Like hungry children waiting for a pie to cool, professional sports leagues are drooling in anticipation of a piece of profits if, as anticipated, betting on games soon becomes legal outside Nevada.
With the U.S. Supreme Court considering New Jersey’s attempt to repeal the Professional and Amateur Sports Protection Act (PASPA), and state after state proactively passing enabling legislation, the NBA is already in line with plate in hand asking for a 1 percent slice of the betting action. Major League Baseball is starting to elbow its way to the table, too.
At this rate, by the time the leagues get finished carving up the perceived profits, there won’t be so much as a crust remaining for the sparkling new legal sports books that gross enormous amounts but net on average approximately 4 percent.
Those searching for a wealth of irony needn’t look far to find it on this issue. Leagues that for decades have scorned the bookmakers and pretended sports gambling wasn’t a big reason fans paid so much attention to their teams are now jockeying for a partnership with the bookies.
Trouble with the leagues is, their math is bad. And if the idea is to create a legalized business that is popular with fans, and profitable for operators, hogging too big a bite is a good way to ensure failure.
The NBA is being “short-sighted” in asking for a 1-perent fee, Twitter’s Vice President of Analytics Jeff Ma said in a CNBC report by C.W. Crouse. By focusing on a quick cut, Ma says, the NBA and other leagues could be missing long-term opportunities with fans and the front office.
Exacting a fee that would immediately be passed along to bettors who will note the inferior payoffs of playing legally makes little sense. It reminds me of when New Jersey legalized casino gambling, then didn’t allow them to stay open 24 hours. As legalization caught on elsewhere, other jurisdictions weren’t so short-sighted.
“There’s a lot of reasons that people don’t necessarily want to bet legally and if you make it even harder with worse odds and all that kind of stuff, you’re creating the wrong situation,” Ma told CNBC.
In the same report, Sportstrader’s Dr. Laila Mintas observes, “If you put too much burden on the (legal bookmakers), they will not be able to compete with the offshore markets.”
Amid the discussion of legalization and the dizzying $150 billion estimate the American Gaming Association has so often said is annually bet on sports illegally in the U.S., the NBA released a statement through spokesman Michael Bass that makes the league’s hunger clear.
“Sports leagues provide the foundation for sports betting while bearing the risks it imposes, even when regulated,” Bass said. “If sports betting is legalized federally or state by state, we will need to invest more in compliance and enforcement, and believe it is reasonable for operators to pay each league 1 percent of the total amount bet on its games to help compensate for the risk and expense created and the commercial value our product provides them. This is a similar approach to legally-regulated sports betting in other international jurisdictions.”
Ma and Mintas appeared recently in a panel discussion of sports betting at the MIT Sloan Sports Analytics Conference. The goal of the conference is to provide a greater appreciation for the role of analytics in the multibillion-dollar sports industry, and betting legalization is considered a potential boon for sagging ticket sales and television popularity. Industry experts continue to weigh in on the real odds widespread legalized sports betting will be a hit with fans who aren’t overly worried about gambling illegally right now.
One element few of the experts are talking about yet is the inevitable response that’s sure to come from offshore sports betting businesses as they up their game in an attempt to remain competitive. The price war between the legals and illegals could be wicked.
Price competitiveness and the reality of narrow net profit margins is another big reason states should get behind the efforts of Nevada Rep. Dina Titus to repeal the 0.25 percent federal “handle” tax on sports bets. If for no other reason than to have something with the leagues and states to bargain with, its elimination should become a priority.
Because when it comes to business competition, no one understands the odds and percentages better than a bookmaker.
And 1 percent is too big a slice of a pie that’s still baking.
Contact John L. Smith at jlnevadasmith@gmail.com. On Twitter: @jlnevadasmith.
