- Data-sharing deal is first between a major US sports league and sports betting operator
- Partnership – worth $25m over three years – serves as model for other stakeholders to follow
- NBA ensuring it is capitalising on gaming revenues as the fight for ’integrity fees’ continues
The NBA’s data-sharing deal with MGM Resorts International is a modest but meaningful partnership in the new sports betting landscape of the United States.
As part of the arrangement – worth a reported $25m (€21m) over three years – MGM will receive official real-time league data directly into its betting platforms via an NBA feed. In return, MGM will provide the league with anonymised access to its account-level betting transactions, which will immediately flag up any anomalies and potential fraud.
Financially, the deal is comparatively small for a league whose teams generated $7.4bn in revenue in 2017-18. But it has set a precedent as the first commercial partnership between a major US sports league and a sportsbook operator.
Since the Supreme Court struck down the Professional and Amateur Sports Protection Act – a law that largely banned sports betting outside of Nevada – in May 2018, US sports leagues have looked to capitalise on a new revenue stream. However, their attempts to ensure ‘integrity fees’ – which would give leagues a percentage of the total handle – are included in new sports betting legislation have thus far failed.
The NBA, as well as other major leagues, is continuing to push state and federal lawmakers to include integrity fees into bills. But in the interim, the NBA has switched its focus to earning royalties from its official data.
“What was very important for the NBA was that we were able to establish, through a commercial relationship, that we should indeed be compensated for our intellectual property and for our official data,” NBA commissioner Adam Silver said at a press conference in July.
“Once we began the discussions with the states…[we] quickly saw that it was going to be an uphill battle to get the states to agree with what we thought was the appropriate framework. [But] we never ran from the fact that we thought we could accomplish commercially a lot of what we were trying to achieve with the state legislature.”
NBA ‘gains ability to look under the hood’
In the NBA’s attempts to determine the commercial value of its official data, Silver admits he did not “over-negotiate” with MGM. The league believes it is getting “fair compensation”, but a relatively short deal was signed to ensure the NBA would not be tied down if the partnership was felt to be undervalued as the sports betting landscape continues to evolve.
“I think there was a recognition here that it’s a leap of faith on both sides,” Silver added. “It’s a deal, moderate in length, where I think we can both step back and assess as we go, and ask: ‘Is this working? Is this deal fair? Are we providing the consumers with the right type of experience?’.”
MGM will gain exclusive marketing assets in the deal: the right to be called the ‘Official Gaming Partner’ of the NBA and WNBA, the use of NBA marks and team logos in its venues and on its apps, and promotion across the NBA’s digital assets.
But the access to data feeds is non-exclusive. For integrity reasons and to diminish any discrepancies among gaming providers who use different third-party sources of player and team data for betting lines, the NBA wants all betting companies to use its official information.
“If you’re a consumer, spending on games, you want to know that you can trust the data that is being served up to you. And there’s only one source of official data and that’s from the NBA,” Mark Tatum, the NBA deputy commissioner and chief operating officer, says.
“So if you’re sitting in an arena and you make a determination of, ‘well, no, that was an offensive rebound by one player versus the other’, you’re not the official scorekeeper, so there’s one set of official data that is the NBA’s and that should be the data that’s used for the protection and the integrity of sports betting and for the consumer.”
The NBA, likewise, is seeking access to operators’ betting information to help prevent fraud and match-fixing. “[The NBA is] gaining the ability to look under the hood to be in position for the first time to be able to monitor granular betting activity,” says Daniel Wallach, a gaming and sports law attorney at Becker & Poliakoff. “That is something vital that MGM is giving the NBA in this deal, and it underscores how this can work across other operators and across state lines.”
It sets a precedent, it keeps the conversation moving. I wouldn’t be surprised if another league followed.
Angela Ruggiero, chief executive and co-founder of Sports Innovation Lab
Model set for other stakeholders to follow
The non-exclusivity clause also enables the NBA to benefit commercially from similar deals with other sports betting operators. MGM will also be able to strike partnership deals with other leagues. In short, a model has been set for other stakeholders – both operators and rights-holders – to follow.
Indeed, just a month after the NBA announcement, MGM agreed a contract to become the exclusive Gaming Partner of the Alliance of American Football, a new rival to the NFL which is set to launch in February 2019.
Further deals are planned. “We’re in discussions with many leagues and many teams that we think support this effort,” Scott Butera, MGM Resorts’ president of interactive gaming, tells us. “Our view is that [the NBA deal] sets a good example of how an operator and a league can partner in a way that makes sense for both sides.”
