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Racing and football the likely beneficiaries of TV marketing blackout by UK gambling firms

LONDON, ENGLAND - MAY 29: Sky Bet Play Offs advertisement during the Sky Bet Championship Play Off Final match between Reading and Huddersfield Town at Wembley Stadium on May 29, 2017 in London, England. (Photo by Robbie Jay Barratt - AMA/Getty Images)

  • Drop in advertising against football unlikely to impact media-rights income
  • Value of shirt and LED inventory could increase
  • Exemption likely to drive horse racing media-rights revenue

When Britain’s biggest gambling firms voluntarily agreed to a ‘whistle-to-whistle’ ban on TV advertising during live sport shortly before Christmas, the feeling was that they were trying to take hold of their destiny before legislators did it for them.

Like pay-television broadcaster Sky’s announcement in the preceding month that it was going to limit the number of gambling adverts against its sports content to one per commercial break, the decision was most likely motivated by the growing mood of antipathy towards the betting industry among British politicians.

The betting operators appeared to have learnt a hard lesson from their failed campaign to prevent the maximum stakes on fixed-odds betting terminals – the “crack cocaine” of gambling – from being cut last year. Having initially opposed any restriction at all, they saw the UK government punish their intransigence by slashing the stakes from £100 (€114/$129) to £2, the lowest level possible, on a wave of public sentiment. Opposition policy is for even more radical restrictions on the industry, including a compulsory levy on gambling operators and a whistle-to-whistle ad ban like the one UK betting firms have now imposed on themselves.

Most likely deciding that a new approach was required, the Remote Gambling Association, the trade association for some of the largest European gambling operators, including Bet365, Ladbrokes, Paddy Power and William Hill, led the voluntary whistle-to-whistle ban.

On its planned introduction this summer, it will stipulate that gambling firms refrain from advertising during pre-watershed live sport, from five minutes before the start of the event to five minutes after it ends. It also includes an end to betting adverts around highlight shows and re-runs, and an end to pre-watershed bookmaker sponsorship of sports programmes. The ban will not apply to horse racing or greyhound racing.

Knock-on impact

Clearly any change in TV ad spend by gambling firms will have a commercial effect on rights-holders, though with this ban likely to cut revenues in some areas and increase them in others, there is some disagreement about whether the overall effect will be positive or negative.

The amount of money spent on television advertising by sportsbooks has grown rapidly since the 2007 Gambling Act permitted sports betting adverts on television for the first time. The ease with which customers can now bet on mobile devices has given birth to a new strand of ad that encourages in-play betting – often with offers related to an ongoing match.

Betting and gaming firms spent about £81.2m on TV advertising in 2012, rising to £118.5m in 2015 (Nielsen) and £190m in 2017 (Regulus Partners). A media-buying agency contacted by SportBusiness estimated that in 2018, sportsbooks will have spent £225m on television advertising.

The lion’s share of their spending – £157.5m, or nearly 70 per cent – is around live football, targeting a new type of bettor who, unlike the traditional horse racing fan, may never have stepped into a bookmakers before. The same agency estimates that horse racing accounted for £29.6m of advertising spend by gambling firms, while other sportsbooks accounted for the remaining £37.9m of expenditure in 2018.

An intuitive assumption is that – with the vast majority of approximately £195m per year suddenly off the table – broadcasters will find it more difficult to monetise their sport broadcasting rights. Whether this will hit hard enough to impact the media-rights fees they are prepared to pay will depend on the property, their business model and whether they can find other ways of bridging the shortfall.

But advertising is a relatively small part of the revenues of pay-television broadcasters Sky and BT Sport, which share domestic linear rights to the English Premier League and almost all the market’s premium sports properties.

According to Sky’s 2018 annual report, advertising accounted for 6.7 per cent (£917m) of the broadcaster’s overall revenues of £13.6bn from the year to 30 June 2018. Direct-to-consumer revenues (including subscriptions) accounted for £11.8bn.

A fall in advertising revenue of the size implied will make a dent in Sky and BT’s revenues but is unlikely to reduce either broadcaster’s rights-fee expenditure alone. It is, however, unwelcome at a time when cracks are appearing in the pay-television business model.

“It wouldn’t have been a particular problem in the past, but the subscription model is under huge pressure because of piracy and the fact that the under-35s have different ways of engaging with sport now,” says Phil Carling, managing director, football, Octagon Worldwide. “Advertising revenue has always been the cherry on the cake [for pay-TV broadcasters], but in straitened times the cherry is very important.”

Sky’s response to the news of the whistle-to-whistle ban gives some indication of where it thinks gambling firms will migrate their advertising spend now that live sport will no longer be available to them. Citing a Gamble Aware report, Stephen van Rooyen, Sky UK & Ireland chief executive complained that the betting industry spends five times as much on social media promotion as it does on TV advertising and called for something to be done to address this too.

“The amount of cash spent promoting gambling on social media has more than tripled over the past three years,” he said. “If the RGA and gambling companies are serious about protecting vulnerable gamblers, then they should start by looking at where they spend the most money, what has the least level of regulation and where there is most evidence of harm: the online world.”

Football inventory

If bookmakers spend even more on social and online marketing, it could drive up the value of club sponsorship packages that include content commitments on their social media channels.

“I would draw the distinction, which is also one that all the betting firms will make, between advertising which is for brand awareness and advertising which is there to drive transaction,” says Charlie Beall, consultant with digital sports consultancy Seven league.

Beall believes betting brands will develop a two-pronged marketing approach in which they use television marketing, club social media channels and shirt sponsorships to push broad brand messages, but more targeted digital advertising to promote call-to-action adverts to known bettors. This will essentially make their in-play adverts less visible and open to scrutiny.

