Penn to Paper: ESPN BETs Big!

On August 8, 2023, ESPN rolled the dice and announced a new licensing agreement with Penn Entertainment. As part of the agreement, Penn will rebrand their existing sportsbook from Barstool Sportsbook to ESPN BET.  Under the terms of the deal Penn will pay ESPN $1.5 billion over 10 years, but the new pact comes with real risk for the Worldwide Leader.  Unlike Barstool Sports, a significant attribute of ESPN’s brand is trustworthy reporting.  If the company’s credibility comes into question, it could undermine both their new venture and a core component of their current business model. 

ESPN’s move into gambling is not the first high profile example of the conflicts of interest that develop when the worlds of sports reporting and sports betting collide.  A couple of months ago, The Athletic’s Shams Charania found himself at the center of a gambling controversy surrounding the NBA Draft.  Shams is an NBA Insider who is often breaks many of the association’s biggest stories.  He also happens to be a paid FanDuel Partner and co-host of “Run It Back” on FanDuel TV.  FanDuel, like rival DraftKings, was built on fantasy sports, but became a major player in the online sportsbook space once sports betting legalization began to take hold in the United States during 2018. 

On June 22, 2023, a little less than eight hours before the NBA draft, Charania reported that Scoot Henderson was “gaining serious momentum at No. 2 with the Charlotte Hornets…”.  As outlined by Sports Illustrated, prior to the report, FanDuel had Brandon Miller at -650 odds and Henderson at +400 odds to be the second player off the board.  After the report, the odds flipped dramatically, making Henderson a -700 favorite and Miller a +400 underdog.  Ultimately, Charania’s reporting failed to align with the outcome of the draft. Miller went #2 to the Hornets and Scoot landed in Portland as the #3 pick. 

Shams’ reporting was very likely legitimate.  It’s not uncommon for there to be internal debate within a team’s front office right up to the deadline to make a decision; however, the potential opportunity to manipulate the betting public so that FanDuel could rack up substantial profits is obvious.  What if Charania had intentionally crafted a false report on the momentum behind Henderson to drive large amounts of losing bets on the number two pick?  That’s not an accusation, it’s a statement to highlight the real issue…The fact that the relationship between the two parties forces us to ASK the question. 

In the aftermath of the NBA Draft controversy, FanDuel claimed that the company, “is not privy to any news that Shams breaks on his platforms”.  Still, the questions were raised, and Shams’ reputation and character were called into question.  These are the treacherous, shark infested waters that ESPN has elected to wade into…

Every Adam Schefter or Adrian Wojnarowski tweet, that potentially influences movement of a point spread or money line, will now come under intense scrutiny.  The truly unfortunate part is that Schefter and Wojnarowski didn’t sign up for this.  ESPN has put them in an impossible position by adding an entirely new dynamic to their jobs.  Yes, their reporting could always move betting lines, but their employer was not previously in a position to benefit from those results. Prior to pursuing this opportunity, executives at ESPN and Disney undoubtedly discussed the public perception of venturing into sports betting and must have asked each other…Is this REALLY WORTH IT???  I believe IT IS!!!

Over the last decade, ESPN’s business has been shifting more and more towards becoming strictly a live rights company.  Studio shows like its flagship program, SportsCenter, just don’t draw viewers the way they use to.  The world has changed and how fans consume sports and sports media has changed significantly.  Sports talk and analysis has been largely democratized by platforms like YouTube and podcast networks.  Sports commentary in between the games has shifted to a market where viewers/listeners are able to choose between the personalities & styles they identify with, across followings large or small.  

The only properties that remain drivers to ESPN’s cable channel are live sporting events, for which, there’s simply no substitute.  The company’s reliance on live rights, and changing consumer preferences, are forcing ESPN to evolve.  Cord cutting and the dwindling draw of studio shows have resulted in declining revenue and a need to cut cost.

Recently, the company laid off several high-profile on-air personalities, including Jeff Van Gundy, Max Kellerman, Suzy Kolber, and Todd McShay.  Having taken steps to reduce expenses, the company will now look for new sources of revenue.  It’s been widely reported that ESPN is believed to be preparing the launch of a full direct to consumer streaming service, either to supplement or replace ESPN+.  Their current streaming service tends to feature lower profile games, with rating drivers like Monday Night Football, remaining exclusive to the cable channel.

If reducing cost and planning a move to a direct to consumer model is step one in ESPN’s evolution, leveraging the brand’s value, that has been built over 40+ years, is step two.  Even as fans no longer look to ESPN for talk shows and commentary in the way that they had in the past, those four letters still hold incredible name recognition and strong brand loyalty.  In looking to capitalize on their branding, the company may have placed the right bet with Penn!

Cultures and customs change over time. Sports betting is becoming a much larger part of the mainstream consumption of professional and collegiate sports.  As such, it’s a seemingly natural fit to integrate the brand most associated with the broadcast of big games with the viewers interaction with those games, through gambling.  Now is the time for ESPN to take its brand in a new direction!

