February 11, 2021

The Sports Betting Industry is Here to Stay

Many of the Super Bowl’s most notorious annual advertisers opted out of a TV spot for this year’s game, keeping in line with an overall fan experience that felt anything but normal. Instead of traditional brand heavyweights like Coke, Pepsi, and the Anheuser-Busch giants dominating commercial airtime, some fresh faces chose to enter the picture for the first time in 2021. Of all the newcomers to the Super Bowl advertising party, perhaps none left feeling better than their airtime was money well spent than DraftKings – a sports betting giant who dropped an estimated $5.6 million total for two 15-second ads during the game (AdAge).

While $5.6 million is a staggering total to pay for not even a minute of airtime, that number pales in comparison to the volume of business that gambling giants like DraftKings are churning out these days. The brand’s decision to spend big on Super Bowl advertising in 2021 is a sign of just how confident the company feels about its prospects moving forward.

In the third quarter of 2020, DraftKings reported revenue of $133 million (98% growth) over that three month period (DraftKings). With the company expecting a full calendar year of live sports for its users to bet on, revenue projections have been set as an astounding $750-850 million for 2021 (Sports Pro Media). Although DraftKings often steals the spotlight given its high brand visibility and status within the market of betting companies, the company’s success is not unique within the industry.

The popularity of legalized sports betting platforms is reaching astronomical heights. For evidence, we need to look no further than the Super Bowl itself. Friendly wagering and casual gambling pools like ‘Super Bowl Squares’ have long been a part of the event’s tradition, but these informal betting ways have now been surpassed by official betting sites when it comes to enticing fans to put their money on the line. Experts estimate that the final legal wagering figure for the game will come in around $300 million total. That number would be an increase of $30 million from 2020 (Legal Sports Report).

The movement to legalize sports betting has gained traction on the regional level, as more and more state legislatures across the country have started to pass laws allowing for the usage of mobile betting sites like DraftKings within their state boundaries. The total number of states who have legalized sports betting in some capacity is up to 21 total as of February 2021, while another six have legislation currently awaiting expected approval at some point later in the year (Action Network). If the sports betting craze hasn’t already hit, the wave is certainly imminent.

Take a state like New Jersey, for example, which has the highest betting presence of any state apart from Nevada – the original American gambling mecca. The Garden State, which reports that 80% of its betting totals come from “sportsbook apps and websites,” has posted incredible revenue stats since legalizing the practice over two-and-a-half years ago. Here are how the state’s overall betting platforms performed in 2020 alone:

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Considering these figures and revenue streams, it’s easy to see why state legislatures across the nation are rushing to get in on the betting action. Even in a pandemic year that saw live sports put on total pause for nearly five months, sportsbooks in New Jersey surged ahead, raking in record-breaking bet totals for seven consecutive months to end the year. In every month excluding the peak pandemic shutdown of April, the state raked in at least $1 million from taxes collected among the sportsbook it allows to operate on its premises. The betting platforms themselves stole the show, however, finishing the calendar with three straight months above $50 million in revenue.

With figures like these, individuals around the sports industry can no longer deny the impact that gambling is going to have on the sporting world in the near future. This trend toward legalization will undoubtedly present a number of challenges and concerns among officials, and those worries are valid. Those around some of the nation’s top leagues can talk all they want about how the legalization of in-stadium betting is unethical and threatens the authenticity of the fan experience, but that talk will be futile at the end of the day. Although it may take a decent amount of time before all 50 states certify legislation into action, national legalization of sports gambling is inevitable. The financial reward for states opening their doors to legal sportsbooks is simply too powerful.

So the big question arising from all this talk of betting legalization is still rather ambiguous -- how will gambling change the way teams and leagues operate moving forward? Drawing certain conclusions one way or the other is difficult given the new and unprecedented nature of this gambling wave, but the bottom line is that sporting executives must embrace this wave for what it truly is: a chance to make more money.

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Take the NBA’s Detroit Pistons, for example. With the team’s home state of Michigan officially passing the legalization of online sports gambling in January 2021, the franchise jumped ahead of the curve, inking multi-year sponsorship deals with the two online betting giants: DraftKings and FanDuel (Detroit Free Press). Recognizing that betting was about to become a part of the Pistons fan experience no matter what, the team chose to capitalize on the impending betting spike in its home state by establishing a productive partnership with these mega-betting entities as opposed to an adversarial one.

As legal betting continues to thrive in more states across the country and thus becomes popular among a wider global audience, it will be up to individual franchises like the Pistons to determine how betting influences their overall fan experience. While some might raise valid concerns about how an excessive embracement of betting could ruin the sanctity of the sports fan experience, the reality is that the rise of gambling legalization seems irreversible. With the legal gambling wave knocking on the doorstep of more and more franchises, teams have two simple options: put aside ethical concerns and get it on the action, or sit back idly as other entities around them rake in millions.

Sources

  1. https://www.legalsportsreport.com/sports-betting/super-bowl/
  2. https://adage.com/article/special-report-super-bowl/draftkings-air-first-super-bowl-commercial/2309706
  3. https://www.sportspromedia.com/news/draftkings-2020-revenues-growth-us-sportsbook-betting-market-guidance
  4. https://www.actionnetwork.com/news/legal-sports-betting-united-states-projections
  5. https://www.playusa.com/draftkings-super-bowl-commercial-big-moment/
  6. https://www.legalsportsreport.com/sports-betting/revenue/
  7. https://www.freep.com/story/sports/nba/pistons/2020/11/30/detroit-pistons-partnerships-fanduel-draftkings-nba/6462850002/

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