Sports Business Report: Rhode Island Becomes 4th State to Legalize Sports Wagering, State to Keep 51% of Profits
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Rhode Island Becomes 4th State to Legalize Sports Wagering, State to Keep 51% of Profits
Rhode Island has become the 4th state to legalize single game sports wagering after Governor Gina Raimondo signed a bill that ensures 51% of all sports gambling profits go to the state. The state did not authorize mobile or internet wagering, meaning bets will have to be placed at land-based casinos; Twin River Worldwide Holdings (privately-held) owns 2 in the state (one opens in Sept.). Rhode Island casinos are expected to begin taking sports bets on October 1st.
Howie Long-Short: Rhode Island sports fans will be excited about having the ability to bet legally, but the state won’t maximize revenues without accepting mobile or internet wagering; in fact, they’re unlikely to even hit budget projections. Governor Raimondo’s budget projects $23.5 million in revenue over the first 12 months. To generate that amount, the state’s 2 sportsbooks would have to generate +/- $900 million in wagers; that won’t happen. In 2017, Nevada was the only state (i.e. no competition like R.I will face from NJ, DE, WV, MS etc.) to offer single game sports betting, the state had mobile wagering and still generated just $5 billion in sports bets.
International Game Technology (U.K. based) has been selected (only company to formally submit a bid, also handles state lottery) as the state’s sports betting technology provider (powers MGM sportsbooks in Nevada). The company is entitled to 35% of all sports betting profits, meaning the state’s 2 casinos are keeping just $.17 of each dollar earned. International Game Technology, a component of the Russell 1000 index, trades on the NYSE under the symbol IGT. Shares have been on a steady decline (-16.4%) since the company posted a wider Q1 loss ($103 million to $54.8 million) than a year ago (see: $97 million foreign exchange loss) back on May 22nd, closing on Friday at $24.92.
Fan Marino: Any concerns about sports betting cannibalizing the horse racing industry were laid to rest following the first weekend of legalized sports betting in New Jersey. Monmouth Park Race Track reported the on-track handle for the 2 days (June 16-17) was up +18% YoY, as attendance rose +21% YoY. In fact, Monmouth Park owner Dennis Drazin believes sports betting offers the track’s horse racing business security, saying “we can increase our days, we can offer better purses, we can help the breeding industry come back.”
Round the World Race Provides International Marketing Platform, Opportunities for R&D
The Clipper Race, founded by Sir Robin Knox-Johnston (1st man to sail solo, non-stop around world – 50 years ago this week), is a record-breaking 40,000 nautical mile journey around the world. Eleven teams of amateur sailors (i.e. 40% have no previous sailing experience), participate in 4 weeks of rigorous training before embarking on the 8-leg voyage (13-16 individual races); each with a qualified skipper, on identical 70-foot ocean racing yachts. The final leg, of the 11th edition, of the 11-month expedition, starts this morning at 9a from New York City. Fans are welcome to watch the yachts parade past the west side of Manhattan between 10a-10:25a, before they head out past the Statue of Liberty; the procession can be seen along the Hudson on the West side of downtown Manhattan and from the Jersey City waterfront.
Howie Long-Short: The race reaches major markets across 6 continents, making it an attractive international marketing platform to promote brand awareness. Each of the 11 teams has a Team Partner that purchases the rights to name/brand the yacht, giving the business (HotelPlanner.com, PSP Logistics and Garmin), brand (Dare To Lead, UNICEF, NASDAQ) or destination (Visit Seattle, Great Britian, Sanya Serenity Coast, Qingdao, Liverpool 2018) a floating billboard and a unique platform for global activation (see: in-port sailing).
Garmin is the only Team Partner that is publicly traded. The company, best known for its GPS technology, trades under the symbol GRMN. In late April, GRMN reported record revenue for Q1 ’18 with double digit growth in revenue (+11% YoY to $711 million), gross margins (+60% YoY, attributed to segment and product mix) and EPS (+31% YoY to $.68); during what is the “lowest seasonal quarter in the company’s financial year.” Shares are up +1.6% since, closing on Friday at $60.23.
While Team Partners sponsor individual team yachts, Fleet Partners have their logo on every team’s yachts; albeit in a much less prominent location. Dell is among the race’s 5 Fleet Partners and uses their association with the race for product testing, R&D and data collection. As the Rugged Computed Technology Supplier for the Clipper Race, the company outfits each yacht with Dell Latitude 14 Rugged Extreme 14-inch notebooks (meets military-standard requirements) for on board navigation, to keep regulation contact with the Race office and to send back daily blogs, images and video so followers and those at home can follow the action. Unfortunately, none of the Fleet Partners (also includes: Henri Lloyd, Stormhoek Wines, Elliott Brown) are publicly traded.
Fan Marino: As mentioned, HotelPlanner is among the businesses that have a yacht in the race. I stopped by the North Marina Cove on Friday afternoon to have a quick chat with HotelPlanner.com CEO Tim Hentschel to discuss why lifestyle sports sponsorships are outperforming traditional team sports sponsorships.
Fan: How do you justify spending $1.325 million on a Clipper Race Team Partnership?
Tim: We have a lot of different sponsorships in the sports space, because anything that involves sports involves big groups of people. By internet marketing and advertising standards, the cost is very reasonable. We look at the traffic that comes from different articles that get written, the uptick we have in bookings coming from crews and friends of crews, social media engagement and all-in-all we think the ROI is in-line with the other sports sponsorships that we have (think: NFL teams, NBA teams, PBR); we measure them all and we think this one of the better ones.
Fan: Why do you think the return on a sailing sponsorship outperforms a comparable campaign with an NFL or NBA team?
Tim: The other sports sponsorship that we see significant engagement with is the LPGA. Sailing and golf are more than just sports, they’re lifestyles and we see high levels of engagement around lifestyle sports. Lifestyle brands tend to fly under the radar a little bit, so people can follow them, get passionate about them and adopt them. You need to cut through the clutter to get people to engage with you because advertising budgets are so massive and there are so many brands. The demographics of the (sailing or golf) fan can afford to travel and will travel because they’re fanatical about the sport. More and more we’re looking at getting into sports like snowboarding and surfing rather than the big-time events like a Super Bowl.
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