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May 21, 2018

Sneakernomics: Legalized Gambling and Sports Retail

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The recent decision by the Supreme Court of the United States which allows states to regulate gambling on sports will have an impact on the sports retail business.

The leagues in the U.S. are constantly searching for new revenue streams. The big cash cow, TV rights, has likely reached its peak as some leagues have seen viewership fall in favor of much less lucrative social media platforms.

The last two major unrealized revenue streams for the leagues are legalized gambling and ads on jerseys. We have seen the NBA successfully introduce ads on jerseys. No one was smote from above. Over time, I expect ads on jerseys will be an even greater thing, as the ads take over a larger amount of the jersey. Sleeves will return as that will allow more space for ads. The big money has yet to flow, but it will. Global soccer shows potential here.

My belief is that leagues will support gambling on games as long as they get a cut. I expect several states will quickly enact gambling statutes in time for the NFL season this fall. Look for one of the states that has already voted for gambling to take the lead here and create a template for others.

There will likely be great hue and cry over the morality of gambling, but states are as strapped for new sources of revenue just as leagues are. Gambling will come with fancy trappings, but it will come. (As a local wag once told me while standing in front of a New Orleans casino: “We don’t have gambling here; we have gaming.”)

Las Vegas takes a hit here as bettors will no longer have to travel there to wager. We can expect the sin in “Sin City” to expand to offset these losses.

It will be fun to watch the fantasy leagues (who have long claimed fantasy was not gambling) try to get a piece of this business.

The NBA will take the lead here as the NFL dithers about “integrity” issues. Maybe the NFL can use these proceeds to pay off the CTE claims. I love the idea that the leagues will support “integrity fees” and get their cut of the bets. Leagues will likely charge for “league sanctioned data and content” as another way to grab some revenue.

Mark Cuban, owner of the Dallas Mavericks, said “everybody who owns a top-four professional sports team just basically saw the value of their team double, at least.”

Legalized gambling may be the final lever to get the NCAA to pay its indentured servants who bring in vast amounts of income to the coaches, athletic directors, and schools.

I’m also looking forward to the time when Paddy Power Betfair is a household name.

Marginal teams and marginal players will get a lift here as they make great betting targets, much like we have seen in fantasy sports. It remains to be seen if legalized betting creates an increase in fan wear worn as streetwear.

In addition to the sports retail environment, it will be interesting to observe how this decision will impact sports ratings, which I expect will go up.


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