Does Betting Harm The Perception Of Sport?

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Is betting bad for sport? Does the shadow of match fixing harm the perception of sporting leagues? Today on the blog Andrew takes a look at the current debate over the legalisation of sports betting in New Jersey and whether or not it will in fact harm the reputation of North American sports leagues.

TimDonaghy

Despite the muttered protests of curmudgeons ('purists'?), betting has quickly become a natural part of the sporting landscape. It is difficult now to listen to, read about, watch on television or attend any kind of sporting contest without the betting odds for said event being referred to at some point, if not repeatedly. For some this is experienced as part of the perpetual undermining of everything that was once noble in sport, for them, reducing the sporting field to a mere roulette wheel.

The major sporting leagues of North America (the NCAA, NBA, NFL, NHL and MLB) are currently engaged in legal battle with the state of New Jersey over a law passed in the U.S summer of 2012. The law would have seen sports betting legalised in the state starting January of 2013, permitting sports betting at casinos and racetracks within the state. This would make New Jersey the fifth state in the U.S to offer legal sports betting (with Nevada, Oregon, Montana and Delaware) and the first since the national ban on sports betting was put into law in 1992, a law that New Jersey claims is an unconstitutional infringement on state's rights.

Unfortunately for New Jersey, a state that could well do with some additional income, the major sporting leagues, (referred to as 'The Leagues') have chosen to block the legalisation of sports betting and sue the state of New Jersey on the grounds that sports betting will 'harm' the image of their leagues. On December 21st of last year, Judge Michael Shipp ruled that the Leagues had “demonstrated...that state sanctioned gambling will adversely impact how the Leagues are perceived by those who can affect their future, specifically their fans.”

In order to “demonstrate” this, the Leagues made use of a number of internal studies conducted by both the NCAA and the NBA. The court recognised that although the surveys alone did not “constitute a direct causal link between legalised gambling and negative issues of perception on the part of (fans).” it did accept that legalised sports betting would increase the total number of gamblers betting on games which would increase the negative perception of the league amongst its fans due to the increased potential for match-fixing.

Burkhart and Welsh

Last month, two third-year students at Saint Louis University School of Law and Co-Presidents of the Sports and Entertainment Law Association Nicholas Burkhart and Dylan Welsh wrote a paper entitled The Legalisation Of Sports Gambling: An Irreparable Harm Or The Beginning Of Unprecedented Growth. In the paper Burkhart and Welsh describe the surveys presented by the Leagues as “anything but convincing”stating that:

"There are serious questions as to whether the surveys offered by the Leagues demonstrate reputational injury amounting to real and immediate harm."

The first of these surveys is the 2007 NBA Las Vegas/Gambling survey. The survey attempts to quantify the willingness of fans to spend money on tickets or merchandise if a NBA team moved to Las Vegas. Burkhart and Welsh point out that the results of the survey are mere conjecture, that although the respondents are indeed “real”, the survey only measures perceived willingness to spend money, not actual spending.

The second survey was the 2009 NBA Integrity Survey. This survey asked NBA fans if they considered match-fixing as problematic. Although 33% of respondents did perceive match-fixing as indeed problematic, it failed to ask respondents if they perceived a link between match-fixing and legalised sports betting.

The Donaghy Scandal, Irreparable Harm And League Prosperity

Burkhart and Welsh make particular emphasis of the Donaghy Scandal and the League's opportunity to establish a direct link between 'harm' to a major sports league, in this case the NBA, and sports betting. The scandal which saw former NBA referee Tim Donaghy sentenced to 15 months in prison in 2007 on two felony counts related to taking bribes from gamblers and betting on games himself, should have provided the Leagues with the perfect example of how sports betting can injure the perception and ultimately the profitability of a league, particularly since in 2011 during labour negotiations NBA Commissioner David Stern stated that 22 of the 30 NBA franchises “were showing losses of more than $300 million collectively a year.” As Burkhart and Welsh point out:

“The Leagues instead turned to internal polling in an attempt to establish a causal link between legalised gambling and harm, relying on a hypothetical franchise move to Las Vegas, a city with legalised gambling.”

Could the Leagues have successfully argued that the Donaghy Scandal directly harmed the NBA? As Burkhart and Welsh suggest, despite a nation-wide increase in sports betting, NBA profits have continued to increase. The lone independent estimate of NBA revenues was conducted by Forbes and Financial World, which suggests that “while independent estimates of ticket revenue may be low, league revenues grew following the Donaghy Scandal in the summer of 2007.”

Diminishing Attendance?