MGM is confident that it will benefit financially from the NBA partnership. “We believe that it will lead to customer acquisition for betting online [via an app] and at our resorts. Obviously, that would be the biggest thing,” Butera adds. “Someone who is new to the betting world should get comfort [from the fact] that it’s league-sponsored data that we’re using. Plus, we get the ability to advertise who we are and broadcast our message and our plans through their platform and global reach. That the NBA is a year-round global entity, we think is significant.”
In states were sports betting is legal, MGM has 13 properties on the Las Vegas Strip in Nevada (including the Bellagio and the MGM Grand) two in Mississippi (Beau Rivage and Gold Strike Tunica) and one in New Jersey (the Borgata). The Borgata has made over $4.7m in sports betting revenue since June and its monthly income rose from $855,152 in August to $2,394,106 in September, thanks in large part to the start of the American football season.
MGM has three other resorts in the US – in Massachusetts, Maryland and Michigan – and plans to expand to 25-30 states in the next five years, according to Butera. MGM currently has online sports betting, via its playMGM app, in Nevada and New Jersey.
The NBA believes that the expected increase in betting on its matches – particularly at MGM properties, which will be able to provide customers with new in-game and side bets due to its data access – will lead to rising engagement.
A 2016 Nielsen Sports study, commissioned by the American Gaming Association, revealed that adults who bet on the NFL (via legal gambling and fantasy sports competitions) watched 19 more games during the 2015 season than those who didn’t make a wager. In addition, 65 per cent of people surveyed said they would be more likely to discuss a game via social media if they had placed a bet on it.
“Because we operate and play games in places where sports betting is legal, there’s no doubt that the engagement levels and the people who are more into watching the games, following the games and following the players, rises,” Tatum says. “We certainly know that the engagement level rises, because it rises in viewership, it rises in the social media and the digital media following, so all of those things we see go up.”
Angela Ruggiero, chief executive and co-founder of Sports Innovation Lab, adds: “Even if [the MGM partnership] isn’t going to drive a ton of revenue to the NBA, it’s going to drive eyeballs to the streaming platforms or broadcast and media feeds. The engagement that they’ll get from this will be worth a lot more [than the $25m value of the deal].”
Ruggiero believes it is only a matter of time before another major US league follows suit. “The fact that Adam Silver was able to demonstrate that value [of its official data] to MGM and that MGM pulled out their wallets speaks to the appetite in the market,” Ruggiero says. “It sets a precedent, it keeps the conversation moving.
“The NBA is, in my opinion, one of the most dynamic leagues in terms of taking risks and being innovative. It’s something we’ll continue to see and I wouldn’t be surprised if another league followed. We see a lot of followers in this industry, behind the NBA.”
Will the deal help or hinder quest for integrity fees?
Despite arranging a private partnership with MGM, the NBA is continuing to push state and federal legislators for integrity fees, which would give leagues a cut of the handle of all wagers placed on their sports (though it is unclear if players’ unions would demand a share of that income). The financial reasons are clear.
“In a 50-state US sports betting market, a one-per-cent fee on handle would likely be worth billions of dollars annually,” Chris Grove, the managing director of sports and emerging verticals at Eilers & Krejcik Gaming, tells SportBusiness. “The NFL would probably reap the single largest share, but the NBA would realise a competitive amount. Betting volumes have been steadily trending up for the NBA over the last decade.”
In Nevada, the amount of money wagered on basketball – both college and NBA – has risen for the past six years. In 2017 that figure was $1.4bn.
Ruggiero adds: “The difference between one per cent or 0.25 per cent of total bets in the legal sports market compared to a $25m deal is night and day.”
Since the Supreme Court ruling in May, none of the states which have legalised sports betting – Delaware, New Jersey, Mississippi and West Virginia – have introduced integrity fees into their bills. Gaming experts are divided over whether the NBA-MGM partnership has helped or hindered the quest for integrity fees.
Some believe the deal gives leagues a greater chance of success in persuading state legislators to make data-sharing a requirement in law as MGM, one of the world’s largest gaming operators, has shown it is willing to do so with the NBA. “This deal can serve as an argument in favour of a statutory framework that includes central bet monitoring. It shows that the gaming companies can do it,” says Wallach.
Others believe the partnership gives lawmakers an excuse not to mandate what private entities can negotiate commercially. “[The deal] does underscore an argument that is commonly made by stakeholders who oppose integrity fees: that integrity or royalty fees are a commercial arrangement and not something that should be mandated by lawmakers,” Grove adds.
Nonetheless, the NBA has ensured it will benefit commercially from legalised sports betting while the fight for integrity fees continues. “There are many different ways to skin the cat, so to speak,” Silver said.
“We decided here – rather than sort of re-litigating the integrity fee, which is still being hotly discussed state-by-state – to find an approach which is unique to us and where we both feel that we’re being fairly treated.”
Additional reporting by Ben Cronin
