• Tempo of US sports will allow greater opportunity for next-play betting
• Fantasy operators spent more than Proctor & Gamble on marketing to establish themselves in the US
• Sportradar is advising gaming operators, regulators and leagues.
The legalisation of sports betting is happening on a state-by-state basis in USA, threatening to create a fragmented market. Can you picture a scenario in which betting will be regulated on a federal level?
Obviously, our position is neutral, we are neither in favor of a federal bill, nor a state-by-state bill, but realistically speaking, based on what we see in the gaming industry, we believe sports betting is something that will evolve on a state-by-state basis. In each state where there are operators, there is a gaming commission that is looking after the licensing process, the certification of the products, the number of licenses, the number of machines you can have on the floor. That is done in agreement with some Native American tribes that have strong local interests and sovereign lands. This adds some regulatory complexity at a state level.
Do you think all of the US Major Leagues would prefer a federal bill rather than state-by-state legislation?
The underlying paradigm here is that finally the leagues are behind the sports betting business. There are several models but it’s becoming pretty evident that all the leagues: the NBA, NFL, MLB, NHL are behind sports betting and they see the benefit of doing that because this could be not only a tremendous revenue-generating business, but it can also increase the levels of engagement and the followers of each league dramatically. Some might think a federal model would be easier to implement – obviously it removes the level of complexity dramatically and would allow for a blanket regulatory framework – but realistically I don’t think that is going to happen in the short-term.
How big are the opportunities for sports rights-holders?
If you look at the US market, clearly the potential of the addressable market is very significant. Some have estimated the illegal market is worth $10bn, others that it is worth $25bn, but one way or another the market is going to be very big. What makes this market very big is the way Americans consume sport content more than any other nations on the planet. I always find it intriguing that you can step into a Michelin-starred restaurant and see that while you are ordering a $100 dish there is a baseball game being shown behind the bar, something you’d never see in Europe.
What sort of sponsorship revenues can teams and leagues expect from gaming operators?
Leagues and teams will be able to extract value, not only from the sports betting operations but also from marketing activities. It’s estimated that more than 50 per cent of the gross gaming revenue that will be generated by sports betting operators – especially at the beginning of the regulations – will be reinvested in marketing. That marketing will be in the form of above-the-line communications and sponsorship. Teams and leagues can extract a ton of value out of that. They will ‘double dip’, first getting a share of the business of the sports betting operations and then they will get money from the marketing initiatives.
How will betting in the USA differ from betting in Europe?
The tempo of American sport will really enable next-play betting, so you will be able to place a bet between two different actions. You can place a bet if the next action is going to be a pass or if it’s going to be a run. This is something you can do today in tennis – for example who is going to win the next point – but [tennis] is not as popular [in the States] as the NFL or MLB. And if you think about baseball, where you have, I believe, 45 seconds, almost a minute between one action and the next, you have [an increased opportunity] to place bets. Live betting on the next play will, in my opinion, generate unprecedented levels of engagement.
Does the fantasy sports sector in the USA offer any precedents?
If you take a look at what DraftKings and FanDuel did a few years ago, they invested 120 per cent of their revenues in marketing. I believe DraftKings invested something like $250m in marketing activities, and FanDuel invested $200m, so these combined operators invested almost half a billion dollars in marketing initiatives, which is huge. I believe that they spent more than Procter & Gamble at one point, which is very telling. I don’t think that the gaming operators will achieve the same level of expenditure, but they will definitely need to make people aware of their offer in the market.
Do you think there is any chance that legislators will enforce a ban on gaming operators sponsoring teams or leagues, as has been the case in Italy recently?
I think that gaming in Italy and in Europe has reached a level of penetration that is not comparable to the US and to a certain extent it is starting to be almost a social problem. I don’t see the US facing the same issue. It might happen, but I don’t see that coming in the short-term.
Are there any concerns at a rights-holder level about the impact of introducing sports betting?
At this point in time, the areas where I see some concerns by the leagues – which is legitimate to a certain extent – is around [betting on] minor leagues and college sports. Obviously, they tend to be a little bit more cautious in their specific segments due to the nature of their sports. The vast majority of these guys are not professional players that are paid millions of dollars. But I don’t see why leagues would put the brakes on potential co-marketing initiatives. As a matter of fact, if you look at what the NBA has done with MGM – where they have signed a co-marketing partnership – that is a sign to me that they are embracing these opportunities more and more.
Would it be fair to say the industry needs mobile betting to be legalised in US states to really make the most of the opportunity?
Yes, if you look at any mature jurisdiction, mobile betting represents the vast majority of sports betting activity. What is fueling the adoption of mobile betting is also the live betting opportunity – you’re watching the game and you’re capable of placing a bet on what is going to happen in the next 10 minutes. People want to do that with their phones but potentially tomorrow you will also be able to do it through your TV or with your voice-controlled Alexa. Clearly if you need to go to a casino to place a bet for an event that will happen tomorrow, the market will be severely reduced in terms of opportunity. So mobile and interactive betting are clearly both growth-drivers.
Are there plans on the part of US broadcasters to integrate betting into their sports coverage and gamify the viewing experience?
One of the largest sportsbooks in the UK is Sky Vegas. It was recently acquired by PokerStars, but Sky Vegas used to be part of the Sky TV group. I understand in the past they tried to bundle their sports betting offering with their content offering and it didn’t work out that well. I see over-the-top operators as being better positioned to take advantage of this offering than traditional broadcasters. Bear in mind one of the businesses Sportradar is in is providing audio and visual streaming content to sportbooks to place bets on live events throughout international markets. We do have content which will be distributed through gaming sites and you can go to a gaming site and watch a game over-the-top while placing a bet at the same time.
What impact has the PASPA [Professional and Amateur Sports Protection Act] repeal had on Sportradar?
As a business we have been very much focused on the media segment until today. We are providing live data or sports data to a lot of media companies in North America and we’ve been building quite a big, solid business around that and our presence in the market here in the US has been vertically-focused on this business line. To provide an example, when a sports commentator discusses a basketball game, we are able to provide insights on what happened that they can then share as an editorial note. In addition, we provide static content to media operators.
Clearly now [sports betting] will add an important incremental business line to our portfolio. We believe that we can further extract synergies by the combination of these two initiatives. We are crisscrossing the country to talk to gaming operators, regulators and leagues, specifically around this topic, bearing in mind that this market at the beginning is going to be slow and is going to take some time to mature. That being said, we’re investing a significant amount of money in this business. We work with major sportsbook operators in the US – both European operators expanding in the US, or American casinos promoting sports betting – and we provide priority to those jurisdictions where betting is regulated or is in the process of being regulated.
What are the synergies between the media vertical and the sports betting vertical?
In the end the data is the same if you think about it. The way that data is displayed through the different channels changes, so there are production synergies that we can generate. But there are also revenue synergies we can generate. Betting data can be content as well. And we can be published not only by betting operators but potentially by ESPN or by another media company that is interested in combining our data visualizations with sports betting data.