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Weekly Issue Issue Date: 1.17.2022
Cut The Cards: First big bets down in the college betting space; odds are high on more deals soon
By Bill King and Michael Smith 10.25.2021
As part of the deal with LSU, Caesars gets its name on a 1,500-seat end zone club and on both ends of the field. getty images
Voters in Louisiana were still more than a month away from passing a 2020 referendum that would bring online sports betting to the state when the agency that holds LSU's multimedia rights approached the school about opening a new, and likely lucrative, sponsorship category that would name an official sportsbook.
After exploratory conversations, school administrators said they'd be open to such a deal, under a carefully constructed set of parameters. There would have to be responsible gambling components. And a clear delineation separating the alumni and fans that the sportsbook would target from current students, most of whom are under 21.
It was an approach similar to that which LSU and other schools have taken in recent years as they opened to beer and spirits advertising and the sale of alcohol in some parts of their stadiums and arenas.
Last month, LSU and rights holder Playfly Sports announced a multiyear, seven-figure deal that made Caesars Sportsbook the exclusive sports betting and gambling sponsor of the athletic program, making the school only the second Power Five member to lock down a category that has been all the rage across pro sports.
As part of the deal, Caesars gets its name attached to a 1,500-seat end zone club, along with camera-visible signs in both end zones. It also gets signs at LSU's basketball arena and baseball stadium, broadcast and digital sponsorship rights across 21 men's and women's programs, and tickets and VIP hospitality for Caesars Rewards loyalty members.
Caesars pledged to work with the Louisiana Association on Problem Gambling on strategies as the state opens to sports betting later this year. The company also will fund an annual scholarship for Louisiana residents pursuing degrees in sports administration, commerce or leadership.
The deal came a full year after the announcement of the first sportsbook sponsorship at a Power Five school, struck between Colorado and PointsBet, which has Denver as its U.S. headquarters.
Since then, six states with Power Five programs have legalized online sports betting — Tennessee, Michigan, Virginia, Louisiana, Maryland and New York — bringing the total to 25 of 65 schools. Ten of 14 Big Ten programs are in legalized states, with Ohio State likely to make it 11 by next fall. There are five from the ACC and Pac-12, three from the SEC and two from the Big 12.
"I think what's happening now, as you have this latest wave of legalization that happened over the past six to nine months, that movement has kicked up a ton of conversations," said PlayFly CEO Michael Schreiber. "You're going to hear a bunch more announcements coming soon. It's a lot of bidding. A lot of auctions. A lot of who wants this thing. And there are sportsbooks that are really interested."
Schreiber would not speak specifically about which Playfly schools might be next into the pool. But it's not hard to find candidates. The company holds rights to seven Power Five programs. Four are in states that have legalized online sports betting: LSU, Maryland, Michigan State and Virginia.
At Colorado, Senior Associate AD Lance Gerlach has been fielding calls about the school's PointsBet deal from colleagues since the day it was announced.
"I know for a fact there are a half dozen to a dozen major Division I Power Five schools pretty far down the path of having that conversation about doing a partnership similar to ours," said Gerlach, who spent nearly a year selling campus leaders at Colorado on the appeal of the category before finally getting approval. "It's going to go in phases, but it's coming.
"I'm surprised more haven't happened yet. But when the floodgates open, the floodgates are really going to open."
Sportsbooks want to sponsor college programs for the same reason they sponsor pro teams: Because college sports fans, and in this case alumni, are their consumers. As sure as they drink beer and soft drinks, buy cars and choose insurance providers, many place bets. By the start of March Madness, about 98 million of them who are over 21 will be able to do so legally from their homes.
That will be about 41% of U.S. adults.
In their publicly released filings, only two states break out wagering by sport in a way that distinguishes college sports from pro. Last season, sportsbooks in Illinois and Colorado took $942.5 million and $264 million in bets on college games, respectively. That was 18% of handle in Illinois and 9% in Colorado.
Those figures likely were constrained markedly by COVID-19 cancellations in both sports. Sportsbook executives say their larger, longer-term internal numbers show college football and basketball trailing their pro counterparts only slightly, driven by the sheer heft of their schedules, with about four times as many Division I basketball games as NBA games and three times as many FBS football games as NFL games.
"There is a tremendous amount of wagering interest in the product, and you've got rabid bases of alumni and fans around the country," said Dan Shapiro, chief development officer at Caesars Digital. "In certain parts of the country, we see that college sports is more popular than pro sports. That's one reason we did the LSU deal. We know how big a deal SEC football is in the South and how big a deal LSU football is in Louisiana."
While football anchors Caesars' deal with LSU, it is the school's broader sports calendar that distinguishes it from the sportsbook's many pro deals, including a massive one with the Saints that included naming rights to the Superdome.
The Saints are undeniably Louisiana's most valuable sports property, but their regular season is confined to 4½ months. The college betting calendar stretches from kickoff classics at the end of August through the Final Four at the start of April. There isn't much wagering on college baseball, but fans will flow through LSU's Alex Box Stadium through the start of June.
