Earlier this month, the NFL announced a trio of sports betting partnerships reportedly worth nearly $1 billion. For legalization and consumer adoption purposes, “The most popular consumer product in the country formally embracing sports betting is significant,” said Jed Kelly (executive director, Equity Research – Consumer Internet, Oppenheimer & Co.). The NFL was last among the big four leagues to do so.
But the Oppenheimer analyst indicated the pacts signed with Caesars, FanDuel and DraftKings would also serve to accelerate in-game wagering in the United States—the proverbial pot of gold at the end of the sports betting rainbow. “We believe [the NFL’s announcement] will benefit in-game wagering, where we now expect the league to work more closely with its media partners to reduce latency,” Kelly wrote in an equity research update on DraftKings. For contextual purposes, 70-80% of sports bets placed in the United Kingdom are made in-game.
Our Take: The timing of the NFL’s sports betting partnership announcement was likely not coincidental. In recent weeks, the league also inked a long-term sports betting data partnership with Genius Sports (that includes more than $400 million worth of equity) and a broadcast deal with Amazon (for Thursday night football that will begin no later than 2023). While all of the league’s broadcast partners received digital rights in the next cycle, “People working in and around in-game wagering products point to the Amazon deal as the most significant,” Kelly said. It is believed the tech-first company is better positioned to reduce latency enough to have compelling live in-game betting markets (perhaps the biggest hurdle to integration). As it stands, the live betting market is pretty much limited to wagering on the outcome of an event with pricing changing during commercials or extended pauses in game action due to the latency issue.
Amazon is said to be investing in technologies that reduce the lag on the broadcast feed (typically 7-10 seconds) and improve streaming quality. But the company also has “Twitch, that has all of these interactive capabilities [working in its favor],” said Chris Bevilacqua, co-founder of Simplebet (a technology company enabling in-game wagering). Amazon’s ability to do targeted advertisements, combined with the NFL’s massive audience, should give the e-commerce giant plenty of opportunities to experiment with in-game sports betting and interactivity to push the industry forward,” he added.
To be clear, 5G, edge computing and zero-latency streaming tech already exists. “It has just been prohibited under all of the preexisting rights agreements between programmers and distributors,” Bevilacqua (who moonlights as a media consultant) explained. “But as we saw in the recent NFL negotiations, that’s all changing in [the next] rights cycle. The NFL will lead the way in creating new, innovative and interactive features during broadcasts, and I believe Amazon and TNF will be at that forefront,” he said. For what it’s worth, Bevilacqua believes in-game betting will only accelerate the erosion of the linear MVPD bundle. “The retrans golden goose is dead, and we’re rapidly moving from a wholesale model to a retail model,” he said.
The broadcaster that lands NFL Sunday Ticket will also likely be a key cog in the advancement of in-game betting. “Sunday Ticket is really the best application for in-game wagering. [Subscribers] are the league’s super fans who really engage with the NFL’s live products. [The eventual rights holder] will likely have a key second screen—or maybe even a single screen—betting experience,” Bevilacqua said.
Kelly suggested the NFL’s decision to announce sports betting partners is likely tied to plans to alter league policies on in-game gambling adverts (which would both boost consumer awareness and pressure on regulators in states without legalized sports betting). As it stands, there is a total prohibition on any sports betting advertising or integrations within a live game broadcast window. NFL chief strategy & growth officer Chris Halpin said the league is “contemplating adapting policies to allow legal sports betting in-game media integrations and advertising for next season.” If the NFL does make a change, expect a thoughtful, measured approach. Halpin highlighted the NFL is aware of the issues that the U.K. and Australia have had with the proliferation of sports betting adverts during the game broadcast (and those ads reaching an untargeted demographic) and clearly recalls the daily fantasy bubble of 2015. “We’re exploring what would make sense and also how we maintain frequency-capping to avoid overwhelming the game and alienating non-betting fans,” he said.
Between their stake in Genius Sports (sports betting partners will be required to subscribe to the league’s official, low-latency data feed, which Genius now controls) and the desire to increase fan engagement/drive more people to watch games, the NFL has the incentive to push live betting forward. FanDuel Play Action, a free-to-play product developed by Simplebet and tested during the 2020 season, showed the kind of potential upside it can offer. During Week 17, the average Play Action user placed 80 wagers, 30% of the users spent an hour or more on the app, and 63% were betting on more than one game at a time.