Headline: Draft Kings and FanDuel.  How are these sites now advertising on TV?

Date: 1/2/2022

Body:  I was watching a football game and I slowly realized that I had seen at least 6 commercials  for different sports betting sites.  I had always thought that outside of Vegas, this was illegal, so, it was only done by shady bookies who had legs broken for non-payment.  Why was this suddenly legal and out in the open?   More recently, I had heard of some sites located on Caribbean island nations who capitalize on this form of capitalism. Is there really a way to make this fit into a commonsense method of managing money?  Twenty states as well as Washington, D.C. now have some form of legal sports betting.  “It’s a very strongly held view in the NFL — it has been for decades — that the threat that gambling could occur in the NFL or fixing of games or that any outcome could be influenced by the outside could be very damaging to the NFL and very difficult to ever recover from,” NFL Commissioner Roger Goodell said in 2012.      “Gambling no longer feels tawdry and in the shadows,” Chad Millman, CEO of betting data company Action Network, said shortly after the ban on sports betting was lifted. “It has democratized information, and people are thinking opportunistically because they love sports.”

Is sports betting REALLY a big deal?

Yes, it is a big deal.  Wagering on sports has ballooned to upwards of $65 Billion in the U.S., ever since the Supreme Court decision in 2018 to allow New Jersey to compete alongside Nevada.  Seeing their success, legislators in many states have worked to allow sports gambling in their states.  In fact, according to Legal Sports Report, New Jersey has begun to have more sports gambling than Nevada.  Much of this action has gone online, and per one study, more than 80% of the sports betting is done through FanDuel and DraftKings.  Unsurprisingly, there is even an ETF designed around these enterprises.  According to Play USA, estimates are nearly $12 billion will be wagered this season on NFL games at legal sportsbooks.

What was it like to watch NFL football before the change?

Before the change in law, it was not legal to have information about gambling on an NFL telecast.  So, there were no commercials for sports betting sites, there were no television shows strictly about how to gamble, and if one wanted to gamble, you had to make your bet with Vegas.  In fact, when somebody wanted to make any comments to fans about gambling, they had to do this very indirectly.  In one example, a noted announcer, when he would want to pass information to viewers who gamble, would make reference to “Our friends in the desert might be interested to know…”  This line would indicate that the information that followed would be of use in wagering, but anything more direct was not allowed.

What changed?

There was a court case.    The state of New Jersey made the claim that Nevada should not have a monopoly on sports betting.    New Jersey claimed that the Professional and Amateur Sports Protection Act (PASPA) impinged on their rights to legislate such issues within its own boundaries.  They claimed that this intrusion of Federal power into State responsibilities was against the Constitution.  The Supreme Court agreed with New Jersey and likened the act of sports betting to commandeering.   In total, the Supreme Court struck down PASPA, and New Jersey was then allowed to legalize sports betting within its’ boundaries.  Interestingly, however there are 4 states which have a program to allow for sports betting, and these programs were allowed to continue because they pre-dated PASPA.   

What changed in the business world as a result of the Supreme Court case?

In a deal among the companies and the NFL (supposed to be worth $1 Billion), the companies could now legally use the league’s logo in their advertising.  Now, it appears that others are wanting a piece of that action.  “The fact that the leagues have all kind of gotten into that business makes it easier for a rights holder like ESPN or Fox or TNT to be in that business as well, because there’s no pushback from the league,” said Eric Johnson, a former ESPN executive and faculty director of UCLA Anderson’s Center for Management of Enterprise in Media, Entertainment and Sports.  ESPN and Caesars Entertainment in August 2020 opened a 6,000-square foot studio facility at the Linq Hotel + Experience in Las Vegas to serve as the home of the company’s sports betting programming, including “The Daily Wager.” ESPN has discussed licensing its brand to sportsbooks, according to a Wall Street Journal report.  One of ESPN’s channels, ESPNews, has a constant stream of betting odds data along the side and bottom of the screen as it re-airs the flagship network’s news-talk shows “SportsCenter” and “Get Up.” When the recent Monday Night Football contest between the Los Angeles Chargers and Las Vegas Raiders was delayed by weather, the company saw a spike in traffic for an ESPN+ article laying out the odds on the game.  “The content space, for us, has been a really compelling one,” said Mike Morrison, ESPN’s vice president of sports betting and fantasy. “Betting absolutely has to be part of that storytelling and the content that we produce.” 

Interestingly, the allowing for sports betting also extended the period when the people are invested in the performance of NFL teams.   Said one industry insider,“Starting in mid-August, the volume of bets has boosted significantly,” Zammit said.  “In years past, pre-season NFL games didn’t attract much interest… but this year we saw a real spike, and turnover has grown week on week through Labor Day with NCAA football action.”  So, it would appear that the 800-pound gorilla of the NFL, now has an infant too.

What is it like now, to watch NFL games?

