NBA first-mover deal lays path for future
The NBA rolled out its new three-year sports betting partnership with MGM Resorts International in ballyhooed fashion last week, with the commissioner himself announcing the deal from a packed ballroom at an upscale Manhattan hotel, carried live on NBA TV.
It was outsized treatment for an $8 million-per-year deal that will represent about one-tenth of a percent of the league’s annual revenue, a nod to the significance of the emerging sector, and the NBA’s place in it.
Far from a mere corporate sponsorship, the NBA’s decision to designate an official gaming partner marks the first bold move by a major sports entity into the new frontier of legalized sports wagering.
Pivoting deftly after an impasse with state legislatures in crafting sports betting regulation, the league opted for a commercial solution that not only assuages many of its concerns about the impact of betting on the integrity of its games, but also compensates it considerably for both its trademarks and authorized, immediate access to game stats used to settle bets.
The deal, driven by see-around-corners NBA Commissioner Adam Silver and opportunistic MGM chief executive Jim Murren, marries a league that has been the pacesetter on a once prickly issue to a well-known brand that hopes to establish itself as the go-to online destination for fans able to bet legally in an increasing number of states, projected to grow to 14 in the next two years.
“There’s many different ways to skin the cat, so to speak,” said Silver, who while stressing that the NBA will continue to lobby acknowledged a lack of legislative traction. “We decided here, rather than sort of re-litigating the integrity fee, which is still being hotly discussed state by state, let’s find an approach which is unique to us and where we both feel we’re being fairly treated.”
MGM and the NBA already had a cozy relationship prior to the landmark agreement. MGM sponsors the NBA Summer League and the company owns the WNBA’s Las Vegas Aces, with the team playing in MGM’s Mandalay Bay Events Center. “This is a partnership of trust,” Murren said. “It’s been based on an understanding that this is a new frontier. We have to figure this out together.”
MGM and the NBA may be first out of the gate, but they’re not likely to be alone for long, said Matt King, the newly minted chief executive of the FanDuel Group. He predicted more deals between sports properties and gambling entities over the next 90 to 180 days.
“Everybody is talking to everybody,” King said. “I think this probably marks a tipping point where you’re going to start to see deals like this are getting done. The NBA-MGM agreement is in line with what I would have expected, but it’s still really interesting to see the deals start to happen.”
King cautioned that in the early days of legalized sports gambling beyond Las Vegas, there remains something of a natural conflict between the national nature of sports leagues and a state-by-state adoption of sports betting that will take years to evolve.
“The one reality that everybody is going to have to face is that sports betting is still going to be a pretty localized business for a long time to come,” King said. “Leagues are used to doing national deals and people paying national price points. And we’re not there yet.”
“It’s inevitable the leagues and operators will strike commercial deals,” said David Miller, vice president and assistant general counsel for the PGA Tour, which is reviewing its policy that prohibits gaming sponsorships. “The MGM deal is one that we will take a hard look at.”
Miller said the tour also must consider the optics of a property taking sponsorship dollars from sports books while it also is responsible for enforcing league gambling rules. Last year, the governing body of soccer in England, the famed FA, severed its $4 million-per-year sponsorship with gambling house Ladbrokes after critics raised that very question. The ATP World Tour in June told its tournaments to stop taking betting sponsorships.
When the NBA reviewed that calculus, it landed on the side of a contractual relationship with gaming operators that will include traditional sponsorship assets, such as league marks.
“It’s why we saw this as more than just a sponsor deal,” said Scott Kaufman-Ross, vice president and head of fantasy and gaming for the NBA. “We feel that, by working together with the operators, we’re going to be in a better position to monitor sports betting.
“That’s one of the reasons it was important to us that this be a non-exclusive deal, so that we can work with other operators to give them that same seal of approval. Because I think it’s going to be one of the key differentiators: Seeing league logos and league promotion to help the fan understand that MGM and Caesars and FanDuel are legitimate, licensed operators, whereas Five Dimes and My Bookie, etc., are not.”
While at the tail end of his 14 years at the NFL, recently departed Eric Grubman, executive vice president of business operations, was the point person on the league’s review of the emerging sports betting landscape. Grubman assessed the deal as one that was the logical next move for the NBA, which cemented its position as the leader in the sector by affiliating with a well-known, trusted casino brand.
“They’re getting in safely and by getting in early they’re probably getting, if not a premium, certainly a reasonable amount because they’re prepared to take the risk of being out front,” said Grubman, who left the NFL in June. “The cons, in my mind, don’t really exist, unless you’re a property that didn’t want to start at point A and wanted to wait until points B, C, D, E, F and G emerge.”
With a league deal in place, expect teams to cash in on the new gaming sponsorship category with their own local deals, which will be driven largely by the sportsbooks’ desire to get fans in their state to sign up for and fund betting accounts. Teams can sign their own deals with sports betting companies, but there are restrictions on how they can activate based on what is legal in their territory.
The NBA teams’ betting sponsorship landscape likely will look similar to the one that emerged after the league crafted its deal with FanDuel as its daily fantasy partner, Kaufman-Ross said. About half of NBA teams struck deals with that company’s rival, DraftKings.
How, and when, teams handle their gaming deals largely depends on how close their states may be in legalizing betting, but teams see vast potential.
“There are massive [gaming] operations around the world,” said Peter Feigin, president of the Milwaukee Bucks, which has a current sponsorship with the Potawatomi Hotel & Casino. “This opens up the opportunities.”
At the announcement trumpeting the deal, Murren laid out MGM’s rapidly emerging sports strategy. In recent weeks, the casino brand has expanded its footprint to 15 states, created a partnership with the world’s leading online sportsbook operator, and now hitched itself to the NBA.
“[Those things] will determine who wins and loses in the sports betting arena, in the United States,” Murren said. “I think MGM is going to win.”