The NFL: no longer a must

The latest data available on the levels of promotions and bonuses being handed out at the start of the NFL season suggests that the intensity of spend last season is not being replicated. Indeed, according to the analysts at Wells Fargo, spending in Pennsylvania, Colorado, Michigan and Virginia during the off-season of April to August was 54% lower than the average for those four states during peak season from September last year to March 2022.

Wells Fargo added that as the market moved into the upcoming peak season, it would be “watching to see some moderation” from last year, in which case the retreat signalled by WynnBET and PointsBet had some significance.

While it would be unwise to read too much into the move, it seems fair to suggest it is a leading indicator that what some thought was a suicidal intensity, particularly in the first three months of this year when New York opened up, might not be repeated.

“Everyone is thinking differently about marketing spend, marketing mix and the knock-on effects of large marketing partnerships than they were a year ago,” says Chris Grove, co-founding partner at Acies Investments. “Everyone’s making adjustments – the NFL one just happened to be a bit more public than most.”

Backing out

As noted elsewhere in this article, the official partnership deals with the NFL bought operators the right to spend their marketing dollars in the most expensive advertising markets. They represented a buy-in to a very expensive party.

It is hard to assess exactly how much these deals would have been worth to the NFL. However, sports partnerships consultancy firm IEG suggested that for last season, the total value of the deals the NFL pursued across all the sectors including sports betting was worth $1.8bn to the organisation.

Grove says that while the agreements couldn’t be characterised as “vanity deals”, they were a clearly more expensive route to market. “The NFL definitely results in some level of ROI,” he notes.

“It’s just a much trickier deal to measure and validate than some others. And any spend without a clear attribution path is likely to come under more scrutiny than spend that has a tight connection to driving new depositing players or obvious reactivation.”

None of this was particularly high up the agenda when the official sponsorship deals were arranged last year. “The past year saw a fundamental change in market conditions, from a period when capital was plentiful and relatively cheap – with interest rates being lower – to a time when capital is scarce and expensive,” says Gideon Bierer, managing partner at Partis Solutions.

“In the former period, time was the primary driver – people didn’t want to miss the market. Operators were playing offence, not defence, and were not very price sensitive especially for flagship deals such as with the NFL – no one wanted to be the executive who misses out on an NFL deal.”

Nothing lasts forever

Josh Swissman, founding partner with the Strategy Organization, notes that after the fact it is hard to say whether these original deals were a “misjudgement” on the part of the operators.

As he adds, “rare is the deal where everyone thinks they are getting value” and there may have been an element of overpayment – and indeed a large degree of one-upmanship – involved. But the decisions by WynnBET and PointsBet can also be seen as examples of what happens in the normal course of sponsorship deals where the value of the deal fades over time.

“Having negotiated some sponsorship deals myself, often they don’t run in perpetuity,” Swissman suggests. “They are in place for a period of time, to establish an association, and then there is a sort of lifecycle to that. They are subject to the laws of diminishing returns, and sometimes it makes sense to move, to find different paths to market.”

Moreover, as each individual market progresses from launch through to early maturity, the advertising and marketing demands change with operators switching from a top-of-funnel focus to a more retention-led approach.

“It seems like everyone was rightly focused on the top of the funnel in the early days of US sports betting,” says Swissman. “And it is natural to progress down that funnel as you build a bigger base of customers. You learn more about them and what keeps them around, so you want to pull back from the top end of the funnel as that happens. That can include sponsorship and heavy advertising campaigns.”

Or as Grove puts it, while any professional sports league in the US has value, “no league is indispensable, at least not as a marketing partner”. “I don’t think the NFL misjudged anything; I think the ground has shifted from a year ago.”

In effect, the switch that has taken place from one of a land grab towards defining a path to profitability means that there has also been a shift in the balance of power.

“As the pricing has come down, there is more of a balance for supply and demand,” says Bierer. “So, say you have a media asset, a team or a league, you will be looking at a smaller number of credible partners, who themselves have a greater number of options.”

Taking a step back

Another dynamic at play with the two brands in question, though, comes down to their individual places within the market. Neither of the brands can be said to be top-tier operators and indeed WynnBET already indicated its pullback from expensive marketing and promotions in November last year.

Meanwhile, despite clearly having aspirations to establish itself at least in the second tier, PointsBet has also suggested its policy will be to concentrate on an improved product experience rather than try to compete on promotions.

The fact that neither has been able to garner the necessary momentum to justify another season of expensive NFL spend says something about the dominance of the leading operators right now in the US. The question arises, though, whether foregoing the chance to spend a lot in and around the NFL necessarily signals a complete withdrawal or simply a tactical retreat.

