- The court’s ruling effectively allowing all states to legalize sports gambling promises to juice revenues, engage a new audience and make individual teams a lot more valuable. After years of lip service against gaming, the league’s real problem was that it will have less leverage over states than over a federal solution. Now the fight will be between owners and players over how to share out the new bounty
Although it is always difficult to read the tea leaves about court cases, especially in the United States Supreme Court, I noticed a clear preference from the Court for striking down PASPA, the law preventing implementation of state sports betting, when I attended oral arguments on December 4, 2017 (discussed here). Well, the tea leaves were right. The world as we know it with sports betting in this country changed yesterday at 10 a.m. with the 7-2 opinion in favor of New Jersey, allowing that state, and a caravan of others to follow, to implement sports betting. Welcome to the future.
Here is a quick look at the opinion, with a longer discussion of the impact on the NFL and beyond:
Let’s clear up some confusion about what the decision did or did not say. The Supreme Court did not grant a consitutional right to sports gambling. This is a case about states’ rights prevailing over federal “authorization.” As the opinion of Justice Alito noted: “We have always understood that even where Congress has the authority under the Constitution to pass laws requiring or prohibiting certain acts, it lacks the power directly to compel the States to require or prohibit those acts.”
Justice Alito looked at the legal environment at the time of PASPA (majority of states had bans on gambling) in 1991 and compared it to the present environment. In that sense, this compares to recent tolerance and legalization of marijuana. Thus, for most states, authorization would have to come through repeal of marijuana sales, which were basically repealing state prohibitions.
It is a new time and new place for sports betting, a far cry from the past. Speaking of which …
The NFL, led by Roger Goodell and his priority of moral conduct, has forever opposed gambling as a threat to its cherished “integrity of the game.” As recently as four years ago, the league shut down a Fantasy Football convention—involving Tony Romo and dozens of other players—because it was in a convention hall annexed to a casino. Since then, however, the league’s position has, in their words, “evolved” with some mixed messages (some would say hypocrisy).
The NFL has recently embraced fantasy sports companies such as FanDuel and DraftKings, all the while noting that the league does not have an equity stake in either, as Major League Baseball and the NHL (DraftKings) and FanDuel (NBA) do. Of course, influential NFL owners Jerry Jones and Robert Kraft were early investors in DraftKings (Cowboys’ players walk out to the field through the DraftKings Fantasy Lounge). Goodell and league executives have distinguished fantasy from gambling, noting that it does not involve team outcomes but rather a mashup of player outcomes. I have found that reasoning perplexing, since if the NFL was worried about nefarious influences, those forces would have more chance of influencing an individual player outcome than a team outcome involving dozens of interdependent parts.
Of course, the NFL’s embrace of gambling has gone beyond fantasy sports. Several teams have had training camp practices at the Greenbrier Resort in West Virginia, home to an ornate casino. The Lions have a sponsorship deal with MGM. In Green Bay, one of our primary gate sponsors was the Oneida Nation Casino, and our players stayed at the hotel abutting that casino on nights before home games.
And then the NFL ceded its moral high ground. In January 2017 it formally approved relocation of the Raiders to Las Vegas, the country’s gambling mecca. I remember covering those ownership meetings and asking owners about their concerns with the Vegas market. Their apprehension involved whether Vegas would sustain a team long term, whether it was more than a tourist market, etc. What, I asked, about gambling? That was low on their list of concerns. Hearing that, I knew at that moment that the NFL was ready to embrace gambling. Indeed, in discussing the Raiders’ relocation, Roger Goodell praised the regulations in Nevada—the same ones he fought in New Jersey!
So why was the NFL fighting this case so hard? Well, the league preferred, and still prefers, a federal legislative solution that the NFL could influence through its lobbying, over a solution dictated by the Supreme Court and the states. The league is not used to negotiating without a position of strength. Now it will have to try to negotiate “integrity fees” with the states—an ironic term for a league worried about gambling affecting integrity—without its usual leverage.
No matter what happened in the Court and in the states, the NFL has had to be preparing for this inevitability. I have long advocated that the NFL needs to hire a CGO, a Chief Gambling Officer, to get control of this space and determine controls for players, coaches, referees, executives, etc. Now more than ever, the NFL needs a Gambling Czar, akin to the “Head of Integrity” role in various European sports.
Follow the money
The question all the leagues and ommissioners were asking yesterday and today is, of course, this: “How can we best monetize?” Whether it’s the integrity fees, sponsor possibilities in the gambling space, alignment with a certain casino over others, etc., Roger Goodell is likely hearing from his senior executives about the most efficient and profitable ways to monetize this result (besides continue to lobby Congress for a national solution).
The real value to the NFL from sports betting may not be as quantifiable but it is dramatic. Gambling is an incredible fan engagement tool that hooks in fans with no rooting interest in the teams that are playing. And the data is dramatic. According to Nielson Research, bettors make up just 25% of the NFL audience but watch nearly 50% of all NFL regular season game minutes. And then there was this statistic:
• Number of games viewed by the average NFL non-betting fan: 16
• Number of games viewed by the average NFL betting fan: 35
This is powerful data for a league looking under every rock for new sources of revenue. It is the reason fans with no rooting interest engage with the NFL. This is not new information to the NFL, but it certainly crystallizes the power of gambling.
And this is just the beginning. With the NFL recently inking a new $1.5 billion partnership with Verizon, think about the possibilities of in-game betting from a mobile device, wagering on the next touchdown, the next field goal, the next play! The NFL knows its key challenge for future growth is attracting and maintaining younger viewers; engaging them in this space is a strategic way to do so.
On a macro level beyond incremental gains in operating revenues, every NFL, NBA, NHL and Major League Baseball franchise just became more valuable. Gambling will bring more engagement, more eyeballs, more ancillary revenue opportunities, more, well, money. And with more money there is more value. Franchise values, about to have a new and impressive data point with the Carolina Panthers sale, will continue to soar with this new fan engagement tool at the starting gate.
Thus, while the NFL expresses some disappointment with the ruling (it had “won” at every other level for the past five years), the league can take solace in the fact that while “integrity” will never be the same, profits will rise. The Supreme Court ruled against the NFL but may have turned on the spigot for millions, even billions, in future revenue potential.
Whither the NFLPA?
Beyond the expected surge in NFL revenues, there is the important matter of the players’ participation in this windfall. The NFLPA joined other players’ associations last week with a statement that, to me, translated to “We are going to want our piece of this!” And the union made a statement upon the decision as well, noting it will “monitor developments closely.”
I can see this setting up as either a way to develop some trust or, more likely, another friction point between the NFL and NFLPA, two sides that have never had mutual trust. The NFL will certainly say that the increased revenues from gambling will be part of overall revenues, thus increasing the salary cap and allowing players to share in the uptick. That, however, is unlikely to be enough for the product, the players, who will want earlier entry points into the revenues generated from their games.
Unless the NFL has a plan for players to share gambling-related revenues beyond a cap increase, the news from today will only add to the issues dividing the two stakeholders.
And a final word on the issue of morality. I understand we are at a different time and place with taboos in our society including, now, marijuana and gambling. And I get that it is bothersome to some people, including the man I’ve referred to as the “Conduct Commissioner,” Goodell. However, Goodell is a steward for NFL owners determined to squeeze out revenue opportunities when they present themselves. “Moral integrity” did not have the same appeal to the NFL when Nevada was offering the Raiders $800 million in stadium subsidies.
This is not your father’s NFL in many ways, the latest one being the “integrity” of gambling. The United States Supreme Court has seen to that.
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