Super Bowl LIII: All Bets Are On

The first Super Bowl since the Supreme Court removed barriers to sports wagering could be a financial boon for teams, leagues, and other businesses.
David McCannJanuary 29, 2019
Super Bowl LIII: All Bets Are On

After several years of declining viewership, Super Bowl LIII promises a pronounced audience spike — and not just to find out whether the Tom Brady can bring home a historic sixth ring for the dynastic Patriots.

This is the first Super Bowl since the U.S. Supreme Court opened the door last spring to legalized sports wagering. On Sunday, we’ll see the impact of that ruling. For states and professional sports leagues in particular, the new gambling rules could mean a financial bonanza.

4 Powerful Communication Strategies for Your Next Board Meeting

4 Powerful Communication Strategies for Your Next Board Meeting

This whitepaper outlines four powerful strategies to amplify board meeting conversations during a time of economic volatility. 

Wagering isn’t available everywhere — yet. To make a legal bet, you have to be in one of the seven states (Delaware, Mississippi, Nevada, New Jersey, Pennsylvania, Rhode Island, and West Virginia) where gambling has been sanctioned. Additionally, the mayor of the District of Columbia signed legislation on Jan. 23 to legalize sports betting, although implementation is pending.

Since the Supreme Court ruling, these states have reported sizable tax-revenue increases.

Atlanta’s Mercedes-Benz Stadium

The revenues generated from Super Bowl Sunday will be another indication of the strength of the legal sports betting business. If the seven states witness a super-sized boom in gambling, it won’t be surprising to see other states pass their own sports-wagering laws. Bills are on the agenda in some 20 legislatures already.

What about that gamblers’ paradise, Las Vegas? Should businesses and city fathers be worried? The short answer is no. While legal sports wagering will spread beyond Las Vegas, this expansion should not have a significant impact on the gambling capital of the United States. Las Vegas has established itself as one of the world’s safest places to bet.

In theory, the expanded opportunities to place legal sports wagers in other states could reduce the number of people traveling to Las Vegas to gamble. But the city has an immensely popular entertainment ecosystem, including live performances and sporting events, which most likely minimizes the potential negative impact on Las Vegas hotels, casinos, and other businesses.

The biggest winners in the new regime are likely to be sports leagues themselves. With bettors fully vested, media viewership in every sport will trend upward. This season the NFL’s audience increased about 5%, at least partly as a result of new gambling opportunities. Legal wagering could cement live sports broadcasts — the big revenue generator for all the major sports leagues — as the “must-see TV” of the future.

Professional leagues are still trying to determine how to best monetize this new revenue opportunity. They have secured official data deals and sponsorships and are exploring how to further expand upon these initial transactions.

In addition to league-wide revenue opportunities, individual teams are beginning to see opportunities for gambling sponsors and media advertising. Leagues and teams may also capitalize on exclusive streaming or media rights with media networks, who may be willing to pay more for these deals as viewership increases.

The real test, and ultimate benefit, is still down the road. Gambling revenue should lead to the next leap in franchise valuations, which will become apparent once the first team is sold after gambling revenue data is factored in.

That’s because devoted gamblers bet on most anything. For nothing is that statement more true than the Super Bowl, a one-shot festival and entertainment extravaganza into which there is somehow shoehorned a football game.

Bettors wager on which way the coin toss goes, which team scores first, how many rushing or passing yards players post, and virtually anything else — the “game within a game,” in the gambler’s parlance. These arcane and myriad bets keep self-interested viewers spellbound down to the final seconds, no matter the final score, which in turn satisfies sponsors and advertisers.

If football will benefit, baseball could hit the jackpot. The nuanced strategies, measured pace, and sheer number of games will attract bettors. Will the next pitch be a curve or slider? What are the odds of a squeeze play? An intentional walk? The opportunities for digitized gambling add a new dimension to the game that should drive up viewership.

And down the road will come further gains, after gambling revenues produce a bump in franchise valuations and thus team sale prices. It will be interesting to see how proceeds from wagering are factored into prices asked for, and paid for, pro sports teams.

The forecast isn’t entirely sunny. Gambling brings with it increased potential for corruption and criminality, such as money-laundering. The digital nature of modern-day wagering makes it vulnerable to data theft and other forms of hacking. Protecting sports wagering from bad influences, such as game-fixing, will be paramount. Any scandal could lead to calls to reinstate restrictions.

However, unlike in the past, businesses, including teams and leagues, are refining and fortifying their compliance functions to ensure that their sport’s integrity remains intact. Companies want to protect themselves — they know that in order to stay in business they need to remain good citizens and shield their business from liability or enforcement.

The Super Bowl may represent the ultimate in “must-see TV,” with viewership and ad-rate numbers to match that title.

But this year represents the first time that gambling numbers begin to pull their weight. This may be the 53rd Super Bowl, but for teams and leagues, the opportunity to realize the long-sought goal of legal gambling may make this the first game of its kind.

Irwin Raij is co-chair of the sports industry group at law firm O’Melveny & Myers LLP. He’s also an investor in, and part owner of, both a professional baseball team and a pro soccer team.