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Ten Factors That Will Change The Face Of Sports Sponsorship

July 2, 2018

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How Will Sports Gambling Change the Value of Sports Sponsorships?

May 24, 2018

The ultimate impact of the U.S. Supreme Court’s recent decision to let the states allow gambling on organized sports will depend on the degree the decision forges business and social connections between sports teams and gambling. Despite months of anticipation that the Court would allow state control of sports gambling, we’re already seeing teams and leagues struggle with their public positions. Do the leagues celebrate and look for every possible way to share in the gambling largesse? Do they press for pro-active federal regulation of sports gambling, which the Court’s ruling would allow and which, conveniently, would be an easier forum for legislation to mandate an “integrity” fee that would let the owners gain a piece of the gambling action? Do they appear even more cautious and avoid active support or involvement? The positions here will vary by league and team, and almost certainly evolve over the months ahead as their business assessments of greed and fear combine with state and federal legislative proposals, social media posts and input from fans and sponsors. Whatever the forum or the results, the genie is out of the bottle and wide-spread gambling on organized sports will be coming soon.

 

The interesting question is how all this will affect the value of sports sponsorships. Although it’s early to tell, we think the answer will depend on some combination of the following considerations.

 

First, greed. Gambling will increase viewership and fan engagement, perhaps the hottest aspects of sports sponsorship value today. As these increase, sponsorship prices will climb. If you are a brand that is agnostic to gambling, you will pay up for the greater value. If you are a brand that finds any link to gambling abhorrent, you may pass, but rest assured that another brand will step up in your place.

 

Second, fear. Increased gambling is not without risks. If gambling affects the integrity of the game (or the appearance of integrity), it will fuel controversy that could adversely affect fan engagement for at least the team or other property involved and perhaps for the league, sport or industry. Any systemic failure of integrity could significantly offset the increased viewership and fan engagement resulting from increased gambling. But absent such a failure, the integrity risks are unlikely to exert meaningful downward pressure on sponsorship prices.

 

Third, structure. The legal and regulatory structure of the new gaming process will have a huge impact on participation, demographics and value. If sports gamblers must go to physical locations (such as casinos or horse tracks) to place their bets, participation and the increase in sponsorship value will be lower. If fans can gamble online and, particularly, via mobile devices, participation will be higher, the demographics will be stronger and the sponsorship value will be greater.

 

Fourth, social acceptance. Once largely limited to Nevada, gambling in recent decades has exploded across American society in a proliferation of casinos and state-sponsored lotteries. Many would say that state-sanctioned sports betting is just catching up. Much of the geographic expansion of gambling has been justified socially and politically as a way to support local education or some other function needing more tax dollars. Whether increased gambling on organized sports will be able to claim similar social benefits (beyond making team and casino owners even richer) remains to be seen. But even without these social benefit arguments, public support for gambling on organized sports is increasing—with one 2017 poll putting approval of gambling on pro games at 55%, with higher levels among some key demographics. While 55% overall is a solid majority, it still leaves a significant percentage of people on the other side of the fence. How sponsors view the impact of gambling on the demographics they are trying to reach will be important to their assessment of the risks of alienating some fans while potentially attracting others. Avid sports fans, male college graduates, people under 40 and fantasy sports participants all show strong affinity with sports gambling, at least on pro games. But the risk of adverse consumer reaction is real, particularly if sports gambling seems to be pervasive.

 

Fifth, positioning. When it comes to more gambling on organized sports, appearances will matter. Both sponsors and rights holders will strive to find a safe balance between taking maximum advantage of gambling’s ability to increase fan engagement and its potential adverse effects on fans who may be turned off by overt support for sports gambling, too much coziness with the organized gambling industry or appearances of undue greed by team owners. Given the huge dollars involved, transparency could suffer, as the public positions of teams and leagues may be less obviously supportive of gambling than their internal business strategies. The best way for teams and leagues to maximize their returns from increased gambling may be to shift the public’s attention from their improved revenue from gambling to their efforts to assure integrity. Leagues and teams might also benefit by appearing to be neutral on the issue of gambling, simply doing whatever might be required to facilitate it once it became permitted.

 

How will these factors come together?

 

First, the potential escalation in viewership and fan engagement will increase the value of sports sponsorships of teams and leagues where significant numbers of fans place bets. Eyeballs matter and engaged eyeballs matter even more. Stats show fans who bet on the team are more likely to watch the team. Rights holders will need to be able to show that this increased viewership translates to increased fan engagement that actually benefits specific sponsors. Sponsors who are convinced that gambling will increase sponsorship value may want to consider extending contract terms now, before the increased viewership and engagement can be demonstrated. (Yes, some might call that gambling on gambling.)

 

Second, maintaining the integrity of the game will be important. But leagues and team owners who view an “integrity” fee as a clever way of gaining a cut of the increased gambling proceeds should think carefully about whether pushing that approach may turn off fans and sponsors and offset at least part of the increased fan engagement value that increased gambling enables.

 

Third, government structures that strengthen integrity and boost the social acceptance and availability of increased sports gambling would support the higher sponsorship prices fueled by greater fan engagement and could limit the downside risks of increased gambling for rights holders, sponsors and fans alike.

 

Fourth, the public balance that teams and leagues strike between reasonable neutrality and obvious greed will be an important factor in determining the net impact of increased gambling on sports sponsorship values. The old adage that “pigs get fat but hogs get slaughtered” comes to mind.  

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