Three implications of the NBA’s gamble on sports betting

Whether it was imposing a lifetime ban on former Los Angeles Clippers’ owner Donald Sterling for making racist comments, pulling the NBA All-Star game out of North Carolina due to the state’s transgender bathroom laws or being the commissioner of the first major sports league in the U.S. to hire a full-time female assistant coach in Becky Hammon, Adam Silver has been a model of a modern, progressive sports commissioner.

But beyond his progressive social stances, Silver has also been an innovator when it comes to the business of sports. Under his watch, the NBA became the first of the four major U.S. sports leagues to put ads on its uniforms. The Golden State Warriors’ three year deal with Rakuten not only pays the team $20 million per year, but is also part of what Warriors chief marketing officer Chip Bowers calls a vision to grow their global brand.

In the spirit of progressive business decisions, Silver and the NBA are taking its biggest gamble yet by being the first U.S. sports league to partner with a gaming, hospitality and entertainment conglomerate, MGM Resorts, on the heels of the Supreme Court striking down the 1992 Professional and Amateur Sports Protection Act (PASPA). Here are potential implications of this partnership.

The Media

Those that clutch their pearls and gasp in fear about the future of children affected by legal sports betting should know that Americans illegally bet hundreds of billions of dollars before the ruling and will continue to do so regardless of how many states embrace this opportunity. What legalization does is bring it out of the shadows and allow for regulation and open discourse, and that means significant changes in how media covers sports and betting.

Even before the Supreme Court’s ruling, a variety of media outlets had already begun specialized coverage of sports betting, such as ESPN’s Chalk and Scott Van Pelt’s popular ‘Bad Beats’ segment on SportsCenter. Now that sports betting is no longer illegal, sports media companies will increase their coverage of sports betting, change the way they cover sports and become more valuable in the process.

According to a Nielsen sports study commissioned by the American Gaming Association in 2016, legal sports betting was hypothesized to generate massive ratings, leading to millions more consumers of sports media, which in turn would make sports bettors highly valuable to advertisers. Bettors having increased incentive to watch sports will lead to increased coverage of NBA games by television, radio and internet and more advertising revenue generated.

Media companies are already increasing their coverage of sports betting programming and are likely to find new ways of presenting statistics and information that might be meaningful to sports bettors. Advertising money and potential could also lead to direct relationships between sports media and sportsbooks, and bookmakers’ investments in sports media could increase the value of sports teams and media companies.

Game experience

Imagine walking into the Chase Center in San Francisco an hour before tip-off, taking in views of the beautiful bay and then walking up to an MGM Resorts betting station within the arena and placing a bet on the game. This vision could very well be the future of attending a home Warriors game in the post-PASPA era.

Not only will sports fans and bettors potentially be able to place wagers in stadiums before games, they are more likely to receive customized statistics in real time and be able to place wagers during games on the action within the stadium, with more permutations of betting options therein. MGM Resorts have a proprietary mobile gaming app that will be decorated with official NBA and team logos and allow fans and bettors the option of making a wager during a game without leaving their seats.

As sports teams develop official betting partners, gambling companies would invest money and promotional capital into teams and sporting events, potentially leading to different forms of entertainment that get integrated into the experience of going to the game.

Non-bettors who think on-site gambling would somehow spoil or sully the experience of going to the game should know that on-site gambling already exists at sporting events. In 2016, California enacted a bill that authorized major league sporting franchises to conduct 50/50 charitable raffles at home games. Half the money goes to charity and the other half goes to a winner who gambled on a raffle ticket while watching the jackpot rise, and these raffles have done nothing to impact the experience of sports fans in attendance and really aren’t noticeable unless you are looking for it.

Money. Lots of it.

At the end of the day, the NBA is a business and business is about making profit, and the NBA’s partnership with MGM Resorts has the league poised to rake in profits in a myriad of ways. More profit for the NBA means more resources for the teams, players and media outlets that cover them.

“Our view is that betting is happening in our sport and therefore we should participate in the revenue that’s generated on the back of our competitions.” – Scott Kaufman-Ross, NBA Vice President, Head of Fantasy and Gaming, from an interview with the Action Network.

Since his 2014 New York Times op-ed piece advocating for the legalization of sports betting until now, Adam Silver has acknowledged that part of the league’s interest in sports betting is motivated by revenue and initially took an aggressive stance in pursuing the implementation of integrity fees. Integrity fees would be fees the bookmaker would pay the NBA based on the amount of money bet on the NBA, aimed, in part, at financing integrity monitoring protocols in place to detect suspicious betting.

Silver has backed off the integrity fees but has determined another justification for compensation from the gaming industry:

“….what was very important for the NBA was that we were able to establish, through a commercial relationship, that indeed we should be compensated for our intellectual property and for our official data.” -Adam Silver, NBA Commissioner.

But aside from providing exclusive access to its data, the NBA could also receive de-identified data and statistics about the behaviors of bettors, which has value in terms of targeted advertisement. By being the first major sports league to form a business relationship with an established gaming company, the NBA will also have a head start in having access to proprietary mobile and online gaming software that will give them an advantage over competitors.

While the Supreme Court’s striking down of PASPA has opened up things for states to allow legal sports betting, the lack of federal support and regulation contributes to some uncertainty about the future of the industry. But speculative fear following the Supreme Court’s decision has not stopped European betting firms from seeing their own stocks rise in value and investing in a US market that is more diverse than Europe’s, hoping to tap into potential annual revenues estimated between $4.2 to almost $20 billion, depending on how many states move to legalize.

And if 32 states legalize sports betting in some form by 2023, as predicted by Chris Grove, managing director at Eilers & Krejcik Gaming, the NBA and its partners stand to be at the forefront and financially benefit from a multi-billion dollar industry, and that would be a game changer in itself.