Have operators jumped the gun on US sponsorship deals?
Official partnerships inked between gaming companies and professional sports leagues in the US have come thick and fast in recent months, but are these deals a match made in heaven or perhaps a case of marry in haste, repent at leisure?
For a quarter of a century the Professional and Amateur Sports Protection Act (PASPA) existed to effectively outlaw sports betting in all but a few US states. So when PASPA was repealed by the US Supreme Court last May, land-based casinos and racetracks wasted little time partnering up with experienced online operators and sportsbook suppliers to capitalise on sports betting regulation as it began to sweep across this vast country on a state-by-state basis. It’s very much been a period of palm-pressing and execs waxing lyrical in press releases about the mutual benefits of these deals.
Not wishing – or willing – to miss out on the potential gold rush, most of the professional sports leagues have also been busy in the past few months partnering up with bricks-and-mortar giants and online operators in multimillion-dollar deals. The flurry of announcements was kickstarted when MGM Resorts signed a landmark deal in July with the National Basketball Association (NBA) to become the first official gaming partner of any US sports league. As well as being the NBA’s and the Women’s National Basketball Association (WNBA) official gaming partner and having the rights to use NBA logos and highlights, MGM secured access to the NBA’s official data feed for live betting. The deal is reported to be worth $25m over three years.
“Once the NBA pioneered this ‘gaming partnership’ territory, it was only a matter of time before the snowball effect took over,” says Joseph Hanna, a partner specialising in sports and entertainment law at New York-based law firm Goldberg Segalla. “At the end of the day, the leagues have essentially devised a method to both have and eat their cake – not only have they now reached deals with these new gaming partners, but they likely also anticipate receiving an influx of revenue based on increased interest in the sports.”
Deals on wheels
After the MGM and NBA tie-up was unveiled, MGM entered into a similar arrangement with the National Hockey League (NHL) and also became the first official gaming partner of Major League Baseball (MLB). The Stars Group, which is active in New Jersey with online sports betting, poker and casino, also netted an official gaming partnership with the NBA in a multi-year deal, including access to official league data and branding. Meanwhile, daily fantasy sports (DFS) giant and now sportsbook operator FanDuel became the NHL’s second official gaming partner, and both MGM and 888 inked partnership deals with NFL (American football) team the New York Jets.
William Hill partnered with NHL’s Vegas Golden Knights and New Jersey Devils (Caesars and FanDuel are also partners with the Devils), while Caesars has joined forces with the Baltimore Ravens (NFL) and the Philadelphia 76ers (NBA). And shortly before Christmas, FanDuel Sportsbook became the latest firm to become an authorised gaming partner of the NBA. FanDuel has been the official DFS partner of the league since 2014 and this latest deal covers sports betting too, giving the Paddy Power Betfair-owned operator, which has a sportsbook in New Jersey and West Virginia, access to betting data and the use of league “marks and logos” across its platforms.
FOMO (fear of missing out), as the kids say these days, would seem to be very much the emotion pervading the industry as key stakeholders eye up legal US sports betting’s enormous potential. Indeed, boutique analyst firm Eilers & Krejcik Gaming anticipates regulated US sports betting will grow to be worth $6bn in GGR annually by 2023 if 32 states pass legislation and regulate the activity. For Joe Steranka, chief global strategist for Steranka Sports + Strategy and the former CEO of golf’s PGA of America, we are entering a unique era. “It is one of the most dynamic periods in sports marketing history,” he states emphatically.
“A confluence of related developments – technology, gamification and legislation – are opening up new revenue streams, spiking fan engagement and, I believe, protecting the sanctity of sport.” Nevertheless, is he at all surprised at how quickly the leagues have jumped into bed with gambling companies in this post-PASPA world? “No, I’m not surprised there were immediate early adopters. FanDuel and DraftKings laid the groundwork for these deals a half dozen years ago.”
Likewise, Hanna says these kinds of tie-ups were inevitable once states began legalising sports betting. “Given the benefits, the speed of which these partnerships have taken form has not been entirely surprising,” he says. “In particular, look at the leagues that have been the fastest to jump on board – it’s no secret that the NBA, MLB, and NHL have all been deep in thought to try and figure out new and inventive ways to increase interest and viewership of what they’re offering to fans.”
The leagues see sports betting as one way of boosting audiences and re-engaging fans with live sport. Baseball is struggling to appeal to Millennials, with attendance at the lowest average in 15 years, while NFL faces similar difficulties. According to Nielsen, 103.4 million US viewers tuned in to watch the Super Bowl on TV last February, although this was down 7% on 2017 and represented the lowest Super Bowl TV audience since 2009. It stands to reason that as legal sports betting permeates this sports-mad nation of 325 million people, it should draw in millions of new casual bettors who don’t already bet with offshore sites and illegal street bookies.
Receiving the stamp of approval as an official gaming partner with the leagues and/or high-profile teams adds a degree of cachet, trust and brand recognition during the fervent landgrab for market share. Then there’s the aforementioned highly coveted access to data, meaning operators can leverage all this official live in-game information and statistics for in-play betting – a still nascent and fairly niche way of betting on sports in the US. Indeed, live betting looks set to explode across the pond in the near future.
Three’s a crowd
Some, though, may question whether these arrangements truly deliver good value for money. For instance, the NBA has thus far acquired three official gaming partners (MGM, The Stars Group and FanDuel), but at what point will these companies start to wonder, “If our competitors are also partnered with the league doesn’t this dilute our own deal? Why are we paying for this?” That, of course, is the problem with a non-exclusive arrangement. While financial details for most of these agreements typically aren’t disclosed, there is a good chance that companies are paying over the odds for the privilege of being official gaming partners.
While these partnerships seem to have put to bed the leagues’ requests for sportsbooks to pay so-called integrity fees, some may also question whether the leagues and teams should be cosying up to betting firms. “Honestly, at this early stage, the initial downside I see is the stigma attached with making this deal with the proverbial gambling devil,” Hanna remarks. “With Vegas and offshore betting already solidified as thriving markets, some bettors already tend to question the legitimacy of sporting outcomes when they are compared to the betting lines, [so] reaching these partnerships will likely fuel those fires.”
As it stands, eight states now offer full-blown sports betting and at least another half dozen are expected to pass legislation in 2019. This expansion means more of these partnerships between gaming companies and the leagues and professional teams are a near certainty. MGM currently holds a particularly strong hand with deals with three leagues (NBA, NHL and MLB) in the bag, while FanDuel has strengthened its ties with the NBA and added the NHL. In addition, news emerged in December that the NFL – conspicuous by its absence where gaming partnerships are concerned – is seeking a national casino partner. Although it’s not clear whether this would be an exclusive deal, MGM and Caesars are the likely contenders.
Cynics will point to how the likes of the NFL – vociferous opponents of legalised sports betting before PASPA’s repeal – are now embracing gambling companies with open arms. Yet with the golden opportunity that awaits as sports betting spreads across the country, the leagues aren’t going to pass up the opportunity to sign money-spinning deals with the potential facilitators of much-needed fan engagement. And, so far, everyone seems to be playing the field, with it very much a case of polygamous rather than monogamous relationships being the order of the day.