Sports Finance Report: Nearly All Money Bet on March Madness is Wagered Illegally

GLENDALE, AZ - APRIL 03: The North Carolina Tar Heels hold the championship trophy after defeating the Gonzaga Bulldogs during the 2017 NCAA Men's Final Four National Championship game at University of Phoenix Stadium on April 3, 2017 in Glendale, Arizona. The Tar Heels defeated the Bulldogs 71-65. (Photo by Ronald Martinez/Getty Images)


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Nearly All Money Bet on March Madness is Wagered Illegally

Nevada sportsbooks reported taking in a record $429.4 million in bets on March ’17 basketball games (includes NBA), with the casinos winning $41.2 million; but, that record figure was just a small percentage of the total amount wagered on the 2017 NCAA men’s basketball tournament. The American Gaming Association (AGA) found that $2.6 billion was illegally wagered on bracket pool entry fees and projects of the $10 billion to be placed on 2018 NCAA tournament games, just 3% ($300 million) will be wagered legally in Nevada sportsbooks; the only state that currently allows betting on individual games. The high percentage of unregulated gambling is among the reasons the AGA supports the full legalization and regulation of sports betting.

Howie Long-Short: The legalization of sports betting is unlikely to move much, if any, of the $2.6 billion estimated to have been wagered in 2017 bracket pools and while it will increase the percentage of bets placed legally on individual games (the bar isn’t high), it won’t be eliminating the black market or off shore options. Why? The high state tax rates being proposed by the individual states and “integrity fees” being pitched by the leagues, will force the casinos to increase the vig on games; making their lines uncompetitive. Serious gamblers aren’t lowering their odds to comply with the law.

Fan Marino: No office pool is better than the one Warren Buffet runs at Berkshire Hathaway (BRK.A). It’s free for employees to enter (there are +/- 100,000 expected to participate) and guarantees $1 million to anyone who picks the “Sweet 16” correctly. If Creighton wins the championship (he’s Omaha based), he’ll make it $2 million. As a consolation prize, the individual who remains “perfect” the longest receives $100,000. Selecting a perfect bracket is impossible (he once offered $1 billion to anyone who did it), but hitting the “Sweet 16” can be done. In fact, it nearly was; one Berkshire Hathaway employee correctly predicted 15 out of 16 teams last year.

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POWERADE To Debut New Brand Platform During March Madness

POWERADE, the Official Sports Drink of the NCAA, will launch a new brand platform centered around POWER to coincide with the start of March Madness. Entitled “That’s Some Kind of Power”, the Wieden + Kennedy campaign provides a fictional account of what could have happened had POWERADE been around “back in the day.” JohnWallStreet spoke with Jason McAlpin (Sr. Brand Manager) and Alex Ames (Sr. Manager Integrated Marketing) about how the company distinguishes itself from a crowded sports drink category, the use of hyperbole and humor in brand messaging and what the company has planned for March Madness.

JWS: Why has the company chosen to distinguish itself from the competition, within a crowded sports drink category, by focusing on POWER?

Jason: POWERADE’s mission is to be the fuel for athletes and help them power through, so they can become the best athlete possible. That’s how we define success. POWER is in our name. It’s something that we can credibly own and uniquely claim, it’s something we have 30 years of equity in. It’s what we provide to athletes and most importantly, it’s something that the athletes create themselves. So, the campaign is the articulation of that platform.

JWS: The campaign relies on hyperbole and humor to get its message across. How did the creative side of the campaign come about?

Alex: We looked at POWER in sports and it’s not quiet, it’s hyperbolic. Mohammad Ali, one of the most hyperbolic athletes in history, put more power behind iconic moments with humor. At the end of the day, sports are entertainment; sports are fun. We really wanted to circle around these 2 words; humor and hyperbole, to unlock a unique tone within the category.  

JWS: What does the campaign entail beyond commercials?

Alex: Within March Madness, we’ll be sponsoring the POWER “move of the day” and POWER “in the paint”; focusing on those powerful moments. We’ll also be on the ground as a part of fanfest, as we have been for years.  

Howie Long-Short: Sports drinks are a growth category, having hit $25 billion in 2016; after rising at an APR of 7% over the prior 5-year period. Originally designed for athletes, sports drinks have since reached a mainstream audience seeking a seemingly healthier alternative to soda. POWERADE, owned by the Coca-Cola Company (KO), and Gatorade control roughly 94% of the market; with POWERADE generating roughly $1 billion in annual sales. For reference purposes, Gatorade generates roughly $5 billion/year in sales.

Fan Marino: During March Madness, POWERADE will run a 30-second national television spot entitled “Ankles”; along with 5 unique 15-second videos. You can check out the NEVER SEEN BEFORE spot, here.

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JohnWallStreet, located at the intersection of sports and finance, is a destination for the educated sports fan.

While we won’t be publishing “hot takes” on LeBron’s relative greatness to Jordan, we will be offering up the most relevant sports related business news, in easily digestible bites, with commentary from both the sports money and sports fanatic perspectives.

We’ll cover publicly traded professional teams & stadiums (MSG, RCI, BATRA, MANU), television networks (DIS, FOXA, CMCSA, CBS, TWX, MSGN), apparel & footwear companies (NKE, UAA, ADDYY, FL, LULU), equipment companies (GOLFELY, FIT), ticketing companies (EBAY, LYV) content and facilities providers (CHDN, DVD, ISCA,TRK, LMCA).  If it trades on Wall Street, and has a sports angle, it’s in our wheel house.

Howie Long-Short and Fan Marino will be providing their expert opinions on each story. They have slightly different areas of expertise. Fan Marino is a firm believer that the SEC is the premier football conference. Howie Long-Short knows it as the Securities & Exchange Commission. Fan Marino lives and dies with the college selection of 5 star, blue chip recruits. Howie Long-Short spends his days analyzing blue chip stocks. Howie Long-Short knows that Black Monday occurred on October 19th, 1987. Fan Marino swears it happens every January after Week 17. You get the point.

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