If much of the early chatter regarding legalized gambling’s effect on the U.S. sports industry is informed by a sort of technocratic wishful thinking—until the live-streaming experience earns its prefix, in-game betting remains a hyped-up hypothetical—the emerging segment already looks like a winner for local TV.
According to Nielsen ad-spend data, online sportsbooks and gambling sites in the first quarter poured $153.6 million into local station coffers, an investment that has made the nascent industry one of the biggest players in the spot TV space.
Leading all comers are FanDuel and DraftKings, both of which operate brick-and-mortar sportsbooks. FanDuel in the past quarter, ending March 31, invested $57.7 million in local TV ads, good for 38% of the category’s overall spend, while DraftKings scarfed up $43.6 million in local station buys. Together, the two brands were responsible for 66% of the sector’s local TV spend, although BetMGM made a splash of its own with a $24.9 million spree.
The combined national TV spend for the two brands was considerably (and predictably) lower at $15.4 million, an accounting that factors in DraftKings’ $5.5 million Super Bowl LV buy.
Online gambling now ranks 11th among the 1,200 product categories tracked by Nielsen, accounting for 2% of all spot TV spend. By comparison, the most lucrative spot TV segment, legal services (or shouty ambulance chasers, if you’re feeling a bit less charitable), accounts for 7% of all ad spend on local TV stations.
As one might well expect, the rise in sports gambling spend on local TV has coincided with the U.S. Supreme Court’s 2018 decision to strike down the Professional and Amateur Sports Protection Act of 1992, thereby clearing the way for states to adopt legalized betting. Before PASPA bit the dust, brands like DraftKings and FanDuel spent their marketing dollars on national TV, which they used as a means to drive traffic to their daily fantasy sports platforms.
Back in 2015, DraftKings and FanDuel ponied up a staggering $305.5 million for national TV inventory, the majority of which was targeted to fourth-quarter sports broadcasts. In October of that same year, DraftKings had backed so many NFL games that it was the league’s second-most profligate advertiser behind only Verizon. Unfortunately for the DFS pioneers, all the marketing hype caught the attention of the FBI and the Department of Justice, who that fall began investigating the sites for fostering what was then characterized as a “multi-billion-dollar” illegal gambling racket.
For the networks, the heat effectively brought an end to the DFS gold rush, and in 2016 DraftKings and FanDuel’s national TV spend plummeted 92% to $24.3 million.
Post-PASPA, the rush by online gambling sites to invest in local TV has been head-spinning. Per Nielsen, the category dropped a mere $10.7 million in spot TV during the first quarter of 2019; in other words, investment in local TV has grown 14.3 times, or 1,336%, in two years.
By 2024, local spot TV is expected to increase its haul of online gambling ad revenue to as much as $590 million.
Local TV spend will only increase as individual states begin to embrace mobile betting. For example, New Hampshire, which legalized sports wagering in July 2019, granted DraftKings an exclusive retail and mobile license in early 2020 after the company agreed to share 51% of its sports-betting revenues with the state.
New York is pursuing a similar arrangement as it works to legalize mobile gambling, as the model endorsed by Gov. Andrew Cuomo will see operators bid for a shot at opening virtual sportsbooks within the Empire State. Cuomo’s newly discovered enthusiasm for mobile betting was likely awakened by the knowledge that New York residents account for as much as 25% of New Jersey’s virtual handle. That adds up to an awful lot of taxable revenue that hasn’t been making its way across the Hudson.
The online-gambling dollars are much appreciated at the local level, as stations are no longer being buoyed by the torrent of political ad spend that helped defray (at least to some degree) the vertiginous drop in automotive and retail spot buys. Back out the $4.2 billion in political ads booked by the stations, and local TV spend in 2020 plunged 23%, according to the global ad agency GroupM.
Including two states that have authorized wagering by way of Native American-owned casinos, there are currently 26 states that have legitimized sports betting, of which a handful have activated mobile/online gambling operations. Another 11 state legislatures are currently considering moving forward with some form of sanctioned sports betting.
Once state-by-state legalization efforts reach a critical mass, a good deal of the spend that is currently targeting local TV stations is likely to shift to national TV and broad digital-marketing efforts. After a business reaches a certain size, it’s simply cheaper (and a whole lot more convenient) to buy local ad inventory rather than try to piece together a series of local spots.
The twin shibboleths of thrift and sloth tend to give way to a phenomenon familiar to anyone who’s ever wondered why they are forever being bombarded by commercials for national fast-food chains that don’t serve their home market. Case in point: If you happen to live in Brooklyn and are watching an NFL or NBA or college football game, you’re guaranteed to see at least two or three Sonic commercials, depending on the network. This is less than ideal, as the nearest Sonic Drive-In is in Bayonne, N.J., and getting there will cost you $36.34 in tolls.
Which is a roundabout way of saying that if you live in Utah, where you’re all but surrounded by states that have legalized gambling, you’re eventually going to be seeing a whole lot of what amounts to the sportsbook version of those Sonic Drive-In ads popping up on your TV.