Coronavirus Losses Piling Up In Sports & Betting Industries

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Coronavirus Losses Piling Up In Sports & Betting Industries
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The economic impact of the coronavirus on the global sports and sports betting industries will be immense, reaching hundreds of billions when considering rights fees, missed ticket sales, closed casinos and money that will remain in bettors’ wallets unless they have an appetite for Turkish soccer or virtual stock car racing.

A legal sports betting industry in which $13 billion was wagered last year has been shuttered ahead of its most lucrative event, the NCAA Men’s Basketball Tournament. Gaming companies with darkened casinos and sportsbooks and bleeding stock value are considering a plea for federal bailout. Like the sports franchises that provide the material for the lines they post, the gaming industry waits.

With most professional leagues now dark, and as of Tuesday, the Kentucky Derby rescheduled from its historic slot on the first Saturday in May to Sept. 5 and the Euro 2020 soccer tournament pushed back a year, few remaining pieces continue to crash down.

Among them could be the Summer Olympics in Tokyo and the NFL season in the United States. With President Donald Trump admitting in a press conference on Tuesday that “it’s bad” and bad enough to affect the nation into the autumn, suddenly the Games in July and NFL season in late summer don’t seem quarantined from the impact, either.

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“Basically, sports gambling is a tiny problem in the whole grander scheme for the sports economy. It's not looking good either, obviously,” Victor Matheson, an economics professor at the College of Holy Cross told “We've basically shut down the entire sporting industry. That's bad for both the sports industry as well as the sports betting industry because there's just nothing to gamble on.”

Each entity had its own expensive dilemma.

“The NBA had a shutdown because the venue is unhealthy when your own athletes are actually sick. The NHL shut down, at least in part because they're sharing venues with the NBA and the NBA has sick players. So there goes the NHL,” Matheson said. “March Madness at least for 24 hours, was going to do closed venues. And then all of a sudden all of the universities say we can't house athletes by themselves on campuses that were shut down just in order to play in a tournament weeks down the way. So there goes the NCAA, Major League Soccer shuts down because [they] don't make any money on TV and make all of [their] money from the fans coming to the games.”

A sports betting fiscal year that Yaniv Sherman, head of commercial development for 888 Holdings, described as “formulated,” has essentially ended without the final flourish.

“We should have lapped the first year [in handle], probably at the end of the NBA playoffs,” Sherman said, referring to the $13 billion the American Gaming Association said was wagered in the U.S. in 2018. “That will be a good time to sort of look back. Right now, as we're looking at it, NBA has gone, back probably going in a limited fashion if it is back. March Madness is canceled. If you look back at the sports season right now, you're probably looking at the Super Bowl effectively being where it ended.”

And gaming companies need to hope they have alternatives, like licenses and platforms to offer online casino and poker, he said. Companies with multiple options will attempt to induce their sports bettors into their online casino or poker offerings if their state allows it.

Right now just Delaware, New Jersey, Nevada and Pennsylvania have some combination of online sports betting, and online casino or poker available to help offset revenue losses from casinos being closed. West Virginia and Michigan have legalized online casinos with target launch dates later this year.

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New Jersey Gov. Phil Murphy noted that online gaming continues to operate in his state when he issued a mandate Tuesday closing schools, restaurants and gyms.

“I don't think we've ever faced something like this, we being the gaming world, the sports world and entertainment, the world in general,” Sherman said, “both the cause and the effect.”

Value and Damage in the Global Sports Economy

Assessing the value of the global sports economy is difficult given the varying level of secrecy surrounding the financial particulars of various franchises in various leagues. Though NFL teams are known to be valued around $2 billion after the record $2.275-billion sale of the Carolina Panthers, their inner finances are secretively held except for the pinhole provided by the filings of the publicly-owned Green Bay Packers.

What is known, however, is the value of the media rights deals that are the lifeblood for league and team properties in an interconnected global sports market. A recent study estimated that the top seven professional leagues in the world would generate upwards of $85 billion in media rights value by 2024. That was, before a pandemic began shutting down the product that networks and streaming services were bidding to broadcast.

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“That's just the revenue that the leagues are earning and their member teams,” Matheson said. “That's not the sports bar that's across the street that is catering to fans. That's not the Barcelona jersey you buy at the Sports Authority or Dick’s, other than the $5 of that jersey that goes to Barcelona.

“This is just the money earned by the league and directly by its teams. That being said, we know that at least psychologically and sociologically, sports are way bigger than that because $85 billion isn't that much in the context of the world economy, which is more like $85 trillion.

I think we saw that on Wednesday night that for a huge number of people, for a huge number of people seeing the NBA shutdown was a this-shit-got-real moment.

Shutdown Sent Sportsbooks Scurrying

The global sports economy’s ceiling cracked on March 11 when the theoretical of playing games in fan-free arenas ceded to the reality that an NBA player, Utah Jazz center Rudy Gobert, was positive for COVID-19.

It got real very quickly for sportsbooks, which saw betting markets drop precipitously from their boards. By this week, in-game offerings had been reduced to the likes of Turkish soccer and Russian professional hockey, which shuttered its playoff for a week beginning on Monday. For a nascent American sports betting industry, with 16 states currently regulating and underway since the repeal of PASPA in May of 2018, this was a brutal blow. It was particularly cruel in Michigan and Illinois, which began accepting legal bets two days before the Jazz and Thunder were beckoned off the court before tip because of Gobert’s positive result.

