Update: The NBA has providing the following statement to Sports Handle in response to this report, from Scott Kaufman-Ross, NBA Senior Vice President, Head of Fantasy and Gaming:
“The NBA’s sports betting partners recognize the value of official NBA data and work with us to protect the integrity of our games. We provided a season-long grace period for other betting operators to have access to official NBA data while we discussed partnership terms. While that period is ending — something distributors and operators have known since the start of the season — we remain committed to securing additional sports betting partnerships.”
The National Basketball Association and Major League Baseball’s quest for a direct, off-the-top cut of legal sports bets has escalated well beyond lobbying at statehouses across the country.
The leagues have taken the fight directly to Nevada sportsbooks: pay the NBA an undisclosed, additional flat fee for a package of playoff games, or get cut off — in the middle of the playoffs — from the supply of sports betting data from one of the NBA’s designated “official” data suppliers, Sportradar US.
Playing hardball
The messenger for this new demand, Sports Handle has learned, has been the Switzerland-based Sportradar itself. The company has advised certain Nevada sportsbook operators about the new fee at the NBA’s directive.
Sources say Sportradar approached multiple sportsbook operators that have purchased the company’s betting data feed called Betradar, and used it to access the NBA data feed, with the new terms before the start of the NBA playoffs.
Around the same time, Sportradar, doing the bidding of Major League Baseball, told certain sportsbooks they will need to fork over a “royalty” of 0.25 percent of wagers taken on MLB contests for access to the league’s official feed through Betradar, sources said. These conversations remain ongoing.
“What I’ve heard, and people are reluctant to go on record, is that the leagues are demanding that to get the official Betradar data feed, you now have to pay a quarter percent of handle,” said Robert Walker, Director of Sports Book Operations for Nevada-based bookmaker USBookmaking. “I’ve heard that the leagues, which would be the NBA and MLB, want a fee for in-game wagering data, in addition to the existing fees.”
Walker previously ran some of the largest sportsbooks in Nevada including those at the MGM Mirage and for Boyd Gaming.
“My sources tell me the demand is coming from the data provider, Betradar,” Walker explained. “I don’t know if the leagues actually reached out themselves. I think they’re strong arming Betradar, who is coming back and saying this is what we have to get.”
The NBA, MLB and Sportradar did not respond to Sports Handle‘s request for comment for this story.
By way of background, the NBA, in lockstep with MLB, has lobbied state and federal lawmakers since January 2018 for what was first called an “integrity fee” — a fee that would require state-licensed sportsbooks to pay pro leagues a 1 percent off-the-top cut of all legal sports bets on each respective leagues’ games. At present, the NBA and MLB are asking for 0.25 percent and calling it a “royalty” instead or simply “compensation.”
So far, no state has obliged the leagues’ request. However this week,Tennessee became the first state to pass a law (Governor Bill Lee will leave it unsigned and let it become law) that includes a “data mandate” requiring, with some murky language, that to-be licensed books purchase “official league data” to power any in-play betting markets it may offer.
Sportsbooks balking at the threats, so far
Earlier this spring, Sportradar approached a number of Las Vegas-area sportsbooks with the unexpected request. The books were initially given a deadline of April 13, the start of the NBA playoffs, to pay an additional fee for Sportradar’s playoff package. If the payment was not made, the company threatened to shut off the signal from its data feed.
Several days before the deadline, the company offered a discount to the Vegas books if they met the demands. It is unclear if Sportradar made similar requests to legal sportsbook operators outside of Nevada, namely, New Jersey.
After April 13 passed, Sportradar apparently extended the deadline until the end of April. Multiple Las Vegas sportsbooks have balked at paying the fee and still have access to the feed, according to sources. A separate deadline for the MLB fee was set for May 1, sources say. It is not yet clear if Sportradar, in conjunction with the NBA or MLB, is seeking to effectuate these new payments via verbal or written agreement, perhaps in the form of a new contract.
As of May 2, the sources were unable to name a single book in Sin City that had agreed verbally or in writing to cut a check to either league, or in the case of MLB, begin cutting checks. But the NBA and MLB are not giving up. While the National Football League and National Hockey League have expressed disinterest in an “integrity fee” or “royalty,” the NBA and its Commissioner Adam Silver, remain insistent.
Silver has continually said the NBA should receive some compensation. When asked at the 2018 NBA All-Star Game to defend the league’s request for a royalty from sports betting operators, Silver cited the roughly $7.5 billion it spends annually to create their games and content.
To buttress the position, NBA Senior Vice President Dan Spillane, who has testified in numerous states regarding legal sports wagering, said before a New York legislative panel and elsewhere, “Without our games and fans, there could be no sports betting.”