Fast forward to 2021, and Charles Barkley now openly discusses gambling odds during his betting segment before and after NBA games on the popular TV show Inside the NBA, which airs on TNT.  In fact, many TV broadcasts of pro sports games today feature ads from leading U.S. sportsbooks DraftKings DKNG, -3.48% or FanDuel, and odds for games are now shown on TV networks regularly.  Sports betting TV shows have also launched: ESPN DIS, -0.67% created a show dedicated to sports gambling called the “Daitly Wager,” and CBS VIACA, -3.64% also has a gambling show called “SportsLine Edge,” for example. ESPN even began featuring point spreads on its famous BottomLine ticker.  They have their own shows too.  ESPN and FS1 have daily gambling shows and are also increasing their digital content. VSIN, which started with five hours a day of live shows in 2017, has jumped to 21 hours this season.  The biggest change viewers will see is during commercials. NBC, CBS, FOX, and ESPN will be allowed to make up to six spots available for sportsbooks during each game — one during pregame, one per quarter, and one at halftime.

Other people suggest that this additional information about wagering does not make the game itself any less entertaining.  Christopher Halpin, the NFL’s Executive Vice President, Chief Strategy and Growth Officer, said networks can reference betting lines in pregame shows, but only to help contextualize game analysis or a broader storyline. There can also be limited displays of lines during pregame in graphics and the bottom scoreboard updates.   One expert contextualized this debate quite well when he said,  “The question is, are you actually going to be a sportsbook or are you just going to license your name out?” said media analyst Rich Greenfield, of LightShed Partners. “How deeply is it going to be integrated?

What is the argument FOR the change to allow sports betting?

The rise of regulated gambling gives viewers a literal investment in the outcome of a game, even if their home team isn’t the one playing, said Abraham J. Wyner, faculty lead of the Wharton Sports Analytics and Business Initiative of the University of Pennsylvania.  “I’ve been a lifelong fan of my favorite teams, particularly the Yankees, and that keeps me interested, but I’m not about to go watch Red Sox-Rays if I don’t have a betting interest or some other kind of interest in the outcome,” Wyner said. “As people are becoming more removed from the actual playing of the game in their lives, betting is a great way to cultivate more interest and deeper interest in the broadcast.”    So, the theory here is that to get people to actually play the game, get them to bet first… and incrementally, you can get them on the field to play, and ostensibly, bet some more.

FOX, NBC, and ESPN have all experimented with gambling-oriented features the past couple of seasons. FOX and NBC have run free-to-play prediction games offering cash prizes, while ESPN had a gambling spin during one of its MegaCast presentations of a playoff game last season.  “It’s safe to say that all the sports rights owners are trying to find new ways to engage fans,” FanDuel CEO Matt King told MarketWatch

What is argument AGAINST sports betting?

“We’re not necessarily looking to go after the hardcore, early adopter,” said Edward Hartman, senior vice president of corporate development at Fox Corp. “The real opportunity we see is what we think will be the fattest part of the bell curve — the mass adoption phase — which is the casual sports fans who love their teams and love watching games and will have a casual wager to enhance their enjoyment of a game.”  “There’s still a big percentage of the population that will never put a bet down, and you don’t want to tick that crowd off. But you can’t put your head in the sand and pretend that there aren’t billions of dollars at stake based on the outcomes of these games, so it’s a tricky balance,” said VSIN co-founder and Chief Executive Officer Brian Musburger.

Not everyone is happy, though, with the league’s new relationship with sportsbooks. During an NBC Sports conference call last week, Hall of Fame coach Tony Dungy said that the NFL shouldn’t be in a position where it promotes gambling, especially among young people.  “It’s a great game. I know people gamble. I know it’s legal. I don’t want to see the NFL promoting it,” he said. “I understand times change, but again, for me, it’s just a personal opinion.”

Of all the networks, CBS remains an outlier as it has not partnered with a sportsbook. CBS Sports chairman Sean McManus said gambling information will not be a part of game broadcasts for various reasons.  “There’s still a big percentage of the population that will never put a bet down, and you don’t want to tick that crowd off. But you can’t put your head in the sand and pretend that there aren’t billions of dollars at stake based on the outcomes of these games, so it’s a tricky balance,” said VSIN co-founder and Chief Executive Officer Brian Musburger.  “We’re trying to thread the needle with respect to how much gambling information that we should put in our studio shows. What is useful to the gambler but not obtrusive to the non-gambler. And I think that’s a delicate balance right now,” he said. “When we think it’s appropriate, and it makes the telecast more enjoyable and more informative for our viewing audience, we will add more information when we think that’s important.”  Even staunch gambling supporters know that distributing gambling information remains a delicate balance and that the approach of a steady rollout makes the most sense.

“The people watching the games make up the market, a very targeted market, that the sports gambling companies need to recruit. So this becomes just a cost of customer acquisition,” Ganis said.  This is backed up by many studies, and the sad truth revealed is that the people who might be most hurt by the explosion of gambling information, are also the people most financially unable to financially support it   For this reason and others, the  NFL was the last of the four major U.S. professional sports leagues to partner with sportsbooks even though it commands the most interest and dollars.

The Verdict

“I guess I am a little bit surprised at how quickly the league’s transition from being completely anti-gambling, at least publicly, to being now complete partners with the entire operation,”  said one baseball official.    If he admits to being surprised at the velocity of gambling becoming nearly as important as the sport itself, we can also be excused for being a bit shell-shocked by it all.  On the other hand, in the Coliseum of Rome, thousands of years ago, people made bets on which gladiator would win and survive.  Our current situation seems only a twist on what came before.  Perhaps the famous Latin phrase should’ve been, “Bettor, beware.”  So, keep your eyes sharp and mind thinking… even when enjoying the SuperBowl.






Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

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