Perhaps most importantly, Caesars gets access to market through LSU's digital platforms and to tap into its database of over-21 fans and alumni. A recent survey by the American Gaming Association found that 45% of core sports bettors are age 23-34 and 53% hold a bachelor's degree or higher, characteristics that align well with the avid base for college sports.
College football also offers an asset that the NFL thus far has prohibited: Camera-visible signs in the stadium. LSU games will air nationally most weeks on either ESPN, ABC, CBS or the SEC Network, while Saints games more often air regionally.
"There's a value we can assign to that," Shapiro said. "The major programs in the SEC or Big Ten are not going to be on par with NFL deals, but there is quite a bit of value there and companies will be willing to pay for it. Where they are in the pecking order [compared to other pro leagues] is hard to say in the abstract, but some of the bigger programs are going to be pretty valuable."
While the legalized map, a swing in social acceptance and the undeniable attractiveness of college programs as marketing vehicles for sportsbooks all have aligned, the timeline has proved problematic.
Three years after clearing the way for legalized sports betting in 2018, the Supreme Court ruled that college athletes could be paid for the use of their name, image and likeness, with the NCAA leaving it to schools to monitor the commercial implications. The creation of the NCAA transfer portal has led to a big increase in athletes jumping from school to school. An actual pandemic drained athletic budgets and upended daily campus life. Next up: a debate about whether athletes are actually university employees.
Top of mind for about as long as it took Pete from Pittsburgh to decide whether to take the over on Penn State, legal sports betting now is barely a ripple in a sea of college sports transformation.
"A year or two ago, sports betting was a big topic, [but] it's kind of faded from the whole discussion," said Tom McMillen, president and CEO of Lead1, the association that represents the 130 FBS athletic directors. "We had our annual meetings and not one word was said about sports betting. NIL came along and sucked all of the air out of the room."
It's not that schools are unaware. They're just overwhelmed. As one high-ranking college leader put it, existential threats to the business of college sports, such as the potential end of the NCAA, loom as more immediate challenges.
"It's hard to fault anyone within these athletic departments for not getting to this because it's a time of complete chaos for these athletic departments," said Casey Schwab, a former NFL Players Inc. executive whose Altius Sports Partners firm now counsels schools on NIL matters. "There's five tigers they're trying to chase or five hurricanes about to hit their house — whatever metaphor you want to use. … And the easiest answer is always no."
The inconvenient timing of the betting rollout does not lessen its potential impact. Millions in revenue from sponsorship and official data could offer a vital infusion at a time when athletic departments and their multimedia rights holders — the companies that sell the sponsorships — look to recover from the fiscal shortcomings created by the pandemic.
Along with fielding proposals from programs exploring the category, Caesars has made inquiries of some schools that fit its target profile — well-known, with large fan bases in legalized states that are high priorities.
"Some have just said, 'Look, we're not ready yet. We're just sort of watching what other people are doing,'" Shapiro said. "And that's a perfectly fine response."
The company is in conversations with other programs, but does not see any deals as imminent, Shapiro said.
"There's already so much on the front burner that we're running out of space and the pots are boiling over," one Power Five AD said. "So, I'd say it's definitely on the back burner for now. But sports betting is certainly becoming more mainstream and more out in the open. And it is a new revenue category that has to be explored."
That response was indicative of the feedback from 10 high-ranking college administrators when contacted by Sports Business Journal.
One AD from a state that has passed sports betting legislation said it's time to reexamine the revenue potential that could come from sportsbook sponsorships. A few years ago, the AD said, athletic administrators and university presidents complained about the threat gambling posed.
"So, now, should we walk into this space in order to generate revenue?" the AD now asks. "It's a great question."
At Playfly, Schreiber said the agency has made building expertise in working with sportsbooks a priority, leaning on the experience of an in-house ad sales staff that represents RSNs across the country, many of which have benefited from a flood of advertising as states have opened.
The nation's leading college marketing rights holder, Learfield, would not comment but confirmed that it has been gauging the appetite of its schools.
"The challenges are really above and beyond the athletic department," said Eric Foote, chief commercial officer for PointsBet USA, who previously worked in college sports with CBS Interactive and at Pepperdine. "You need buy-in across the board, whether it's presidents, chancellors, ADs or rights holders. And not any deal will look the same in college, because everyone is probably looking at this category in a different manner — whether you allow IP, whether you allow signage, whether you only touch radio, whether you only do digital. The challenge will be that there's no one-size-fits-all."
The wait-and-see approach also extends to some sportsbooks, which say they still are working through the regulatory and compliance implications of marketing and using digital platforms on college campuses.
It's a complex endeavor that, for some schools, will require months or maybe even years of conversations with legislators, trustees, donors and other university leaders. Schreiber predicted that some schools will fall like dominoes as they get "air cover" from first movers, as they have in other "vice" categories.
"What we're doing is creating an infrastructure that will allow gambling to take place easily inside our venue," one Power Five insider said. "I would guess that most everyone is looking at that, but they're just not telling anyone what they're doing."
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