MLB’s public position has hewed along the same lines: the leagues spend money, others are profiting by accepting wagers on those productions, and the leagues, they argue, bear the risk.
“If the Yankees weren’t playing the Red Sox last night, the casinos don’t have that game to offer bets on,” said Kenny Gersh, an MLB executive vice president, at a November 2018 industry conference. “The leagues, casinos, and sportsbooks all should work together to be successful. If we work together, we’ll increase the handle enough so that [the fee] pays for itself.”
For MLB as well as the NBA, the ultimate sports monetization prize would be a royalty mandated by state or federal law, as well as a legal mandate that legal U.S. sportsbooks purchase data through a league-approved third party. Sportradar is not the only such provider for either league. In November 2018, the NBA executed an agreement with Sportradar and Genius Sports, designating both as official, non-exclusive sports betting data suppliers for similar products.
SuperBookUSA and Westgate Las Vegas SuperBook Director of Sports Operations, Jay Kornegay, is concerned that a comprehensive revenue-sharing agreement with the leagues and sports betting data providers would adversely impact the company and is simply untenable.
“We respect the leagues, I think there are a lot of different ways we can work with the leagues but when it comes to revenue sharing, there’s no room for it,” Kornegay told Sports Handle.
Crunching the numbers
There are varying estimates on how much of a dent a 0.25% fee on a book’s handle could create. During a 27-year period through 2018, approximately $21.4 billion was legally wagered on professional and college basketball in Nevada, according to a study from UNLV’s Center for Gaming Research. But the finances are also variable month-to-month. While Nevada sportsbooks recorded a monthly basketball handle of $96.2 million in May 2017, the books suffered a $4.4 million loss on basketball — the largest one-month loss on basketball in state history.
Nevada sportsbooks are required to pay a state tax rate of 6.75 percent of gross gaming revenues, as well as a 0.25 percent federal excise tax on betting handle.
When a jurisdiction allows a fee to be attached to a sportsbook operator’s handle, the jurisdiction is giving preferential treatment to a league to the detriment of its taxpayers, said Becky Harris, Academic Fellow, Sports Betting at UNLV’s International Center for Gaming Regulation. Harris, former chair of the Nevada Gaming Control Board, testified last September at a Congressional subcommittee hearing on sports betting.
“It just goes to show the lengths to which stakeholders will resort to try to monetize what they can’t get accomplished on the federal level or through state legislatures,” Harris said.
When asked whether a data provider would be required to obtain a license in Nevada to collect a royalty, Harris said she is not aware of any prior circumstance where the board dealt with such a matter.
Over a two-month investigation in early 2019, Sports Handle examined current rates for sports betting data packages across the U.S. legal marketplace. At the time, the monthly rate for a package of roughly 300 in-game lines ranged from $4,000-$6,000 a month, according to multiple sources. Sportradar entered the Nevada market several years ago and at the time inked what one industry source dubbed “sweetheart deals.”
One Nevada sportsbook executive interviewed in February said he has not seen rates spike since the NBA unveiled the deal with Sportradar and Genius Sports months earlier. The executive, former CG Technology Vice President of Risk Management Jason Simbal, said prices could increase once a number of states begin to require sportsbooks to use official league data. Simbal has since left the company.
Brendan Bussmann, Director of Government Affairs at Global Market Advisors, has extensive experience in the gaming industry. The firm’s client list includes prominent names such as: Caesars Entertainment, Boyd Gaming and Station Casinos. Bussmann believes that the leagues, data providers and sportsbook operators should work together to develop ways to increase fan engagement through sports betting. The collaborative efforts, he says, will generate more revenue than a cut off the top.
“There is no integrity in a fee, the integrity exists in the laws and regulations,” Bussmann said. “If there is an agreement between two parties to get a cut, that should be done through a private transaction in the marketplace. It shouldn’t be legislated, it shouldn’t be regulated.”
The leagues, he adds, are “stepping over a dollar to pick up a penny.”
Will demands backfire?
The NBA has found some willing buyers for official data. MGM Resorts International cut data/marketing deal with the NBA in 2018 worth a reported $25 million for three years, designating MGM the league’s exclusive official gaming partner.
But sportsbooks old and new, in Nevada and Pennsylvania, especially those that operate only or solely around sports wagering and not as a tiny slice of an international entertainment company such as MGM, have to carefully weigh every cost of doing business. Each will have to ask the question: Can we afford data from Sportradar or another official supplier such as Genius Sports, with or even without new fees and/or an added 0.25 off-the-top cost? If the 0.25 percent fee applied to betting handle on all leagues according to legislation the NBA and MLB are seeking, based on the $5 billion total handle in Nevada alone in 2018, licensees would owe a collective $12.53 million.