Grove points to the danger of reading too much into any single move. “There are so many moving parts for online sports betting in the near term, let alone the medium-to-long term,” he says.

According to parent company Flutter Entertainment, FanDuel has a 51% US market share based on GGR

“I think what we’re seeing so far tells us a couple of things,” he adds. “The US market is hard, scale matters and product matters. None of these things are especially surprising, but the degree to which each appears to have impacted the distribution of share in the US is really quite surprising.”

Bierer suggests something similar and says there is an element in today’s sports betting landscape to draw on the famous quote within financial circles from Warren Buffett: “Only when the tide goes out that do you discover who’s been swimming naked.”

“There are those companies that have fundamentally sound business models and then there are those that pay more to acquire the players than they are worth,” Bierer says. “In the end, you can’t outrun that. Many companies are now focusing more and more on enhancing their unit economics, via product and marketing improvements, than on user acquisition and scale.”

Healthy competition

But Andy Rogers, founder of The Rokker Network, suggests that further down the feed chain potential also exists as the market becomes more mature. “While it appears that there’s clearly some early monopolisation, our hypothesis is that as the market becomes more sophisticated – and a wider cross-section of the total addressable market becomes involved in new products including online casino and others – there will be more opportunities for mid-tier operators to compete,” he says.

“That said, it’s likely to become more difficult for operators who don’t control their core technology and product to execute an offence-defence strategy that’s not purely based on marketing spend.”

Swissman makes the observation that marketing is an art, not a science, with companies embarking on fine tuning and tweaking all the time in the hope of hitting the right formula for getting players through the door and then hopefully retaining them. “Companies endeavour to get this right perpetually,” he says. “Getting it right last year doesn’t look like getting it right this year.”

And, of course, the competition is watching, which just adds another layer of complexity to the situation. “Competitors are certainly watching each other very closely, and obviously in theory might capitalise on another’s move,” he says. “They do that all the time. But rather than signal what might be viewed as weakness, they view it more about moves on a chessboard.”

This is exactly the lens through which the subsequent news around the NFL can be viewed. In mid-September, BetMGM emerged as the new sports betting sponsor for NBC’s NFL coverage, replacing previous sponsor PointsBet which – because it hasn’t renewed with the NFL – can no longer be an advertiser around NFL football.

It shows how much marketing is a game of musical chairs, with one sponsorship name quickly replacing another. With marketing there is always new opportunities to explore and decisions to be taken about where you focus your efforts and your spend.

PointsBet, for instance, recently announced an agreement with 1/ST Technology for the delivery of a white-label US thoroughbred horseracing advanced deposit wagering product to complement its US offering. It may not involve an NFL level of promotional spend, but it is the kind of deal that provides the company with a point of difference when it comes to their customer offer that comes at a lower cost than anything they could do around the NFL. It is also likely to be more targeted than the firm’s NBC deal which it admitted in various earnings calls in the past year was somewhat untargeted.

As Strategy Organization’s Swissman points out, at the top end of the market, “the waters can get a little bit murky and competitive”. Standing out in a crowded market is truly quite difficult – and, as it turns out, expensive.

The official deals with the NFL

The first official sponsorship deals between sports betting operators and the NFL were announced in April 2021 when it was revealed that Caesars Entertainment, DraftKings and FanDuel were to be official sports betting partners with the league.

The deals also introduced us to the term ‘tri-exclusive’ and, as part of these agreements, each of the three was granted the “exclusive ability to leverage NFL marks within the sports betting category” as well as “activate customers around retail and online sports betting”.

All three were now able to integrate relevant sports betting content directly into NFL Media properties including NFL.com and the NFL app, with DraftKings and FanDuel able to “enhance their fan experiences” with NFL highlights, footage and ‘Next Gen Stats’ content. Meanwhile, Caesars and the NFL would collaborate on integrating NFL content into Caesars’ platforms. All three also signed up to use official data provided by Genius Sports.

Then in a separate announcement just ahead of the start of the 2021-22 NFL season, another tranche of ‘official’ partnerships was unveiled. The four chosen ‘approved’ sportsbooks were Fox Bet, BetMGM, PointsBet and WynnBET and it meant each was “eligible to purchase NFL in-game commercial units and other select NFL media inventory”.

At the time of the first agreement, the NFL said that as the sports betting landscape “continued to evolve” the organisation had been “thoughtful with our strategy and are excited to announce three partners who share the NFL’s vision and goals”.