It’s been one year since the road was paved for sports betting to become legal across the United States. On May 14, 2018, the U.S. Supreme Court struck down a decades-old law (the Professional and Amateur Sports Protection Act, or PASPA) that had banned sports betting nationwide and essentially limited gambling activity to Nevada.
Sports betting is now legal in 11 states including Nevada, where it was already legal prior to the Supreme Court ruling. Delaware, New Jersey, Mississippi, West Virginia, Pennsylvania, and Rhode Island legalized sports betting in 2018 following the Supreme Court’s decision.
Legalization was widely expected to trigger a tidal wave of sports gambling dollars for the media business.
No wonder ESPN and Caesars Entertainment announced a deal Tuesday to build a studio at a Las Vegas hotel that will serve as the anchor to an expansion in the Disney-owned network’s coverage of sports gambling next year. Caesars will also supply data on sports odds to ESPN as part of the deal.
Fox Sports last week announced it’s acquiring an equity stake of roughly 5% in The Stars Group for $236 million, for example. Fox is also launching a sports betting product called Fox Bet in partnership with The Stars Group by the fall of this year.
Meanwhile, Sinclair Broadcast Group is acquiring 21 regional sports networks (RSNs), which offer 5,300 live sports events per year, from Disney for over $10 billion. Sinclair is banking on legalized gambling bringing its newly acquired RSNs increased viewer engagement, higher ratings, and subsequently, greater ad revenue.
The growing spread of legalized sports betting will continue to influence these types of deals and help media companies hit pay dirt in the remainder of 2019. It’s a welcome development considering the momentum behind legalization in 2018 looked like it was slowing: no states legalized sports betting within the first four months of this year.
However, sports betting legalization activity has finally started to pick up steam. Montana and Indiana became the first two states to legalize sports betting in 2019 earlier in May, while Tennessee is expected to follow suit soon. Sports business reporter Darren Rovell of The Action Network — a platform that offers sports betting-focused analysis, articles, videos, and podcasts — in May upped the number of states he expects to offer legalized sports betting by the end of 2019 from 13 to 15.
Growing sports gambling-related investments will be encouraging to some states and sports broadcasters hoping for legalized sports gambling to become an economic engine.
It’s still early days for many legal sports betting operations, but the majority of the states that legalized sports betting in 2018 have been disappointed in the amount of windfall that sports gambling has brought them. As of April, Mississippi and Pennsylvania generated 50% of the tax revenue from sports betting they had projected, according to the Associated Press. Meanwhile, West Virginia is so far collecting just 25% of the monthly tax revenue it projected, while Rhode Island collected just 5% of the monthly tax revenue it expected to receive from late November 2018 to February of this year.
But Delaware and New Jersey have been bright spots for sports betting advocates and both met their sports betting tax revenue expectations. From June to December 2018, Delaware sports betting operators generated over $9 million in revenue, while this figure was over $94 million for New Jersey sports betting operators in that same time frame. For a point of comparison, Delaware has much fewer residents than New Jersey and accounts for 0.3% of the U.S. gambling-age population, while the Garden State accounts for 2.9%, according to a report by gambling research firm Eilers & Krejcik.
The ability to place bets on mobile devices, which isn’t allowed in all states that have legalized sports gambling, is a big reason why New Jersey has been a bright spot among other states. Folks from neighboring New Jersey states are driving to the Garden State to place mobile bets in droves — 44% of all New Jersey sports betting mobile traffic comes within 2 miles of state borders, according to GeoComply. Delaware has met its tax revenue expectations largely because it’s one of the three states that already had limited gambling operations prior to May 2018 and was able to quickly expand its operations once the Supreme Court decision was made last year.
Legalized betting’s impact on sports broadcasters is less clear cut. The NFL averaged 15.8 million viewers a game during the 2018 season, which marked a 5% year-over-year increase and reversed two consecutive years of viewership declines. But this uptick in viewers can’t largely be attributed to legalized sports gambling because NFL games are nationally televised and betting isn’t legalized in every state.
It’s likely more useful at this point to examine how gambling-focused media initiatives are taking off. The Action Network as of March averaged around 2 million unique visitors per month, a figure that’s up from 500,000 from August of 2018. Meanwhile, one of NBCUniversal’s regional sports networks in January 2019 debuted an alternative sports-betting-focused broadcast of an NBA game, which received higher ratings than its average NBA game broadcasts, per S&P Global Market Intelligence.
Growing appeal of sports-betting-focused media broadcasts is promising for advertisers that wish to have their products and services shown to engaged sports audiences. A consumer is likely to pay more attention to a sports event that they have a financial interest in versus one that they are watching casually.
This helps explain why the legalization of sports betting is exciting Madison Avenue — Evercore ISI predicts sports betting in 2019 could drive $7 billion in incremental ad spend in the U.S.