Can Sports Betting Continue On Its Pandemic-Fueled Roll?

The COVID-19 pandemic affected the entire media industry, and the impact on various sectors was wildly divergent. Streaming platforms amassed millions of new subscribers, while local linear broadcasters suffered as major advertisers, particularly the automobile and political categories, nearly bottomed out. Many TV and radio stations were hanging on by a thread, when suddenly advertising around the relatively new sector of sports betting ramped up and, for some, saved the day.

As sports has returned in the post-pandemic world — along with endorsements from “official” sponsorships of sports betting companies, sports gambling ad spending has continued to soar. In addition, live betting on televised sports may also have a secondary benefit to broadcasters: it keeps the audience engaged — and eyeballs on the screen — even when their favorite team is getting blown out. Down by 30 at halftime? In past years that meant switching channels or turning off the television. But now fans can still be engaged by placing all kinds of bets on individual plays and players.

Will sports gambling continue to be the savior for all the revenue loss of the past two years? That’s what local TV and radio is betting on — pun intended — but as with nearly everything else in the media industry, it’s not as cut and dried as it may appear.

In the May/June issue of TFM (The Financial Manager), the publication for members of the Media Financial Management Association, Christian Kligora, senior vice president of customer success at Marketron, takes a deep dive into the world of sports betting revenues in his article “Knocking it Out of the Park.” He posits how much we might expect sports betting brands to spend on advertising in the near and longer terms, how quickly spend might increase (or not), and some other positive and negative trends to help us understand that revenue from sports betting is anything but a slam dunk.

Kligora gets a lot of his data from a very solid resource: BIA Advisory Services’ 2022 U.S. Local Advertising Forecast. The report calls sports betting a “significant driver” for ad revenues, projecting the category would grow 44.9% from 2021 to 2022 — the largest anticipated growth for any sub-vertical.

According to BIA, the total local advertising spend for online sports gambling in 2022 will land near $1.6 billion. TV broadcasting benefits the most by far, securing 34.4% of the total, with radio coming in at a distant 9.8%. Other big revenue winners will be cable (13%), newspapers, directories and magazines (both print and online) at 11.9%, and mobile at 11.5%.

In a separate, joint report, BIA and Nielsen projected that local TV OTA revenue could go north of $806 million by 2024, assuming more states legalize sports betting. If fewer states legalize it, the report puts revenues closer to $587 million.

These numbers are very significant for traditional local media, Kligora says, signaling there’s finally a core advertising category that’s not only skyrocketing, but tipping in their favor — much more so than digital. The main reason for this advantage is that sports betting regulations are specific to each state, and most digital advertising platforms currently don’t allow it.

But before we get too far ahead of ourselves thinking that advertising revenue from sports betting is going to change the world as we know it, we need to take a look at the sports betting landscape, and the potential upsides and downsides of how it may all play out.

The American Gaming Association (AGA) reports that 30 U.S. states and Washington, D.C., have legalized live, in-person retail sports betting. Online sports betting is a different animal: the 21 states (and D.C.) that allow it all have different regulations around online betting. For example, some states work with multiple operators, but states like New Hampshire agreed to an exclusive deal with DraftKings. Ohio and Florida are on hold, and seven additional states are in the midst of legislation or ballot referendums.

According to a Bank of America analysis, New York, Pennsylvania and Michigan are currently the top states for gaming revenue. Nevada is further back in the pack due to its strong retail sportsbook presence. Identifying the top states for sports gambling is relevant, since money — and revenue for local media — tends to follow where the bettors are.

In terms of ad spend, the brands you’ve probably heard of — FanDuel and DraftKings — both of which debuted in 2018 once the Supreme Court declared sports betting operations legal, spend the most on advertising. But there are some newer players that are aggressively following suit. BetMGM and Caesars Sportsbook are quickly coming from behind, placing celebrities such as Jamie Foxx, Halle Berry and Peyton, Eli and Archie Manning into slick, high-profile ad campaigns intended to dethrone FanDuel and DraftKings.

There’s not a lot of data on how much the online gambling industry has collectively spent on advertising, but Media Radar put the number at $488 million between November 2020 and November 2021. Nielsen reports online sportsbooks and gambling sites spent north of $153 million in 1Q 2021 — the majority on Super Bowl ads.

What could go wrong? Several things. First off, as all advertisers tend to operate, sports betting sites will spend money only if they’re making a profit. That means bettors need disposable income. As inflation and other current economic woes related to national and global events start to affect more Americans, it’s possible people will restrain their sports betting.

Another challenge is around what brands will do when they reach their customer acquisition goals. Once that happens, many players will sharply reduce their ad spend. Caesars Entertainment has already signaled it doesn’t want to spend a penny more on ads than it needs to. Further, as more states legalize sports betting, each state will find itself competing for ad dollars. Brands may leave one state and spend in another to attract new customers, particularly in states where legalization is pending.

Kligora offers two other cautionary thoughts: first, remember that gambling has many negative connotations, and has wreaked havoc in many people’s lives. Most sportsbooks companies are well aware of this issue, and have created ads that address the addiction around betting.

Second, and related, brands and their ad agencies are well aware that they need to tread carefully around the frequency of ad placement.

There are many unknowns, but it’s clearly a promising business and revenue stream for broadcasters and other media hungry to replenish their coffers. I agree with Kligora that on balance, there’s reason for cautious optimism.

“Sports Betting and the Media” is one of the many breakout sessions featured at Media Finance Focus, MFM’s annual conference happening May 23-25 in Tampa, Fla. If you’ve not yet registered for this event, it’s a must-do for any finance professional in the media industry.

Joe Annotti is president and CEO of the Media Financial Management Association and its BCCA subsidiary, the media industry’s credit association. He can be reached at [email protected] and via the association’s LinkedIn, Facebook, Instagram and Twitter accounts.