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Why the sports betting bubble will burst

A longtime tech marketing trick is wrapping old faces in fresh packaging. That’s what DraftKings did Wednesday by announcing the hiring of Dan Le Batard and his crew to a $50 million, three-year content deal for the sports betting app. 

It’s the 2021 version of William Shatner fronting for Priceline. A new industry flush with cash hires a geek icon to convert early adopters. That might be the surest sign that it’s a bubble.  

Everywhere you look, betting has infiltrated sports media

ESPN has partnerships with DraftKings and Caesar’s, but the trend is more noticeable at challenger brands. Barstool Sports sold itself to Penn National and dove into the gambling space via the day-trading frenzy while sports was sidelined during Covid. Outkick is now plastered with FanDuel promotions and seems destined to be sold too.  

Meadowlark Media – the company Le Batard started with $12.6 million in venture funding – is a different sort of entrant as a vehicle for flamed out ESPN left-wingers.

It’s built around a host who struggled in the world of ratings, managed by a former ESPN president whose legacy is redefining the network as political, and has a first-look deal with the poster child for that effort, Jemele Hill.  

Converting these media companies’ audiences into sports bettors – the only way these deals pay off – is a dubious proposition. It subjugates the interest in sports that acquired the customers in the first place with a product they may or may not have any use for.  

The $1.5 billion in sports betting revenue last year seems impressive until you factor in that the two companies that control 80 percent of the market – DraftKings and FanDuel – spent nearly $1 billion on marketing. 

Gaming’s defenders will say that these apps are like other software brands that must spend big in the beginning to acquire users before they can turn a profit. But the software industry has gross margins of 70 percent; gaming has half of that.

Software subscriptions and ad sales carry near-zero marginal cost, allowing them to increase sales at practically no extra cost. In gaming (like most other businesses) the costs follow you. 

How large is the market for latent sports bettors? It probably doesn’t have nearly as much overlap with the sports fan audience as these betting partnerships surmise.

What sports betting demands – dispassionate analysis, neutrality, a sense of remove – are contrary to what creates fans in the first place.

Sports fandom has always been fostered through the emotional forces of family, hometown, and storylines. It is part-theatre and part-religion. Gambling is shallow in comparison.  

That’s probably why the successful bettors tend to be the older ones who have aged out of the traditional pull of sports. But experienced bettors are likely to continue to rely on black market options like offshore sports books because the vigorish is lower than the 10 percent that regulated U.S. gaming operators need to charge.   

Betting may be appealing to novices, but success beyond beginner’s luck isn’t realistic. There’s a reason why most trips to Vegas only last for the weekend.

It’s doubtful that media companies and their gaming partners thought about how hard it will be to reacquire the burned customer, especially in the age of endless entertainment opportunities.

Instead of seeing the peak in cable subscriptions in 2010 as a logical outcome of 30 years of industry saturation, ESPN and other media companies concluded that sports programming was fundamentally broken.

So, they have tried to sell sports on propositions other than the traditional ones. When John Skipper ran the network, ESPN became a platform for the left to infiltrate sports, first as the campus hippie politics he never got over and then the more insidious stuff that serves as Chinese propaganda.  

Maybe sports itself is what really bothers broadcasters. Sports reeks with traditional American virtues of competition, color blindness, and masculinity. Replacing the pastime of celebrating sports with betting on it detaches sports from these virtues.

It also achieves the corporate goal of globalizing sports: some foreign cultures, namely China, reject anything traditionally American but exalt gambling.  

Sports ratings dropped when the programming became political, dropped when sports resumed without spectators, and will probably drop through this gambling mania. It’s the fateful combination of broadcasters with ulterior motives and shortsighted league owners.

They will try anything but a return to selling the traditions of sports. And fans will flock to nostalgia documentaries of these traditions in the meantime.

Rich Danker

Writer

Rich Danker worked in politics from 2010-2019 before entering the business world. He served in the Trump administration as a senior advisor at the U.S. Treasury and the Commodity Futures Trading Commission after running several federal election and advocacy campaigns. His writing has been published in the Wall Street Journal, Washington Post, and he was a columnist for Forbes.com.

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