Carling thinks any rights-holder inventory that allows betting brands to continue to appear during live match broadcasts will go up in value.

“I think the prohibitions will have an inflationary effect on shirt values because these assets will not be affected by the ban, nor will perimeter signage and other forms of ‘in-content’ media,” he says. “In this scenario, the ban on paid-for media via the broadcasters will release more funding for inventory which escapes the ban, namely shirt fronts, sleeves, perimeters, training kit and assets owned by the rights-owners.”

(Photo by Sebastian Frej/MB Media/Getty Images)

Gambling firms have always tended to be more interested in media delivery and audience rather than IP in their sponsorship strategies. Consequently, they have concentrated their sponsorship spend on clubs at the lower end of the Premier League and upper reaches of the Football League, favouring short-term deals that allow them to switch between clubs as they are promoted or relegated.

Every year a spot market for sponsorship inventory gets played out in April as the likely destiny of these teams becomes clearer. This market is heavily saturated with gambling messages – Carling estimates 40 to 50 per cent of all LED inventory in the Football League is bought by gambling firms.

SkyBet’s title partnership with the Football League, for example, does not preclude clubs from displaying their own gambling partners on LED inventory or shirts, and many smaller clubs have multiple partners from the sector.

One possibility is that the lower reaches of the market will become even more saturated with betting partners as gambling firms scramble to inject their logos into live events.

“Once the higher-priced items are exhausted there will be a flow of investment into lower-priced assets simply because the notion of exclusivity is ignored with gambling and there seems to be a limitless supply of new entrants into the market place,” says Carling.

One media-rights expert contacted by SportBusiness imagined a scenario in which broadcasters might call for a slice of this action through some sort of revenue-share model with clubs around shirt and LED inventory.

“I could see a way in which if the clubs were still allowed to sell shirt inventory to betting companies, Sky could make a big argument that they are responsible for the major broadcast of that globally. And therefore, if the clubs are allowed to keep that, maybe there is a proportion of that that goes back to Sky.”

Whichever way the ban plays out, football rights-holders, broadcasters and gambling firms will have to be careful not to provoke the ire of legislators. To observe the worst-case scenario, they need only look to Italy, where a ban on all gambling sponsorship and advertising threatens to take €120m of sponsorship revenue from the collective coffers of Serie A clubs.

To reduce the threat of a blanket ban, gambling firms will likely look to develop more subtle messaging of the variety developed by tobacco firms in the 1980s and 1990s. Clubs might want to lobby politicians, impressing upon them the importance of gambling partnerships to clubs further down the football pyramid.

The Football Association had a betting partnership with Ladbrokes before deciding to stop taking money from betting firms.

Alternatively, the clubs and league bodies could follow the Football Association’s lead and refuse to accept sponsorship from gambling firms altogether. So far, the EFL, the operator of the Football League, has resisted doing the same, arguing the FA’s decision has no bearing on its own commercial relationships with the gambling industry. It argues the FA is duty-bound to take a more principled stance as it has the ultimate responsibility of enforcing any breach in betting rules – as was the case when it banned former Burnley midfielder Joey Barton for 18 months for betting on football matches.

League One club Luton Town has taken a more high-minded approach. The team’s chief executive, Gary Sweet, says it has refused more than £500,000 from betting firms because it doesn’t want to promote excessive gambling. First-movers like this will hope to generate some positive PR and may also be better placed to diversify their sponsorship portfolios if a total ban on gambling comes into force.

Should a blanket ban come about, Carling thinks the betting brands would migrate their marketing spend to the US where many states are legalising betting and relaxing the rules around marketing by sportsbooks. As it presently stands, there could also be a small uplift in gambling advertising spend against US sports content broadcast in the UK simply because most US major league matches start after the 9.00pm watershed when the ban no longer applies.

Horse racing

The most obvious beneficiary of the whistle-to-whistle blackout, however, is horse racing, whose exemption from the advertising ban is in recognition of its symbiotic relationship with betting. It will soon be in the happy position of being the only sport around which gambling firms can advertise on TV (greyhound racing is also exempt but is almost never shown on mainstream TV).

Racecourse Media Group, which manages the rights to most UK horse racing events, always seeks a free-to-air partner in order to reach the widest audience and encourage the most betting – UK horse racing is funded by a statutory levy on all bets placed.

RMG is in the middle of a four-year deal, from 2017 to 2020, with ITV, worth roughly £7.5m per year. ITV’s ROI on the acquisition is based on selling advertising spots around races, a good proportion of which came from gambling firms. Competition is believed to have been fierce for the ‘bumper’ sponsorship of ITV Racing, which was eventually secured by British bookmaker William Hill.

(Photo by Harry Trump/Getty Images)

The ban on betting advertising elsewhere can only increase competition for inventory around horse racing, which will help the industry both by pushing up rights fees, and indirectly – as a likely effect of the greater marketing spend by gambling firms – by encouraging more betting.

This would be timely considering racing’s fears around the closure of betting shops when the fixed-odds betting terminal legislation takes effect in April this year. The sport currently earns healthy revenues selling “bet-to-view” media rights to high-street bookmakers based on their number of outlets, and the reduced FOBT revenues are predicted to lead to widespread closures.

The Jockey Club, the operator of 15 racecourses in the UK, indicated the extent of those fears when it froze prize money at its tracks in December, claiming the legislation could lead to the closure of up to 1,000 high-street shops and a subsequent £40m to £60m reduction in horse racing media-rights income.

A surge in advertising spend around racing could help plug this shortfall while the UK government has said it will also work with the sport to mitigate losses from the fixed-odds measures. Other rights-holders who worry that the FOBT legislation is the thin end of a very large wedge will hope the government takes an equally sympathetic view of their relationship with the betting industry.

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