Legalized sports betting and increasingly valuable media contracts will drive an $11 billion growth in the U.S. sports market over the next five years, a new study says.
“While we are only a few months into legalized sports wagering in certain states, it is clear that the opportunity for teams and leagues to monetize it can be great,” says the PwC (PriceWaterhouseCoopers) 2018 “Sports Outlook” report, which was released Monday.
“Whether it is through media or sponsorship, combining wagering with increased fan engagement could also increase ticket revenue or retail revenue. In the long run, the stakes are high,” the authors stated.
The study focuses on a wide variety of sports, including the five top professional leagues – Major League Baseball, Major League Soccer, National Basketball Association, National Football League, and the National Hockey League – as well as tennis, golf, minor leagues, college sports, and motor sports, said Michael Keenan, managing director, sports practice leader at PwC.
The gross revenue for those sports totaled $69.1 billion in 2017 and will reach $80.3 billion in 2022, the study says. The revenue comes from four sources: media rights, gate revenue, sponsorships, and merchandising.
“Legal sports betting will increase revenues for each of the categories,” Keenan said in an email interview. “Of those categories, media represents the greatest opportunity. As people begin to bet on live sports, the demand to view will be increased.”
Last year was the first time that media rights produced more money than gate revenue, the study found. PwC says media rights will continue to be the top revenue source in the next five years, increasing by an average of 4.5 percent a year, from $20.1 billion this year to $23.8 billion in 2022.
Gate revenue will be No. 2, increasing by an average of 2.2 percent annually, from $19.3 billion this year to $21.1 billion in 2022.
Sponsorships are expected to bring in almost $17.2 billion this year and grow an average of 3.8 percent a year to $20.1 billion in 2022, the study predicts.
Merchandising will generate $14.6 billion this year, increasing by an average of 1.2 percent a year to $15.2 billion in 2022.
Keenan said PwC took a “conservative approach” in its projections. He noted that legalized sports betting outside Nevada is in its early stages. Five states have allowed casinos and race tracks to add regulated sports books since the U.S. Supreme Court threw out a 25-year-old law the relegated single game wager to Nevada.
“There are opportunities for growth within sports from sports gambling,” Keenan said. “In addition to accounting for legal sports betting in our media rights segment, we also included it in our estimates for some of the other segments, although we don’t anticipate these gains to be material in the short term when compared to the overall size of the industry.”
PwC says legal sports betting could increase fan engagement with their teams and expand entertainment opportunities for people attending games. For example, the report says, a gaming company that is also a team sponsor could have an app that offers a free or discounted bet available only to fans at a game; in addition, the team could offer food, beverage, or retail credits for fans who arrive early and wager.
“The opportunities for additional partnerships with technology companies to improve the digital experience are significant,” the report says.
Teams could receive additional revenue from any leaguewide fees or sponsorship deals as well as from individual sponsorship agreements. At first, individual sponsorships might be restricted to teams in states with legal sports betting, PwC says. The opportunities would expand beyond those states as national and international gaming companies get involved.
Keenan said he’s bullish on sports media rights, predicting competition between traditional broadcasters such as television networks and nontraditional or technology companies, including Facebook and Google.
“Live sports remains the original reality TV,” he said. “They are DVR proof. There will continue to be a need to acquire and retain valuable live sports programming.
“As league broadcasting agreements come up for renewal … competition will drive up the cost for live sports rights.”
The American Gaming Association said earlier this year that legal sports betting will generate an additional $4.2 billion a year for the NFL, NBA, NHL and MLB. The increase will come from TV advertisers, sponsorship deals, media rights, ticket and merchandise sales and data/product agreements, the AGA said.
The PwC report is the latest to predict a profitable future for legalized sports betting.
On Oct. 31, Spectrum Gaming Sports Group said the early success of legal sports betting in New Jersey, Delaware, and Mississippi will encourage other states to jump in. Spectrum said 18 states, accounting for half the U.S. population, either have legalized sports betting but have not yet launched it or have legislation introduced to regulate sports betting. If all of them institute sports betting with online availability, they could generate $6.6 billion to $9.3 billion in gross gaming revenue, Spectrum says.
During the gaming industry’s first sports-betting symposium during last month’s Global Gaming Expo in Las Vegas, an H2 Gambling Capital analysis said that by 2023, legal betting in 20 states will total $4.9 billion, surpassing England, the world’s current leader. Half of that total will come from three states, California, New York and New Jersey, H2 said.
