Spectrum Gaming Group, a gambling consultant company, has indicated that the controversial royalty fees could generate more money for sportsbooks operating in the US. According to the study, greater cooperation from leagues could increase revenue to almost $10bn (£7.7bn).
Leagues are pushing for royalty fees
Both Major League Baseball and the National Basketball Association have argued for more than a year that they are entitled to a cut of every legal bet placed on their games. This royalty fee could help sportsbooks generate more revenue, the study says.
Spectrum’s executive summary says: “A royalty fee to the leagues could create a partnership among leagues, operators, and states that could accelerate the passage of legislation and create a larger regulated sports betting market and therefore more revenue for all parties.”
The report was commissioned by the two leagues. Spectrum calculated that total gaming revenue should range from $6.5bn to $9.1bn (£5bn to £7bn) annually in states that have legalized sports betting or are likely to legalize it in the near future. Based on a royalty fee of 0.25%, the study reported that league involvement should boost the revenue near the top end of that estimate. That could mean an increase of at least $2bn (£1.5bn) for sportsbooks.
The study states that the National Basketball Association and Major League Baseball could be instrumental in getting the right type of legislation passed. It suggests that the leagues could help advance regulation, mobile betting, and reasonable taxation. Mobile betting alone has the potential to be worth triple the proposed 0.25% fee.
Spectrum declined to comment beyond the report.
Some states are considering new legislation
So far, no state has passed a bill with royalty fees but several states are thinking about it. Missouri and Illinois are already considering new legislation that includes the provision. Some Connecticut legislators said last month they are open to an integrity fee if the leagues agree to a partnership.
A fee would help protect the leagues’ $10 billion businesses. They argue that the royalty is fair and that, without their games, there wouldn’t be any wagering at all.
The industry is creating new revenue for the leagues already. Both the NBA and MLB have signed deals with operators and data distributors.
Sportsbooks disagree with findings
The American gaming association said in a statement: “Sports betting is a very low-margin business, the leagues’ interest in taking a percentage of gaming revenue before winners are paid out, before states and localities receive tax revenue, and before infrastructure to offer those bets are paid for is a nonstarter.”
Major Leagues Executives said that states that agree to the fee would also see the league become much more willing to expand gambling within their borders. Kenny Gersh, baseball’s executive vice president of gaming and new business ventures, said they were considering making all operators an “officially licensed product of Major League Baseball” in states that agree to the fee. “If a legislator wants to take control of the process and make sure that we’re putting all of our resources into helping their state make money, this is their opportunity to do so,” he said.
MLB’s Deputy General Counsel Bryan Seeley also said, “It’s important to show that states are willing to do it, but it’s also important because we think our model bill will actually grow the pie and the state will be better off.”