Legalized Gambling Would Fuel Another Rise For ESPN

ESPN has a problem. It’s shedding subscribers fast. The ongoing trend soured an otherwise positive first quarter for parent Disney, whose theme parks and movie division performed exceedingly well. Of course, this is hardly news. The network’s problems have been making headlines for months, highlighted by a recent round of layoffs, which included many prominent journalists and longtime on-air personalities.

The cuts re-ignited a debate about who and what is to blame for ESPN’s struggles, with some faulting its purported increasingly liberal bent in recent years. However, that argument is unconvincing. As The Atlantic points out, it’s hard to believe many conservative hardliners have canceled their cable subscriptions to protest the network’s supposed leftward lurch because that would mean they’d lose access to Fox News as well.

This is mostly about one thing: cord cutting. New technologies and ballooning cable bills have led to a rapid decline in the number of households that pay hundreds of dollars for TV each month, with ESPN having lost 11 million subscribers since 2011.

That’s a significant hit considering much of its revenue is generated by carriage fees, which at more than $7 per month are the highest in the industry. While carriage fees are rising, fewer subscribers are a mounting problem given the deals ESPN has made to secure the rights to broadcast live events, which just for Monday Night Football, the NBA and the College Football Playoff add up to more than $34 billion.

That’s why the recent cost-cutting moves were hardly a surprise, and why Disney CEO Robert Iger confirmed during the company’s first-quarter earnings announcement that ESPN will introduce a stand-alone streaming service at some point this year, a recognition both of the scale of cord cutting’s impact and that digital content is cheaper to produce, since it doesn’t require huge investments in on-air talent. For the network’s finances, these are positive steps, despite the pain and heartbreak for those who were laid off.

One other thing, however, would jolt its business even further: legalized sports gambling. This is hardly a pipe dream, despite what many may think. In fact, there is currently more momentum behind expanding full-scale sports wagering beyond Nevada than at any time in modern history. Consider the following:

1. A U.S. House committee just released draft legislation that would repeal the federal ban on sports betting, leaving the issue for states to decide.

2. New Jersey has been engaged in a multi-year effort to allow sports betting, and a handful of other states, including Michigan, New York, Pennsylvania and West Virginia are expected to consider bills this year that would eventually make it legal in those states as well, according to (That’s in addition to Delaware, which already permits parlay bets on NFL games through its state lottery).

3. NBA commissioner Adam Silver supports legalized and regulated sports betting, while Rob Manfred, Major League Baseball’s commissioner, has said his league is reconsidering its opposition.

4. The NHL will have a team in Las Vegas beginning next season, and the NFL will arrive by no later than 2020, when the Oakland Raiders move there.

5. President Trump is a former casino owner who has been known to be sympathetic to the cause.

Meanwhile, few should doubt that gambling leads to higher levels of engagement and increases the popularity of individual games that otherwise have very little attraction for a broader audience. For years, Las Vegas has been among the top-rated sports viewing markets in the country, even though next year will be its first as a ‘pro sports city.’

Gambling is undoubtedly the reason why. Fantasy football and daily fantasy sports sites such as Fan Duel and Draftkings, which continue to chug along despite facing legal pressures in multiple states, are a further testament to the powerful pull of having money on the outcome of a game.

The NBA and MLB know this and are willing to say it publicly. The NFL knows it too, but it isn’t, maintaining its long-held stance that legalized wagering could threaten the integrity of the league’s games – a disingenuous position given that it facilitates fantasy football leagues on its own website. (Also, don’t forget that Las Vegas bookmakers have always been the first line of defense against point-shaving, bringing unusual betting patterns to the attention of the proper authorities, making the reasoning behind the NFL’s opposition even more ridiculous).

Greater interest and more viewers equal more advertising dollars, and, naturally, that would be good news for ESPN. But the network needs to be more than just a passive observer, content to ride legalization’s coat tails. Indeed, it should partner with a major gaming company that has operations in multiple states to create a framework for integrating mobile betting into its app, making placing a wager as easy as accessing a news story, video content, scores or other statistics.

MGM or Caesars, given the scale of their operations, would be a perfect match for this type of project. If ESPN fails to move, a countless number of tech firms and various startups will fill the vacuum and create, facilitate and profit from betting exchanges, including companies like Activision or Amazon, which have a history of getting ahead of big trends.

Again, none of this is pie in the sky. Legalized sports gambling is coming – probably not this year and maybe not next. But it will be a reality eventually, and as a rights holder of much-coveted live sports content, ESPN will be a beneficiary. However, to take full advantage, the company, as perhaps the most recognized sports brand in the country, needs to aggressively drive the trend versus merely sitting back and reaping the benefits of it.

By CEO Ross Gerber

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