Sports

Leagues Continue To Seek A Slice Of The Sports Betting Pie In 2019

slice of pie

Goodbye, “integrity fees.”

So long, “royalty.”

There’s a new name for the portion of the sports betting action that pro sports leagues want state legislatures — or the federal government — to guarantee to the leagues.

In less than four months, I have traveled to Washington, D.C., Las Vegas, Manhattan, and now New Orleans to witness American Gaming Association Senior Vice President of Public Affairs Sara Slane take on pro sports league executives on this issue. At a gaming industry event in New Orleans on Friday, NBA Senior Vice President Dan Spillane described the leagues’ goal as receiving “compensation” for their role in gaming operators being able to offer sports betting.

But a fee by any other name still doesn’t smell as sweet to Slane. When Spillane wrapped up his panel segment by saying that the compensation issue “gets most of the attention,” Slane interrupted to say, “You’re being modest!”

“On this integrity fee — I know Dan desperately wants me to call it a royalty — this one-quarter of 1% of handle on a legal operator puts more onus on them and makes it more difficult to move a consumer from an illegal site to a legal site,” Slane said.

Spillane as whipping boy

Spillane did note that it is the NBA’s job “to find a way to protect the integrity of the competition, to make sure that fans are confident that the competition is determined by honest efforts, and not any factors beyond that like fixing, or bribes. If that gets undermined, it is an existential threat to our business.”

Spillane was needled by Slane just hours after William Hill US CEO Joe Asher harshly criticized the leagues seeking fees and former New Jersey Gov. Chris Christie went thermonuclear as the luncheon keynote speaker.

That led Ohio state Sen. Bill Coley — president of the National Council of Legislators from Gaming States organization that ran the event — to call Spillane “Daniel in the lion’s den.” Gaming Labs International (GLI) Vice President Kevin Mullally went with an 1970s-era metaphor: “This is reminiscent of Wes Unseld walking out on wobbly knees to help the Washington Bullets to win an NBA title.”

Understatement award goes to NBA executive

Spillane’s response to Christie’s barbs? A measured tone.

“I know there are some bad feelings in some quarters about litigation over the last several years, but we’re trying to move forward,” Spillane said of a six-year legal wrestling match with New Jersey that was won by the latter in May when the U.S. Supreme Court wiped out a 1992 federal law limiting most states from having legal betting on sporting events outside of horse racing and jai alai.

Spillane said that while the NBA — which is closest in philosophy on compensation to MLB and the PGA Tour — still prefers a federal solution, he visited the New Orleans event, attended by more than 60 state legislators, because state-by-state efforts appear to be the current path forward.

There were some new wrinkles in his approach. For instance, Spillane said that gaming operators pay a software operator for software that runs a slot machine, or for playing cards for a poker game. So why not the NBA?

“Billions of dollars have been spent over the years to create a premium product that is a direct value to businesses that offer betting on sports,” Spillane said.

He bristled at Asher’s reference to the leagues having sought 1% of the total handle, saying it had been a year since that proposal was scratched for the 0.25% model.

Asher said that “the idea that there is a greater threat to integrity in the legal market than in the illegal market just doesn’t make any sense. It’s just made up.”

Spillane also struck back at the notion that pro sports owners already have plenty of money so there’s no sense in giving them more. He noted that there also are a number of billionaires in the $89 billion U.S. gaming industry that is seeking to avoid the fee.

The data debate

Asher also said that the leagues were being disingenuous in a parallel argument that states should mandate gaming operators pay for “official league data.” Asher cited the NBA’s argument that, for example, if there is a bet on how many assists LeBron James will have in a game, and there is debate over whether James finished with six or seven, official league data can prevent confusion.

“That’s not what this is about — that’s like the fingernail on the world’s biggest man,” Asher said. “People don’t bet on how many assists LeBron James had in a game, to any material degree. They are betting on whether the Lakers are going to cover the spread, or whether the Lakers are going to win the game. That’s what people bet on.

“What ‘official league data’ is about is monopoly pricing power,” he added. “If you have to use official league data, the leagues can charge whatever they want. ‘Oh, William Hill, you want the results of the Super Bowl, that will cost you $5 million.’ That’s really the secret of the official league data requirement.

“But they’re smart guys, articulate guys, and they’re going to keep trying.”

Spillane responded that early-stage data not only is showing that mobile sports betting is bringing in the lion’s share of revenue, but that “in-play betting” on incremental segments of a game or even individual plays is proving extremely popular.

He added that the leagues would be receptive to some sort of clause in a state law that data pricing must fall within reasonable bounds.

One wonders if, even as the leagues seek an official data mandate from states, there are more and more voluntary data deals being struck by leagues and gaming businesses. This may prove to be one angle that mostly solves itself.

Spillane also countered another opposing talking point: that the leagues already will benefit plenty from sports betting via more lucrative TV contracts, greater fan engagement, etc.

“But casinos are, too,” Spillane said. “They get more on hotel rooms, on food, from more people betting on games. March Madness — it’s incredible. So we’re just looking for modest compensation.”

Other takeaways from NCLGS

Asher, the longtime casino executive, made a salient point about the debut of legal sports betting in June in Delaware and New Jersey, and the choice by the governors of both states to join in the media hype.

“It speaks volumes to the social acceptability of sports betting, or at least the public perception of it, that the governors of these two states showed up to make the first bet,” Asher said. “I can’t think of a time when a governor showed up to throw the dice at a craps table to open up a casino, or as the first guy there to pull the slot machine handle.”

harrahs new orleans
Harrah’s in New Orleans, site of the NCLGS conference

For all the buzz about the threat of federal intervention into sports betting oversight that was in the air at NCLGS, GLI’s Mullally came on to throw a big bucket of cold water on the possibility.

“Let’s assume a worst-case scenario that the Earth shifts on its axis and somehow this [federal sports betting law] happens,” Mullally said. “There would be very strong state resistance, such that they would give about as much attention to that federal legislation as they are giving to [federal prohibitions on] marijuana. To the extent they need to, [states] will establish workarounds to the federal legislation, rendering it ineffective.”

Mullally said the one thing that could, in theory, “hammer states” would be the imposition of a federal tax. But as his “axis” reference shows, he’s not holding his breath.

Coley, the NCLGS president, told the legislators that they must avoid the same mistakes that he and his colleagues made when legalizing casinos in Ohio a decade ago.

“There is an arrogance of legislators sometimes, that we understand ‘x’ so we think we understand ‘y,'” Coley said of being misled by lobbyists. “We didn’t ask the right people. We were stupid. Our goal is for you not to be stupid.”

Michael Pollock, managing director of Spectrum Gaming Group, was a newspaper reporter in Atlantic City around the time that Resorts casino opened in 1978, ending Nevada’s nationwide legal casino monopoly. While New Jersey’s single-digit tax rate often is lauded as an example of an “enlightened state” in terms of being pro-business, Pollock said that is historical revisionism.

“The reason New Jersey is at 8% is because Nevada was at 6.75%, and New Jersey wanted to set its rate at the highest in the U.S. and the world, for political purposes,” Pollock explained.

Photo by Anatolii Riepen / Shutterstock.com

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