Last week, Arizona lawmakers passed legislation that will allow for sports betting within the state—perhaps as soon as this fall. Included in the bill sent to Gov. Doug Ducey is language that will grant as many as 10 professional sports organizations—including the Arizona Cardinals, Arizona Diamondbacks, Arizona Coyotes and Phoenix Suns (NASCAR and the PGA will also benefit)—the opportunity to apply for a sports betting license and house a retail sportsbook within a five-block radius of their venue.
The new law does not mean Arizona’s pro sports teams will be booking bets themselves, however; they, as license holders, will instead sign market access agreements with sports betting operators, who will run the book (see: Sportico’s reports that DraftKings is building out a retail sportsbook at the TPC Scottsdale golf course, while FanDuel will do the same at Talking Stick Resort Arena). Those agreements will also provide access to mobile betting statewide (a first in pro sports), which should generate meaningful revenue for the clubs. Diamondbacks owner Ken Kendrick said from a value perspective, the deal his team is closing in on (he would not disclose specifics) is comparable to “adding one more high-end corporate partnership, and corporate partners at the high end are definitely paying seven figures a year.” The hope is “over time, as sports betting gets more ingrained into the sport, the revenue stream—and therefore our share—will grow,” he said.
Our Take: It is not uncommon for sportsbook operators, looking to gain entry into a given state (or federal district), to make deals with industry stakeholders. But Illinois and the District of Columbia are the only other legislatures that have included pro sports teams among those entitled to a piece of the sports betting pie (Texas is exploring it). In every other state, a teams’ ability to capitalize on legalized sports gambling is limited to marketing and sponsorship partnerships.
The big difference between Arizona’s bill and the legislation in Illinois and D.C. is that Arizona’s license allows for statewide mobile betting (as opposed to limited access), in addition to the retail location(s). “For example, in D.C., operators are geo-fenced within a couple blocks of the arena,” said Sara Slane (founder, Slane Advisory). “So, while William Hill has a market access deal [with Monumental Sports and Entertainment, and a sportsbook at the arena], their mobile app shuts off once a user is outside of a three-block radius of Capital One Center. In Arizona, that won’t be the case. Sportsbook operators will be able to operate their mobile apps statewide [making it a far more lucrative opportunity].”
Sportsbook operators are expected to pony up for the opportunity to gain statewide mobile access, particularly because the number of licenses available within the state is limited. “[The Arizona legislation] is not like Maryland, which will allow up to 60 operators in, or Tennessee, which is an unlimited market access state. There is a cap on entry points into the state—particularly for those who want a marquee retail opportunity,” Slane explained. Arizona has set the limit to 20 operators: 10 sports teams and 10 Indian casinos. Said Kendrick, “There was a lot of interest [in partnering with the Diamondbacks]. We could have chosen from several very well-known gaming partners.”
While statewide mobile-level access is probably the more valuable component of Arizona’s agreements, Slane says the in-venue opportunity should not be overlooked. “[In-stadium] is a great customer acquisition, acclimation tool, and retail can do extremely well. Just look at the Meadowlands and what is happening with Monumental and William Hill [in D.C.],” Slane said. Kendrick said the Diamondbacks will have a physical sportsbook on stadium premises, which will be operational even on days the team is not playing.
In addition to the minimum guarantees teams receive in exchange for market access, some teams—depending on league rules and the amount of risk they are willing to take—may have a revenue share component included in their deal. Kendrick said the deal his organization has structured, for instance, includes a portion of the upside.
The partnership deals teams sign with operators will include a host of marketing and sponsorship assets (think: in-stadium, on RSNs). However, as it currently stands, the big four leagues do not allow mobile sportsbook operators to place their names on a stadium. So, don’t expect to see stadium naming rights included in any of the Arizona market access packages. However, considering teams are permitted to do deals with brick-and-mortar casinos (see: Caesars/Saints, Hard Rock/Dolphins), it is reasonable to believe the leagues could alter their bylaws in due time. “Things are constantly changing and evolving as it relates to sports betting,” Slane said. For what it is worth, the Suns do not currently have a naming-rights partner.