Executives of Major League Baseball and the American Gaming Association squared off Wednesday over the league’s demand for a cut of sports betting action as it proliferates throughout the country.
The discussion, hosted by ESPN anchor Scott Van Pelt on the third day of the Global Gaming Expo, was generally engaging and respectful but got contentious a couple of times.
Kenny Gersh, executive vice president of gaming and new business ventures for MLB, pushed for the league to receive a quarter percent of total handle of betting revenue on baseball as a royalty. MLB should also be compensated for its data, he said.
Sara Slane, senior vice president of the American Gaming Association, said the current model of sports books, in which 95 percent of bets are paid out to winners, doesn’t allow for sports leagues to share in overall handle.
Gersh bristled when Slane repeatedly referred to the percentage payment on handle sought by MLB as an “integrity fee,” a term first floated earlier this year by the NBA and since rebranded by the two leagues as a royalty payment.
The leagues have been unsuccessful in getting compensation from New Jersey, Delaware, Pennsylvania, Mississippi and West Virginia, the four states that have enacted sports betting since the U.S. Supreme Court struck down the federal ban on sports betting outside of Nevada in May. Congress is considering whether to jump into the fray with federal regulation, a move that could potentially net the leagues some revenue.
MLB originally sought a full one percent of the handle.
“You are going to make money from sports betting. I haven’t heard about a lot of bookies going out of business because they can’t do it profitably,” Gersh said. “From a fairness standpoint, if you are going to… grant someone the opportunity to make money off our sport, we think we should be involved. We think a quarter point off the top is a fair number.”
For sports betting to be successful, it should be a partnership between the leagues, the states and the casinos, he said.
“If there are economic incentives or royalties attached to it, we are going to lean in and do things with our data and allow advertising and shine a light on regulated sports book market,” Gersh said. “With a quarter point off the handle, we need to increase the handle by 7 percent to make that pay for itself. That will happen.”
Slane responded by saying baseball wants a cut in the revenue without any risk associated with it.
“We have to go through a regulatory process and invest billions of dollars in buildings and licenses,” Slane said in response. “You want us to take that risk and (also) pay you, and you… benefit on the back end as well.”
“I don’t understand why the legal market is viewed as the enemy,” Slane said. “The illegal market is the enemy. In order (for us) to compete with the illegal market, it has to be financially viable. What you ‘re proposing is not.”
Gersh countered that there’s a lot of risk for the leagues, and said that the amount MLB is asking for would not keep sports books from making a profit.
“It may not be as much money as you want, but (the profit exists),” Gersh said. “We should both be in this new world making money together.”
Amid this back-and-forth, Masters Consulting principal Stephen Masters, the third panelist, sitting between Gersh and Slane, joked, “I’m just happy to be in the middle.”
Van Pelt asked the panelists if there was any chance of compromise in the future.
Gersh said it’s difficult to do commercial agreements with casinos to provide data if there’s not a requirement to do so.
“I have nothing else to say,” Slane responded. “We can go around and around, but it comes back to economics… It would not work. I appreciate that you want us to succeed, (but) the only way we are all going to make money is if we get critical mass.
“The more states that come online… the more money on sponsorship and advertising and TV rights. The streaming rights you will sell every which way. That should be the end goal.”
Masters, who spent the last decade as head of Nielsen Sports, which measures the viewing and consumption of sports media, said an increase in legal betting would have an impact on increasing viewership. He speculated that MLB could realize a billion-dollar profit from the impact of expanded betting.
Research shows that 19 percent of NFL fans bet on games now, which could eventually rise to one in three, or about 45 million of 150 million fans. Avid fans watch, on average, one NFL game a week.
Those who bet or play fantasy watch an average of 38 games a year, Masters said.
“The NFL hates gambling, but it’s driving viewership and engagement. (Gamblers and fantasy players) are watching 2.5 times more football than fans who don’t have anything riding on the game.”
Gersh said MLB has been looking at betting for a long time, saying that the league had established a task force even before the Supreme Court decision that traveled the world studying sports betting practices.
“Sports betting wasn’t being done optimally,” he said. “It wasn’t appealing to the mass consumer. We thought we would see an opportunity to help the sports betting market evolve in a way that’s better suited for baseball.”
That’s why MLB is focusing on data feeds and investing resources to make sure what’s happening on the field can be delivered in real time to the betting market, Gersh said.
“Baseball is perfectly set up for in-play betting,” Gersh said. “It’s a series of discrete events. When Mookie Betts comes up to the plate, you can bet if he is going to get on base, make an out or hit a home run.”
Masters said the NFL and basketball is set up for in-play betting. He said he doesn’t think there will be an increase in the avid bettor, but the casual fan is what is going to drive in-play, and that is what is exciting, he said.
Gersh said he’s been surprised at the pushback from sportsbooks about the use of the league’s data to grade bets. MLB has cameras and radar that track the plays and can rely the information quickly.
“It is regulated industry and required to go through regulated process but yeah we can get our data that we are settling our bets on from a guy in a garage watching it on TV,” Gersh mockingly said. “That blows my mind, and I don’t understand what that is a no brainer.”
Slane said sports books aren’t saying they shouldn’t pay for the data. It just shouldn’t be done by statute. The NBA has an agreement with MGM and Golden Knights have one with William Hill, she said.
“I don’t know of any industry where, by statute, there is a legal requirement between two private entities to have an obligation going forward,” Slane said. “This is a low-margin business. People get irrationally exuberant over the $150 billion illegal number. Ninety-five percent of (wagers) go back to winners, and we have advertising costs and taxes.
“Is it going to help our business? Absolutely. Is it going to get customers into the building? Certainly. You are going to get paid. (But) there is not this huge pot of gold.”