Unlike Barstool, ESPN has a wide enough reach to potentially draw bettors from competing sportsbooks.  Battles will have to be waged with juggernauts, DraftKings & FanDuel, and Penn’s ability to deliver on the tech will be critical, but the partnership could commandeer significant market share. 

The potential conflict of interest concerns will continue to be raised and regulators may intervene at some point.  In the near future, ESPN might have to decide between being a SPORTS NEWS outlet or a SPORTS ENTERTAINMENT platform.  Quite Frankly, it’s probably a shift they should make proactively, as Stephen A Smith is already established as ESPN’s most marketable personality. Doing so could help prevent what currently feels like an inevitable controversy. If the company is slow to act, and its hand becomes forced, the entertainment route is really the only option. It’s not that the “insider” reporting model can’t be monetized, it’s simply nowhere near as lucrative as the opportunity that legalized sports betting presents…

Cash Rules Everything Around Me, C.R.E.A.M.…Get the money!  

Entertainment PAYS!

Solving the NFL’s Gambling Problem

The days of legalized gambling on sports being restricted to places like Las Vegas are long gone! Since a May 2018 Supreme Court ruling gave individual states the authority to regulate gambling, over 70% of states in the US have legalized at least some form of sports betting.  The widespread legalization has taken a large economic driver from the Black Market to Wall Street, shinning a spotlight on activity that was previously hidden from the public eye.  The exponential increase in visibility has amplified the discussion around gambling at 345 Park Ave and resulted in a wave a recent suspensions of NFL players for violations of the NFL gambling policy. 

The 2023 NFL offseason has included nine player suspensions for gambling violations.  Most notable was the six game suspension of Detroit Lions top prospect, Jameson Williams.  The three-one-three wide-out’s punishment is the most high-profile gambling penalty levied by the league since former Atlanta Falcon, WR Calvin Ridley, was suspended indefinitely last offseason.  Ridley had taken a leave of absence from the team during the 2021 season to focus on his mental health and, in his time away, placed NFL bets over the course of a five day period.  Ridley acknowledged that he had placed the bets, which totaled $3,900 according to a report by Brett Smiley of Sports Handle. 

In the time since his suspension, Ridley was traded to the Jacksonville Jaguars and reinstated by the league for the 2023 season.  While Ridley being away from the team at the time of his violation made his suspension unique, the suspension of Williams has raised many more questions about the NFL’s gambling policy.  Unlike Ridley, Williams was not suspended for betting on NFL games…he was suspended for placing bets on OTHER SPORTS while at a team facility. 

According to the NFL, “the gambling policy prohibits anyone in the NFL from engaging in any form of gambling in any club or league facility or venue, including the practice facility.”  Hold up, WHAT?  I’m sorry but, can someone from the league office explain to me how an NFL player placing a bet on an NBA or NHL game has any impact on the integrity of the National Football League? Furthermore, why it’s OK for an NFL player to place a bet on the Toronto Maple Leafs or Los Angeles Lakers from their couch but, doing so from the weight room is problematic???

The NFL has overly complicated its policies to its own detriment.  The complexity has given rise to discussion around the hypocrisy of the NFL for partnering with sportsbooks.  As a result, the league has been generating negative publicity centered around gambling, the very type of publicity its policies were put in place to prevent.  If it wasn’t for the poorly constructed rules, more of the focus would be on the fact that the gambling sponsorships that the NFL has secured are great for both the league and the players. 

Sportsbook sponsorships contribute to an increase in revenue that is split between the owners and the players, in accordance with the CBA.  The partnerships between the league and the sportsbooks also allow for the organizations to work together to identify violations of the NFL gambling policy, which should help ensure the integrity of the game. Unfortunately, the policies simply don’t make sense, the league needs to get out of its own way and simply the rules for everyone involved.

There is no debate worth having about whether or not the NFL needs to regulate gambling. The NFL ABSOLUTELY must protect the integrity of the game!  It is critical that consumers of the product have confidence in the legitimacy of outcomes however, there are much easier and less complicated ways to achieve that goal.  The NFL gambling policy should be as simple as, NFL personnel cannot place bets on NFL games, in a season in which, they were employed by any of the 32 NFL teams or the league office. 

A policy of this sort would be much easier for NFL personnel and the public to understand.  It would also extend the player exception for betting on other sports to all NFL personnel, while removing the restrictions on club and league facilities.  Currently, coaches and other league personnel are prohibited from betting on any sporting events.

Taking this approach would also close any loopholes regarding employment during a season, when players are regularly cut from rosters and join other teams days or weeks later.  If you collect a check from the league or an NFL team, you can’t bet on NFL games during that season, simple! 

The league office, NFL personnel, and the fans would certainly benefit from a clearer policy based on common sense. There’s still time for the NFL to correct the flaws in its gambling policy before the kickoff of the 2023 season.  A season which will build towards its Grand Finale on February 11, 2024 when Super Bowl LVIII is played…in Las Vegas!