Did fans stop attending NBA games following the Donaghy scandal? Burkhart and Welsh point out that although NBA attendance has diminished by a total of 3% since 2007, there is nothing to suggest this was a result of the Donaghy scandal, stating that the “decline may not be attributable to the Donaghy scandal, but instead the reflection of fans having less money to spend on tickets and better alternatives for viewing games via high definition television and streaming on both computers and mobile devices.”

In fact, it's very likely that a number of sports leagues around the world saw similar decreases through this period of financial instability and further, it could be easily demonstrated that a drop off in actual attendance could be reflected in an increase in television ratings and fans viewing games online.

Franchise Values?

What of the value of individual NBA teams? At the time of the Donaghy scandal NBA franchise values actually increased. As Burkhart and Welsh write: “Between January 2007 and December 2008, the average franchise value increased more than 7 percent.” That figure however pales in comparison to numbers presented by Forbes in 2013, showing that since 2007, the value of the average NBA franchise has risen by 44%.

Hardly evidence of any 'harm' irreparable or otherwise, inflicted by the Donaghy scandal.

TV ratings?

How about television ratings? Burkhart and Welsh point out that just as details of the Donaghy scandal were coming to light, the NBA was extending its television contract with broadcasters ABC, ESPN and TNT through to the end of the 2015-2016 season. This deal saw an annual increase in revenue for the NBA of $163 million or 21%. And when it comes to actual ratings, the NBA is hardly struggling.

As Burkhart and Welsh state: “The 2010-2011 season was the highest rated season ever for TNT, whose ratings increased by 45%, ABC, whose ratings increased by 30%, and ESPN whose ratings were up 29%.” and this is not even to mention the ever increasing online viewership.

Changing Perceptions Of Sports Betting

Are people today really that bothered by sports betting? Burkhart and Welsh cite a 2008 Gallup Poll stating that 17% of Americans will have placed a bet on a sporting event at some stage in the previous 12 months and that nearly a quarter of men gambled on sports. Further figures were cited suggesting that “the number of (survey) respondents who disfavour legalised gambling because it 'can corrupt sports' fell from 47% to 37%.”

Burkhart and Welsh then consider the rapid popularity of fantasy sports. In his Declaration in Support of Plaintiff's Motion, NBA Commissioner claimed that if sports betting were legalised in New Jersey “the allegiance of certain fans will be turned from teams, players and high-level competition, toward an interest first and foremost in winning a bet.” As the authors state:

“In essence, the League argues that an increase in gambling as a result of the Sports Wagering Law will turn “fans” into “gamblers” who cheer only for players, teams and bets, rather than their home town favourite, resulting in irreparable harm to the League.”

The 'harm' will be the result of a diminished “bond” between the fans and their team. This however is exactly the nature of fantasy sports, a pursuit followed by millions across the world, a pursuit even promoted and endorsed by the NBA itself.

Concluding Remarks

The reality is that people have been gambling on sports for years. In the same way that both alcohol and nicotine are rarely referred to as “drugs”due to their legal status, football tipping, office pools and fantasy sports competitions are likewise gambling. James Surowiecki has cited a study estimating that each year $300 billion dollars is bet on sports in the U.S. Can you guess how much of that $300 billion is bet legally? Less than $3 billion dollars. Not even 1%. Surely if the major sporting leagues of the U.S were really interested in protecting their reputations and the harm that could actually come as a result of a major betting scandal, they would be wiser to legalise and regulate sports betting. Only in doing so can they seriously combat the match fixers.

This is not to say that the legalisation of sports betting in the U.S will deny any opportunity for matches to be fixed. As we have seen in recent years across the football fields of Europe, there is and will always be the prospect of match-fixing. But if as David Stern appeals, that a betting scandal is the worst thing that can happen to a sport, then why not regulate sports betting and diminish the prospect?

Notwithstanding the fragile sensibility of the purist, the reality is, betting generates much of the interest in sport. Perhaps it's a coincidence that the rapid rise in sports betting around the world, both legal and illegal has occurred at the same time as TV ratings for sporting events has likewise boomed. Perhaps it is just a coincidence, but the reality is that many of us have watched sporting events simply because we either have a betting interest or a fantasy sports interest. Without betting just how much interest would there be in the Premier League, or La Liga, for the most part, seasonal processions of the footballs financial elite.

The major sporting leagues of the U.S may wish to deny this, but they are kidding themselves. Without sports betting, their popularity would be severely diminished. The reality is, the absence of sports betting would do more harm to their bottom line, than its regulated presence.

 

 

Follow Andrew on Twitter: @bexpertblog

bettingexpert blog editor. Always taking the alternative route to finding the value.