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Sports Betting Could Grow NFL Revenues by $2.3 Billion Annually
Nielsen projects (based on a fan survey) that a fully mature (i.e. nationwide) U.S. sports gambling market could be worth up to $2.3 billion annually in new revenue to NFL teams. The report (commissioned by the American Gaming Association) assumes media rights fees continue to rise (projected: +18%) because of increased fan interest/engagement, that sponsorship (think: team-casino partnerships) and ancillary advertising revenues will grow (projected: +7%) and that the league will be successful in striking “official data partnerships” with sports betting operators (projected: worth $30 million/year); it’s also assumes ticket sales will increase (projected: +6%). It’s important to point out that “integrity fees” were not included the projections.
Howie Long-Short: The American Gaming Association has called the $2.3 billion projection “conservative” and they’re not the only ones who believe that. Morgan Stanley analyst Ben Swinburne pegged the potential for new advertising and sponsorship revenue alone at nearly $2 billion.
While it’s fun to talk about a nationwide, legal sports betting market, the reality is that we’re years away from realizing it; if ever. As it stands today, just NV, NJ, DE, WV and MS are taking bets on individual sporting events. Even the most aggressive of estimates have just 35 states legalizing sports betting within 3 years.
Regardless which of those 35 states NFL fans reside in, it’s likely they’ll have the opportunity to place a bet at a William Hill (WIMHY) sportsbook; the company already operates in NJ, MS & WV and maintains 31% of the Nevada sports betting market share. It’s now being reported that the company has established a partnership with Eldorado Resorts (ERI) and two have plans for an online JV. The deal gives William Hill distribution in the 13 states where ERI maintains brick and mortar casinos, in exchange for 20% off WIMHY’s U.S. business; ERI will also receive $64.5 million in restricted stock (vests over 5 years) in the U.K. based parent company. WIMHY shares rose 6% on Wednesday, closing at $13.70; ERI was up 1% (to $47.35).
The English bookmaker’s aggressive approach to entering the U.S. market has been motivated by a government crackdown on gambling in the U.K. New regulations on FOBTs (fixed odds betting terminals) has resulted in company shares treading water over the last 12 months. GVC Holdings (another U.K. company, owns Ladbrokes) announced a similar partnership with MGM back in late July. U.S. gaming companies with brick and mortar properties in multiple states, which offer the access and reach new players to the space require, are well positioned in the current sports betting market.
Fan Marino: The NFL has reversed a long-standing ban on casino advertising, opening the door for teams to ink deals with local casinos (it’s unclear if casino partners be required to purchase the league’s official data). Don’t expect to hear of team-casino partnerships spreading across the league this season though, New Jersey remains the only state home to NFL teams and with legalized sports betting legislation on the books. Expect both the Jets and Giants to take advantage of this newfound revenue stream before the end of the ’18 season.
That’s not to say fans in the NYC market are going to be bombarded with casino advertisements when watching the home teams play. While the league will now allow its teams to take gambling money, regulations are in place to limit casino advertising to pre-and post-game programming; sports gambling ads are also prohibited.
NFL Games to Remain on Linear TV Unless Streaming Technology Significantly Advances
Brian Rolapp, NFL Chief Business and Media Officer, has indicated that while the next 5 years will serve as an “inflection point” and it’s possible the league could experience widespread changes if streaming technology were to advance significantly, traditional linear television broadcasters remain well positioned to retain NFL broadcast rights through the next broadcast cycle. Rolapp said the league’s “entire model is about reach” and that he’s “yet to see” a tech or streaming company deliver a “true broadcast-scale event”; a high-quality stream with 25 million+ simultaneous viewers. Until then, the league will continue to experiment with streaming and expand digital/mobile distribution with simulcast agreements.
Howie Long-Short: Yes, NFL TV viewership is down relative to historic performance, but it continues to perform well when compared to everything else on television. The league had 71 of the Top 100 rated shows on the tube in 2017. For comparison purposes, the league had just 22 of the Top 100 rated shows in 2007. Sure, the NFL’s TV audience is in decline, but the league has a stranglehold on its position as the best choice for advertisers looking to reach the masses.
While you shouldn’t expect a tech or streaming company to land exclusive broadcast rights during the next round of negotiations (particularly if the league is going to leave money on the table to reach the widest audience), the value of those rights should continue to rise and provide the league’s teams with a valuable source of supplemental revenue. To be clear, the league is open revamping its distribution strategy if streaming technology were to make significant advancements over the next several years; Rolapp said he’s well aware of the “staggering” amount of time users spend on Facebook, Amazon and YouTube.
Fan Marino: As mentioned, the league’s “new mobile streaming plan is about reaching more people.” For the first time, simulcasts of local market television broadcasts will be available for free on smartphones and tablets across all wireless carriers (used to be limited to just one carrier) and through NFL and Yahoo Sports’ mobile apps. While that approach is certain to result in increased mobile viewership this season, Sports TV Ratings expects television viewership to continue its decline by 5-10% YoY in 2018.
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