After the COVID-19 pandemic forced a broad shutdown of all the major U.S. sports leagues back in March, each league returned in varying formats to complete their 2020 seasons, with varying degrees of success. Major League Baseball lost more than $3 billion in revenue from its 60-game mini-season with no fans in the stands. The NBA lost $1.5 billion from finishing its season in a bubble at Disney World with no fans, and Major League Soccer lost $1 billion in revenue from its pandemic season, which included a 26-game bubble tournament at Disney World.
But beyond the challenges and adjustments of the pandemic, the biggest tide of financial change in the sports industry in 2020 was betting legalization and the frenzied launch of online sportsbooks and team betting deals.
While fans were stuck at home, and even as live sports TV ratings dipped, sports betting thrived. And the full impact of the deals made in 2020 may not become clear until 2021 or 2022.
After the U.S. Supreme Court struck down the federal ban on sports betting in May 2018, states have moved to legalize sports betting in a domino effect. In 2020, four more states passed bills legalizing sports betting (Virginia, North Carolina, Tennessee, and Washington), and on Election Day, voters in another three states (Louisiana, Maryland, and South Dakota) voted to legalize—all three of the states where the question was on the ballot, a reflection of the country’s growing comfort with legal gambling. (Voters in Colorado, Nebraska, and Virginia also said yes to expanding casino gaming in their states.)
That brings the total to 26 states (plus Washington, D.C.) that have either launched legal sports betting or passed the legislation and are waiting to launch. Mobile sports betting (on smartphones) must be legalized separately, and 12 states have done so.
Betting operators like DraftKings and FanDuel are aggressively riding the tide of legalization by racing to open up physical sportsbooks (less so amid the pandemic) and mobile sportsbook apps, and by announcing direct deals with teams as their official betting partners.
While each announcement of a new state sportsbook launch or team betting deal may go unnoticed by sports fans outside that state, the overall effect is clear: the tide is turning toward legalization. Even the NFL, so long resistant to any whiff of gambling—the league remained on the sidelines while the NBA, NHL, and MLB publicly argued in favor of legalized sports betting—made Caesars its “official casino sponsor” last year, though the deal doesn’t include betting.
In February of this year, the NFL announced it will allow NFL franchises to ink their own individual casino sponsorships (separate from the league’s official casino sponsorship with Caesars). The league will also allow teams, in states that have legalized sports betting, to build betting lounges inside their stadiums. The Dallas Cowboys moved first, signing a casino sponsorship with WinStar Casino. In June, the Denver Broncos made FanDuel its official sports betting partner, becoming the first NFL team to sign such a deal. A handful of other teams followed suit, in the NFL and other leagues.
Big advertising push—again
For anyone who watches the NFL, it’s been impossible not to notice the flood of new national TV ads, which has in many ways felt like a return to 2015, when DraftKings (DKNG) and FanDuel spent millions in head-to-head advertising for their daily fantasy sports (DFS) products.
Five years later, all that has changed is that both companies are publicly traded, they’re advertising their betting products more than their fantasy products, and they’re competing in the same ocean as big casino giants, rather than the prior pond of DFS.
Take as an example Tennessee, which launched online sports betting on Nov. 1. In the two weeks before launch, Tennessee sports fans began seeing a sudden flood of mobile sportsbook ads on television from the likes of DraftKings, FanDuel, and BetMGM, with “legal in your state soon” disclaimers. On launch day, those three operators each took in more “handle” (total dollars of bets placed, which is different from revenue) in Tennessee than any of them saw on prior launch days in other states.
MGM (MGM) made an additional splash in Tennessee by announcing a deal that makes it the first official sports betting partner of the Tennessee Titans. MGM has a similar deal with the Las Vegas Raiders.
And while those three names have been the most visible in television advertising, William Hill made waves in August when it opened a pop-up physical sportsbook inside Capital One Arena in D.C., home to the Capitals and Wizards, the first sportsbook inside a U.S. pro sports arena. (FanDuel’s sportsbook in New Jersey, opened in 2018, is at Meadowlands Racetrack, walkable from MetLife Stadium.)
All the big players are now publicly traded
DraftKings, in particular, had a transformative year. On April 24, even with all U.S. live sports shut down, the company went public by merging with the Diamond Eagle SPAC (special-purpose acquisition vehicle), and the stock has soared more than 200% since that date. In October, DraftKings offered 32 million new shares to raise $1.7 billion in capital during the pandemic.
FanDuel, meanwhile, sold itself to the publicly traded Irish bookmaker Paddy Power Betfair in 2018, which has since rebranded its U.S. business Flutter Entertainment (PDYPY). This month, Flutter bought Fastball's 37.2% stake in FanDuel for $4.175 billion; to help fund that deal, Flutter will raise $1.48 billion in capital and offer Fox Sports the option to buy 18.5% of FanDuel in July 2021.
While casinos and online sportsbooks will continue to ramp up team betting deals and marketing in 2021, the next frontier in the industry may be digital media and content.
Penn Gaming bought a majority stake in the sports media company Barstool Sports, and in October launched a Barstool-branded legal betting app in Pennsylvania. NBC Sports announced a deal that made Australia-based PointsBet its official betting partner, while CBS Sports went with William Hill. FanDuel’s parent company owns the gambling TV network TVG.
Every betting operator appears to also wish to be a media company.
The momentum and noise around betting is so loud that it’s likely going to have an impact on TV contract negotiations. The NFL’s broadcast rights deals expire in 2022, and if you ask Dallas Cowboy owner Jerry Jones (though hardly an unbiased party), the tide of legal betting should make the NFL’s rights a lot more valuable.
Daniel Roberts is an editor-at-large at Yahoo Finance and specializes in sports business. Follow him on Twitter at @readDanwrite.