Last month, Sportico reported the National Hockey League agreed to a partnership with PointsBet that made the Australian gaming company an official sports betting provider of the league. As part of the deal, the NHL became a stakeholder in the publicly traded company. The league will receive 43,000 shares over the next three years (valued at roughly $531,000 at the time of signing). Historically speaking, cash has been king when it comes to sponsorship agreements (note: the NHL-PointsBet deal includes a cash component). But with sports teams facing considerable “downward economic pressure,” National Lacrosse League Commissioner Nick Sakiewicz said he “wouldn’t be surprised” if teams and leagues are more willing to take risks and accept equity as part of a sponsor compensation package in a post-COVID world. “The last 12 months have really reshaped the landscape,” he said.
Our Take: Despite the bevy of sports betting partnerships signed since PASPA (the federal law that banned sports betting outside of Las Vegas) was struck down in 2018, few have included an equity component. By contrast, in the early days of daily fantasy sports, a multitude of leagues and teams took stakes in DraftKings and FanDuel (NHL Enterprises, the NHL’s marketing arm, still owned shares of DraftKings as of June 2020). Those investments have paid off handsomely. So, it’s reasonable to wonder why we haven’t seen more leagues and teams try the same with sports betting at a similar stage. Doug Fillis (founder, Accelerate Sports Ventures) suggested it is because the leagues and teams are “mindful of integrity concerns” (and they see a difference between DFS and sports betting). Sakiewicz, who said it is unlikely his league “would ever be an owner in an operation making odds on NLL games and [would] be extremely cautious when considering the option,” seemed to confirm that was the case.
While protecting the games’ integrity remains a focal point for leagues and teams across the industry, Fillis said the NHL-PointsBet deal could spark a trend of equity-based sports betting partnerships. “Sports leagues get more comfortable when somebody goes first,” he said. “So, the fact that the NHL went out and did [an equity deal] leads me to believe others will do it as well.”
It’s not clear why the NHL decided to take ownership in a gaming company at this time, considering they did more traditional deals with several other licensed operators. The league did not respond to our request for comment. But several of the people we spoke to indicated synergies between the NHL, PointsBet and NBC (which is partners with both the league and the gaming entity) could have been a factor.
A recent conversation with Monumental Sports & Entertainment CEO Ted Leonsis suggested his organization’s NHL and NBA revenues were down 20-25% in 2019-20. “This year our revenues are down 50%. Next year, even if we can get 50%, 75%, 100% of our fans in, our business is going to be down 20-30% because we are working through the make-goods, the cancellations [and to] find replacement customers.” If one assumes teams across the industry have suffered similarly (or worse), it is easy to understand why, Fillis says, “everything is on the table now”—including equity-based sponsorship deals. “All of these leagues and teams [have been] forced to innovate. And it’s not innovate just to [grow] revenues. It’s innovate to make up for lost revenues because if you don’t, people are losing their jobs,” he explained. The NLL Commissioner confirmed his league would now consider packages that included an equity component (something they would not have done prior to the pandemic) “if it made sense for our business, and we really believed in the brand and its products.”
While teams and leagues may be more willing to accept equity as a form of compensation, corporate sponsors may simultaneously be more apt to give it up. As Larry Mann (partner, rEvolution) said, many “brands may not be willing—or able—to put down what they had been spending pre-COVID. Brands are looking to spend less and get more assets.”
As seen with early investments in DFS, one way leagues and teams can recapture some of the revenue lost to the pandemic is by taking an equity interest in a corporate partner within a booming industry. In addition to sports betting, Fillis cited digital collectibles, CBD products, food delivery, cryptocurrency, athlete body recovery and sports beverages as fast-growing categories that would be worth pursuing.
After the success of NBA Top Shot, it is hard to envision another league doing a deal in the NFT space that doesn’t include an equity component. It’s not clear if the NBA has a stake in Dapper Labs (the company behind NBA Top Shot); the league did not respond to our request for comment. But “the price of entry for Dapper Labs to get the logos to all 32 teams [would have been exorbitant for a startup pre-launch],” Fillis said, leading him to believe the league is a partner in the high-flying startup.