“Obviously, it's gigantic for the sports betting industry. You can't have a sports betting industry if you don't have anything to bet on,” Matheson said. “This is a 100% loss of that revenue source. But I would point out this is an even bigger deal for casinos.”

Indeed, casinos have shut down either voluntarily or by governmental mandate nationally as recommendations from the Center for Disease Control and Prevention have reduced the acceptable size of communal gatherings from a thousand a week ago to ten or less by Tuesday. Casinos in the world’s largest gaming hub, Macau, were shut down for 15 days in February as the virus mushroomed in China. Wynn claimed upwards of $2.5 million in daily losses.

The American gaming industry is now seeking a government stimulus package including “capital structure support and working capital support through direct grant assistance, loan guarantees, or meaningful refundable tax credits that can free up operating capital today,” according to the American Gaming Association.

“In a matter of days, the U.S. casino industry went from a growing, thriving segment of the U.S. economy to a near standstill. We are witnessing a rapidly increasing number of our nation’s commercial and tribal casinos that have been shuttered, impacting 55% of all casino employees. This will have a dire effect in the communities in which we operate across 43 states,” AGA president Bill Miller said in a statement provided to “As state governments close casinos as a part of the urgent public health response to COVID-19, elected leaders should move just as urgently to support the workers and businesses who will bear the brunt of those effects. Our immediate priorities are actions that provide liquidity to allow us to support employees.”

The American casino industry generates $41.7 billion in annual revenue according to Spectrum Gaming.

Gaming Stocks Take A Big Hit

Stocks at gaming companies on U.S. markets have been lashed in record sell-offs and share price drops. With horse racing halted in the United Kingdom, tech giant GVC Holdings told shareholders its earnings before interest, tax depreciation and amoritization could fall by $184.6 million this year because of the postponement of European soccer through at least July and the cancellation of horse racing cards.

“The dominant sportsbooks are taking a significant hit. Some of them are shedding as much as 25% of their market cap, which is unprecedented for these companies,” Sherman told “Literally day-by-day we're looking at something and I think the ones that will be able to weather this will be the ones that are agile and built correctly. If they are tightly managed, if they're disciplined, they're making sure that they have business continuity and then you just need to make a lot of business decisions along the route, but it's all down to the people.”

Flutter Entertainment, which owns Paddy Power, BetFair and FanDuel, one of the dominant American operators, revised earning projections down by $136.7 million this week.

William Hill, with 53% of 2019 revenue derived from sports betting, has projected earnings down by at least $122 million.

"For casinos, the loss of their sports gambling book is probably pretty small compared to the loss and everything else,” Matheson observed. “I can't imagine that in the last week, we haven't seen a total collapse of in-person gambling at casinos. What a place to spread COVID-19.”

Which prevents gamblers from gambling, the industry from recovering and people from exercising their oddly innate desire to do something, however odd, to make things better in times of crisis.

“Back after 9/11, we had this horrific event happen and people are super-concerned about this leading to a really extended downturn because we were already in the middle of a recession,” Matheson recalled. “But [then-President] George W. Bush — and this amazes me because I never would have guessed this — was able to convince Americans that the patriotic thing to do is to go out and buy a new SUV and that'll stick it to Al Qaeda.

“We had the best month of auto sales ever, the October after 9/11. That really did serve to get the economy out of recession. Unfortunately, today, the patriotic thing that helps the economy is go out and help these businesses. But the patriotic thing to stop the virus is not.”

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The Stars Group, meanwhile, reported that it expected to weather COVID-19 despite hits to its sports betting brands as 62% of its overall revenue last year came from online poker and gaming.

“I think in the past and over the last year, what [these operators have] done is in the hiatus, which started pretty much at the end of the NBA finals and into August where the NFL picks back up, there is a lot of cross-sale, offer the sports bettors some gaming products,” Sherman said. “Here you have a much longer stretch.

“For us, in the short term, it could be an opportunity because we're heavily skewed toward gaming and we're very proficient in that regard. But longer term, sports is our fastest-growing vertical.

“Sports has gotten to be so big. I don't see anyone escaping its effect. If you had sports-only operators — and there are a few in the market that don't have a gaming proposition — they're screwed, very hard.”

COVID-19 Outbreak Makes For Bleak Middle of Betting Season

Another crushing aspect of the COVID-19 pandemic for sportsbooks is the timing. Revenues from the largest single-day betting event of the year — the Super Bowl — were harvested in February and lost will be the largest betting market of the calendar, March Madness. And after that, the long fallow period before the imperative NFL season begins again.

But what if the NFL doesn’t begin playing games in August?

“We are assuming football starts,” Matheson warned. “I don't want to be pessimistic here, but a lot of people are talking like, 'Once you get to July, everything should be fine.' Until we are sure that we can stamp this out completely, we aren't fine.

“We aren't guaranteed to be able to stamp this out completely until we have a vaccine. And that's not this fall. That's a year from fall. So that's a little scary.”

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Brant James

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