News

POV: Legalised Sports Betting

Background:
Now that the U.S. Supreme Court has overturned prior restrictions, individual states have the option to legalise sports gambling. In fact, there are predictions that by 2020 nearly half of the fifty states could legalise the practice, with New Jersey, West Virginia, and Pennsylvania leading the way.

Details and Implications:

Higher Engagement: Recent studies from the University of Georgia have shown that sports gambling has a direct correlation to game viewership, potentially impacting local ratings by +30%. In addition, you’ll see an increase in second screen content as a) digital/mobile gaming sites will become the primary tools for betting, and b) next generation team/player data will become invaluable tools for gamblers to gather insights and play the odds. Fans will have a new thirst for both statistical storytelling and anecdotes about significant windfalls, which will drive new engagement and areas of opportunity for brands.

Early Adopters: Experts estimate that illegal gambling drives close to $150 billion on sporting events annually in the U.S. Once legalization occurs, look for traditional fantasy sports sites such as FanDuel and DraftKings to start integrating betting options as quickly as casinos do. Professional leagues are also looking to sports betting as a money-maker, already proposing a 1% “Integrity Fee.” They may also use in-stadium gambling instruments to drive attendance. In addition, tech-forward teams who have gamification on their apps are already poised to begin taking bets once legal. Look for an influx in new online and offline gambling entities to take prominent sponsorship positions with teams and leagues.  

Devil in the Details: In Europe, where sports gambling is prolific, the depth and detail of gambling is so precise that the result of each play, point, or pitch is a viable wager. Sports that are more conducive to play-by-play bets will benefit through a disproportionate increase in metrics. Secondary sports and leagues (e.g. Lacrosse, Women’s Soccer, Minor League Baseball) will see a rise in interest as gamblers will seek advantageous betting lines created on limited information. This rising popularity may lead to greater distribution rights (linear, online, social, and OTT). 

Based on these changes, as states begin to legalise sports betting, brands should consider sponsoring second tier sports that lend themselves to gaming, as these properties are bound to build larger audiences. But don’t worry about the pro leagues. Based on Nevada’s current legal sports practice, 40% of all betting activity is focused on NFL outcomes, making pro-sports a good bet for sponsors.

The Game of Risk: As compliance rules take shape, brands in sports marketing will need to be cautious. Lower level leagues that don’t have the necessary compliance budgets will be more susceptible to the risk of match fixing or other illegal activity. Currently, UNLV and Nevada’s compliance budgets are disproportionately higher than their peers’ due to sports betting in the state – this indicates that compliance budgets for college athletics will need to grow exponentially as gambling is legalised, as low compensation of student athletes leaves them vulnerable to corruption. This increased risk across sports will impact sponsorship contracts, and will likely mandate additional morals clause language to protect a brand’s financial investments in cases of reputation-damaging scandals.

Loyalty or Greed: While sports engagement will increase, legal sports gambling will change the nature of the audience. The composition will now include loyal fans and fervent gamblers. Sports marketers will have to develop messages beyond fan loyalty to fully leverage their association and sponsorship dollars.

Summary:
As more states opt into legal sports gambling, it will lead to increased ratings and engagement, and will build audiences for secondary sports. As intuitive gaming sites/apps and next gen sports data flood the marketplace with options, the leagues will also unveil gaming instruments of their own. Leveraging these burgeoning opportunities will be of great interest to non-endemic brands, but there will be significant risks as the strength of compliance structures will vary. In addition, brand association with teams and leagues will carry new risks of reputation. All of these factors will change the nature of sports marketing in the U.S., and brands will need to remain adaptive as the game unfolds.

Further Reading:

Forbes / ESPN