Sports Betting Promises Gusher Of New Profits

Thanks to a Supreme Court decision last week, states are now free to decide whether they want to legalize sports gambling. While there are many thorny issues to sift through before this becomes a reality, the potential fallout could be enormous.

It starts with the biggest sports behemoth of them all: The NFL. The league’s television ratings have experienced sharp declines over the last two seasons. Why that has happened has been hotly debated, so much so that people tend to lose sight of the fact that despite some erosion, audiences for NFL games are still massive, far larger than virtually everything else on TV. Indeed, among the 30 highest rated shows last year, 20 were NFL games.

If broad swaths of the country were able to bet on games legally, the much-talked-about declines would likely reverse themselves, providing the league a bigger platform—and more influence—than it already has. Drilling down further, though, individual games that are otherwise non-descript would also likely see an uptick in viewership.

Think, for instance, of the Los Angeles Clippers and Charlotte Hornets playing on ESPN at 10:30 ET in mid-February. Ordinarily, this wouldn’t be much of a ratings bonanza. Even with wagering it wouldn’t either, but almost unquestionably more people would watch.

The same goes for the hundreds of would-be equally uninspiring games throughout the year across every major sports league in the country, along with a few that are more niche, like Major League Soccer and NASCAR. Those incremental increases would add up, meaning that every league and their TV partners are potential winners here, not just the NFL and the networks hitched to them.

Gaming companies are other natural beneficiaries, but not all of them. Wynn Resorts, for instance, does not have a presence in the United States outside of Las Vegas (though a new resort is scheduled to open next year outside of Boston). Without the existing infrastructure to leverage this potential opportunity, Wynn has very little to gain from nationalized sports wagering.

The MGM Resorts International, meanwhile, has operations in Nevada, Maryland, Mississippi, Michigan, New Jersey and will open a new property in Boston later this year, just in time for football season. Moreover, its CEO has been very vocal about wanting to take advantage, saying on the company’s fourth-quarter earnings call last year that sports gambling will be a “significant avenue of growth for MGM Resorts in the future.”

Others, like Boyd Gaming and Caesars Entertainment, have promise but nothing like MGM. It has a unique combination of brand awareness, footprint and technological capabilities (Nevada residents already bet in-state with the use of an MGM app) that no other gaming company can match when it comes to sports wagering.

Another big winner will be app developers and tech firms. About the only thing that Yahoo! does well is sports. It has a stable of great sports writers and the Yahoo! Sports app provides seamless access to scores, fantasy sports, news and opinion. One the best features, however, is when a user checks the score of a game, they have the option watch it live (which typically requires a subscription to a streaming service like MLB At Bat or NBA League Pass).

In much the same vein, bettors will now have the option to wager on games using these types of score-checking apps, either before they start or while they are in process. The latter is known as in-game or live betting. It’s the future of the industry, since for gaming operators it represents another layer of profits, while for the various other stakeholders it’s another way to keeping viewers engaged for an entire game.

Live betting, however, is not compatible with having to follow a link to another platform, taking the time to sign in and then placing a wager. By that time, the odds have changed. This process needs to happen almost instantaneously, so doing this correctly will take tech expertise.

There’s a long way to go before we see sports betting nationwide. Hurdles include a potential measure in Congress to create a national framework that governs wagering and demands by Major League Baseball and the National Basketball Association for “integrity fees.” Both of those efforts will slow momentum. Over time, this sports betting will become a reality, and investors can profit off it without ever having to make a wager on a game.

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Ross Gerber is CEO and president of Santa Monica, Calif-based Gerber Kawasaki Inc., an SEC-registered investment advisor with approximately $750 million in assets under management as of 5/22/18. Gerber Kawasaki clients, firm and employees own positions in MGM, Boyd, Disney and Verizon. Readers shouldn’t buy any investment without doing their own research to determine if the investments are suitable to their situation.