and conquer
Never underestimate the sponsorship industry’s ability to segment a lucrative category. Across the 92 teams in English soccer, there are around 50 gambling brands buying top-shelf marketing assets, like jersey sponsorships and perimeter signage, “infinitely more than any other category,” according to Phil Carling, former commercial director of Arsenal FC and head of the Football Association’s Commercial Department, now Octagon’s managing director of football.
While the lines have blurred in recent years across English soccer as digital betting took precedence, team gambling sponsorships have been split between betting companies with in-stadium locations (normally ATM-like kiosks), digital brands located in the U.K. and offshore digital bookies. “Some [offshore bookmakers] advertise in Malaysian or Chinese,” Carling said. “They don’t care about the locals. Americans are far more creative in slicing the pizza. Once the floodgates open for bookmakers in American sport, God knows, it will be awesome to behold.”
Pending the Supreme Court decision, “We’re all sitting around waiting, but we can see what’s going on in Europe, in Asia,” Leonsis said. “We’re really far behind and no one can really articulate why. Twenty years from now, we’ll look back at this moment like we did 20 years ago when someone told us they had email; gaming and gambling will become an integral part of the sports experience.”