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Walk the line

Insight | Analysis

To ensure the long-term future of the US sports betting market, operators will need to effectively promote their brands without carpet-bombing states with advertising. But if the sector has learned its lesson from the daily fantasy market, writes Robin Harrison, it may be able to avoid a similar fate to operators in Europe 

While there may be a grudging acceptance of sports betting, the debate over integrity fees shows there are still issues yet to be ironed out. Coupled with the ongoing uncertainty created by the Department of Justice’s Wire Act opinion, the industry is still young enough to be derailed by legislative developments. 

This makes it all the more crucial for the sector to do what remains in its power to ensure it doesn’t bring any more undue regulatory scrutiny upon itself. 

Saturation point

However, with operators under pressure to succeed in markets with relatively small customer numbers— Pennsylvania, the largest state to regulate sports betting to date, has a population of about 12.8 million— gambling advertising could quickly reach saturation point. 

“There is a danger that customers, particularly sports fans, could be over-exposed to sports betting advertisements,” Penn Interactive Ventures’ Jeff Kaplan says. “We saw this scenario play out in 2014-2015 with daily fantasy sports, and that involved only two major players. 

“With many more brands set to compete for sports betting dollars (New Jersey already has more than 10 active online sportsbooks with many more on the way), risk of over- exposure is a given.” 

Gregory Leach of Massachusetts- based regional sports broadcaster New England Sports Network (NESN) admits that there is likely to be an influx of advertising from lotteries, casinos and sports betting operators. 

“From that perspective, we’re going to want to capitalize on the new category, so I don’t think that we have any specific plans to limit the amount of advertising,” he says. 

“We are just going to see who wants to partner, and then develop smart and sensible advertising platforms.” 

But events in Europe show that when gambling advertising reaches saturation point, reprisals can be swift. 

Swedish operators are currently facing some major uncertainty, with the country’s regulator Spelinspektionen threatening retrospective fines over the vague term “excessive advertising.” 

UK operators have implemented a ‘whistle to whistle’ advertising ban around live sport. In Italy, the government has rushed through a hasty and ill- thought-out blanket ban on gambling advertising.

Ted Dalton, senior vice president of corporate partnerships and business development for the Boston Celtics, says that while the team is monitoring the situation in Europe, it’s one that could be avoided. 

“We’re monitoring what’s happening in Europe, reading and observing and trying to talk to folks who have experienced that as there has obviously been a push-back,” Dalton says. “Obviously it’s somewhat related to the category, as it includes gambling, but I also think it’s a general marketing situation. 

“It’s a new type of opportunity, and a new way to interact with consumers, and while you really want to get your brand out there, if you’re over saturating or over promoting it can become a turn-off for consumers. I think you have to look at it as being a smart marketer, and not hitting people over the head with a message they get tired of and start to tune out.” 

Lessons learned

As Kaplan says, the US does not even have to look too far afield for its own cautionary tale. 

Between 2014 and 2015, almost every sports broadcast, and indeed most TV advertising windows, were dominated by daily fantasy sports promotions. 

This, however, caught the attention of lawmakers. First, Nevada classed DFS as a form of gambling, then New York Attorney General Eric Schneiderman initiated an advertising crackdown. 

Now a number of states have introduced a licensing regime for the market, many including a
tax on revenue, while others have banned it outright. 

FanDuel head of strategy David VanEgmond admits that this crackdown impacted the effectiveness of its advertising and ultimately prompted it to cut its advertising investment. 

However, he argues that this heavy investment in advertising was necessary to help build a viable business. 

“To grow to the scale we wanted, we needed the aggressive advertising,” he explains. “It helped us reach a critical mass and scale. In daily fantasy one of the key things is liquidity, and if you don’t have a significant number of players you can’t achieve that liquidity, which is why I think DraftKings and FanDuel have remained the market leaders. 

“In hindsight we maybe didn’t need to spend at those levels, but it was certainly important to gain scale.” 

However, Kaplan argues that marketing investment is only one component of a brand- building strategy. 

“Investment in marketing is definitely important to building a brand, but there are other factors
that we feel are important to help us establish our brand,” he says. “Let’s take product as an example. Our goal is to build best-in-class products that appeal to a casual sports fan. If we can personalize our products and make it easy for our users to find what they’re looking for, that will help build our brand. 

“Another is customer service. In 2019, customers expect a service function to be fast, easy and personalized. We believe that we can utilize a best-in-class customer service function to build our brand and generate loyalty. So while marketing is important, we’re going to leverage other tactics to build our brand.” 

Power of partnerships

There are also signs that the leagues and teams are learning their lessons from their experience of partnering fantasy sports operators. 

Danson says the Celtics’ partnership with DraftKings was “a great learning experience” in terms of working out how to develop partnerships with gaming companies. 

“It was an incredibly fast-growing segment, there was a ton of demand, and we all looked at it as a fantastic opportunity for all of us and decided to capitalize on it,” he says. “[It] was just an interesting moment in time when you had a red-hot category and strong consumer demand.” 

Yet Kaplan remains somewhat skeptical about the long-term value of such partnerships. 

“If structured appropriately, these deals can be effective for operators, because they create a link between the team that people bet on and the operator who can accept those bets,” he says. “The challenge I see is that most of these deals have not been exclusive. 

“If many operators partner with a particular league or team, it will be really challenging for one operator to stand out among the pack, which diminishes the value of the partnership.” 

It’s also important to note that daily fantasy was a new spin on season-long fantasy sports, a widely- accepted game format. With sports betting, there is a new game format, with higher frequency and higher stakes, bringing along a range of new potential risks. 

Careful consideration

Dalton says that as a result, partnerships with gambling operators will need to be treated differently from other commercial relationships. 

“[As] with any partnership [in an age-restricted category], there will have to be a responsibility message,” he says. “There’s no getting around the fact that this could lead to compulsive behavior, and no one involved wants to see that, so everyone will have to be mindful of that when going into these relationships. 

“We’ll need to promote the responsible and appropriate use so it can be an added value and not become a negative or destructive type of behavior.” 

Responsibility is foremost in the thoughts of Professional Golf Association Tour vice president and assistant general counsel David Miller too. “Social responsibility and the promotion of responsible gambling would certainly be built into any PGA Tour gaming partnership,” he says. 

“As part of our due diligence process, we’re going to make sure that our partners are committed to responsible gaming, and we would expect messaging on responsible gambling in any promotion or activation through our partnerships,” he says. “It will be part of every deal that we do.” 

Kaplan says that Penn National Gaming has set out its own advertising protocols, which he describes as “a healthy mix of what is dictated by law” and what the operator has learned from decades of experience. 

As such, all Penn National’s advertising must come with a responsible gaming message and must not be placed in media directed at children, nor use endorsements or imagery that may appeal to children. Furthermore, ads must not feature individuals that look to be under 21, or contain false or misleading claims. 

However, Dalton admits that even strict guidelines may not entirely protect minors. 

“The reality is if we’re doing something on Instagram, if a kid is following us they may see that, but we’re doing all we can to restrict those opportunities,” he says. 

This is the ultimate issue: there is always potential for minors to be exposed to the level of above-the- line advertising that will have the most impact for gambling partners. However, it could be argued that the industry has already had its watershed moment—after all the two market-leading operators in New Jersey were the same companies caught up in the push-back against daily fantasy. 

If these lessons are learned, the nascent US sports betting industry could avoid significant problems further down the road.