“Anyone who signs with the leagues, you’ve got to know what you’re signing,” Walker said. “So we will look very hard at different vendors. It might be a reason you don’t go with a different data provider. These fees aren’t going to get any cheaper. It may start at 0.25 percent. I doubt it ends there. We want nothing to do with the leagues.”
If state lawmakers say do issue a mandate, licensed operators may be forced to explore other options regarding certain types of wagering, namely, live or in-play betting. “Live betting” is variously described, but in the newly passed SB 16 in Tennessee, it’s defined as “a type of wager that is placed after the sporting event being wagered on has commenced and whose odds on events occurring are adjusted in real time.”
Further, according to Tennessee’s law (emphasis added):
Under this bill, as amended, if a licensee can demonstrate to the board that the governing body of a sport or sports league, organization, or association or other authorized entity cannot provide a feed of official league data for live betting in accordance with commercially reasonable terms, as determined by the board, a licensee may use any data source that is not obtained:
What is commercially reasonable? And how will Tennessee regulators determine what is commercially reasonable? Would an added flat fee under a threat of getting cut off and/or an additional 0.25 off-the-top cut qualify as commercially reasonable? Under what justification? How high might the rates go for such packages? At what price do the rates become high enough to impair state’s legal market, the consumer experience, and tax revenue? These will become the questions for Tennessee regulators and perhaps other states imposing such a mandate.
An Indiana gaming bill that recently passed and now sits on Governor Eric Holcomb’s desk awaiting signature, originally included a similar mandate, but the language was stripped late in the game.
While in-game betting handle is on the rise in the U.S. and viewed as the next frontier, some sportsbooks don’t offer it at all. Their clientele may not demand it or their book isn’t big enough to manage it or the costs associated are otherwise prohibitive. Sportsbooks also put fairly small limits on in-game wagers, often limits of about $300-$500 or less. In what’s overall a low-margin business, sportsbooks don’t make much money from in-game offerings. If prices for live betting data increase with a new 0.25 percent fee, the result may be fewer books offering in-game wagering overall. Meanwhile, in-game wagering has been touted by the NBA’s Silver as a new opportunity for fan engagement.
From SportTechie in April 2018:
Silver gave a couple hypothetical examples of in-play betting — that instead of simply betting on standard categories like win or loss, point spread and over/under, a fan could wager on the number of points a particular player will score in the next quarter or even if a shooter will make the next two free throws.
“Those are all potential, additional forms of engagement for viewers,” Silver said.
Thus, the league may be shooting itself in the foot.
Going an alternative data route
Meanwhile, there are alternative sources of information allowing sportsbooks to post and grade in-game wagers. Often with alternative sources of data there is an added latency of a few seconds, compared with direct-from-league sources, but some sportsbooks don’t view the available suppliers/products as inferior.
In fact, multiple industry sources have advised Sports Handle that they aren’t impressed with Sportradar’s Betradar product when it comes to major U.S. sports leagues, such as the NFL, MLB and NBA. Some sportsbooks rely on several data sources or have turned to alternatives.
But that is generally not the case in New Jersey, where Sportradar US president Matteo Monteverdi said at the March MIT Sloan Sports Analytics Conference that the company has captured 90 percent of the sportsbook operator market.
It is not public information how the terms of agreements between sportsbooks first launched in New Jersey — such as FanDuel and DraftKings — differ from those executed with sportsbooks in Nevada years earlier, or whether newer deals include any 0.25 percent fee or new, additional fees under threats of getting cut off.
Initially conceived as a fee to cover what the leagues purported would be increased post-PASPA costs to enforce and monitor games, and suspicious sports betting activity, league officials later conceded the “integrity fee” was more akin to a “royalty.”
The NBA’s and MLB’s position all along has been that only when sportsbooks use official data can the league ensure sports betting integrity and maintain consumer confidence in the game.
From Major League Baseball Senior Vice President and Deputy General Counsel Bryan Seeley at a Feb. 21, 2019 Kansas hearing:
The only way to ensure uniformity, fairness and accuracy of outcomes is to require – by statute – that all sports betting operators use the official and indisputable data and statistics provided by sports leagues like Major League Baseball for scoring any in-game or similarly complex “tier two” bets.
Integrity — behind a paywall. The “integrity fee” has, officially, been turned on its head.
Brett Smiley contributed to this report.
