NFL's Possible Revenue Streams From Sports Betting
Now that the dust has settled on yesterday’s sports betting briefing from NFL Commissioner Roger Goodell, we are starting to piece together a better picture of what the commish may have planned regarding a key issue: monetization.
Simply put, the National Football League, like its counterparts in the National Basketball Association, National Hockey League and Major League Baseball is eyeing the very real possibility of sports betting becoming legal around the country, and they all want to get paid in some form or fashion. Any day now, either the U.S. Supreme Court or the U.S. Congress could declare the Professional and Amateur Sports Protection Act of 1992 (PASPA) unconstitutional or repeal it outright, and the major professional leagues have got to be ready to cash in – or else they may get left out. With hundreds of billions of dollars’ worth in legal sports betting at stake, the pro sports leagues – one of the principal stakeholders in the whole wagering on sports question – will definitely need to take a close look at how to get a slice of that pie.
Goodell’s briefing to a gathering of the NFL’s team owners on the occasion of the league’s 2018 annual meeting may have pulled back the curtain just a little bit more regarding what he has planned in that regard, but it will take a little bit of reading between the lines. Fortunately, we have a lot of time on our hands, and we’re happy to provide our insight on that subject since, frankly, being steeped in the world of the best USA sportsbooks pretty much the only thing keeping us going at this point. There are enough gold nuggets contained in the commish’s comments Wednesday to keep it from being just bones to be read, however, so let’s dive right in.
First of all, when Goodell said that the NFL had been “focusing on [sports betting] for several years,” we have to assume he means it. That would entail overlooking the commissioner’s oft trotted out (and middling) insistence that the league’s only concern is in “persevering the integrity of the game” (though he says that is still the NFL’s “number one” objective). Goodell told the team owners that he and league have been working out the issues related to what seems to be the inevitable, if eventual, widespread legalization of sports betting outside of Nevada – just in time for the Oakland Raiders to become the Las Vegas Raiders, perchance? - and how that could affect the league.
Secondly, and further lending credence to Goodell’s assertion that the planning going on behind closed doors at the NFL’s head office is not “new work” is the fact that the commish’s report, such as it is, was based on a year-long “secret study” into sports betting. Supposedly, this study was commissioned by the NFL’s senior leadership way before New Jersey ever brought its case to repeal PASPA – which prohibits the states other than Nevada, Oregon, Montana and Delaware from offering regulated sports betting – before the U.S. Supreme Court. If that’s really true, then the NFL probably has a fairly good idea of where it wants to go in terms of profiting from sports betting if PASPA is struck down and wagering becomes more widely legalized around the country.
Thirdly, though Goodell continually emphasized how important careful regulation of sports betting was to keeping pro football legit, he did say that the apparent looming national legalization of sports betting could create a powerful new “possible added revenue stream” for the league. That goes without saying, as much of the sports watching public dovetails into the sports betting public, while it also fair to say that many people only follow sports specifically so they can bet on them. The NBA and the MLB are hip to this fact, as they have allied together in one common lobbying front, taking their joint position to 11 different statehouses around the country, petitioning lawmakers for a “betting right” or an “integrity fee” to be paid by sportsbook operators to the leagues.
This integrity fee is more or a less a tax or a royalty on the “use” of the leagues’ “products” and “property” (those would be the games and athletes themselves) to be paid out directly from the ‘books to, say, the NFL. And what a payout it is: in the case of the MLB’s and the NBA’s so called “blueprint” for their idealized state level sports betting legislation, they are asking (or demanding, whichever) 1 percent of all the handle taken in by the sportsbooks, and that amounts to roughly 20 percent of gross revenues. That of course would be on top of whatever actual taxes assessed on the nascent sports betting industry by whichever state decides it wants access to another revenue stream of its own.
Though it should be easy to see how the costs of running a sports betting shop could quickly stack up for the operators waiting in the wings of a PASPA repeal, the pro sports leagues – and that now, evidently, includes Goodell’s NFL – have a point. If the laws that scare some fans away from betting on sports are not in place, there could be a huge upswing in the sheer numbers of people tuning in each week to watch professional sporting events, if only for the purpose of betting on them. Trusted metrics like the Nielsen Ratings bear this out: it is reported that fully a quarter of the average weekly NFL viewing audience is placing bets on the contests, and that is true for roughly 60 percent of the duration of a given game.
Though there is as yet no official word that football will be joining baseball’s and basketball’s leagues in asking for concessions like an integrity fee, it would make sense that Goodell would be angling to get some kind of compensation from any sportsbook operators – call it a reciprocal relationship. Maybe even a mutually beneficial one.
More to the point, let’s just assume for a quick minute that even a quarter of the estimated $200 million or so that is wagered on sports illegally in the US every year began being syphoned over to the NFL, which accounts for just about a quarter of all the sportsbooks’ action. Suddenly, the league could be looking at an additional $125 million in annual revenues for no additional work on its part, and all from just that 1 percent skim off the top of the handle, and that amount would probably only swell as time goes by. That is a mighty inducement to at least consider getting in on an integrity fee of some kind, especially since maintaining pro football’s integrity as a legitimate sports not constantly mired in cheating scandals (we’re looking at you, tennis) is pretty much what Goodell has been harping on exclusively for years.
A fourth point to consider is that Kraft Group CEO Robert Kraft, who also owns of the New England Patriots, is showing the NFL what the NHL and Major League Baseball already know: daily fantasy sports, now widely legal nationwide in some form or other, is another huge revenue taproot. DraftKings, the biggest operators in the DFS segment, in particular has made forays into becoming an out and out sports betting operator should a PASPA repeal occur by June, and that would enable a household name to move comfortably into that slot with a new offering for its dedicated users.
Finally, there is the potential for sportsbook advertising to consider. The NFL probably won’t get involved too heavily in this regard, but maybe it ought to, as the NBA has already shown how successful even something like sponsorship logos on sports uniforms can be (and how inoffensive this is to fans, who really don’t mind in the slightest). One can envision a situation in which the Patriots’ players, for example, could take to the field with a DraftKings patch on their shoulders – it’s doubtful the viewers that don’t bet on sports would care, but it could influence those that do to place their bets at some future DraftKings sportsbook.
No matter what Goodell really thinks about sports betting on a personal level, it is undeniable that sports betting – of which a sizeable plurality is football betting - is big business. For more than 25 years overly restrictive but ultimately toothless laws like PASPA have been shunting that business to overseas operators, and that means nobody here in the States is benefitting in the long run. That’s true for the bettors, who may or may not be breaking the law just for betting on their favorite teams, the states, which don’t get the benefit of extra money in the public till, and not even the leagues, who enjoy massive viewership support and brand engagement courtesy of sportsbook players.
If the NFL really wants to ride the tiger of the modern world when it comes to sports betting, it would be best serving its own interests and those of just about everybody else in the process. That’s about as close to a win-win as it gets.