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Sportsbooks, TV station groups eye wagering opportunities in Maryland, Ohio

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According to Market Intelligence, December 2022

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Sportsbooks, TV station groups eye wagering opportunities in Maryland, Ohio

While California voters dashed the hopes of TV station groups and other media outlets hoping to reap advertising dollars from legalized sports betting in the Golden State, the industry is taking some solace from sports betting launches set for elsewhere.

Mobile online sports betting is newly legal in Maryland as of Nov. 23, nearly a year after sports betting became legal in that state. Ohio is set to allow legal sports betting operations starting Jan. 1, 2023. The American Gaming Association estimates that 90% of sports wagers are made online.

The Maryland and Ohio launches follow a Nov. 8 election in which California voters soundly rejected two propositions that would have opened the door to sports betting in the most populous U.S. state.

"We would have preferred the sports betting ballot to pass in California, but we have Maryland" and soon Ohio, said Steve Lanzano, president and CEO of the Television Bureau Of Advertising Inc., a trade organization for the local U.S. broadcast TV industry.

Simplebet CEO Chris Bevilacqua said new state launches require significant amounts of marketing spend, with customer acquisition expenditures often in the $800-$900 range. Simplebet is a business-to-business development company that uses machine learning to drive real-time microbets for sportsbook operators.

With sports betting adoption delayed for at least another year or two in California and Texas, operators can better rationalize their cost structures and push toward profitability in states where they are already established, Bevilacqua said.

Launch support will be welcome news to TV station operators and other media outlets in Maryland and Ohio. Sports betting's rise came at a propitious time amid pandemic and supply-chain issues that have stalled ad spending by car dealers and manufacturers, which historically have comprised TV stations' top ad category.

Spending has shifted as the sports betting market matures. Sinclair Broadcast Group Inc. COO Rob Weisbord said Nov. 2 that some ad budgets are now being directed to national outlets and regional sports networks, like the Bally Sports-branded channels operated by the company's Diamond Sports Group LLC subsidiary. The shift reflects the fact that sports betting is now available in more than half of the country, meaning ad buys no longer need to be as narrowly targeted.

Some media groups are also cycling through tough comparisons as state-by-state launches slow.

Brian Lawlor, president of local media at The E.W. Scripps Co., said on the company's Nov. 8 third-quarter earnings call that ad spending in the gambling category was down more than 50% year over year.

At Nexstar Media Group Inc., the sports betting and gaming category sustained a third-quarter decline in the mid-single-digit millions year over year, which executives attributed to fewer states launching operations. COO Tom Carter also pointed to a general movement by larger sports betting operators to place their ad dollars nationally while reducing spending in more established markets.

Charles Gillespie, CEO of Gambling.com Group Ltd., a provider of digital marketing services for the global, regulated online gambling industry, said money is being allocated to national outlets and performance marketers can also more pointedly drive customer acquisition.

Operators are looking to buy players from gambling.com, which receives a conversion fee from the sportsbooks after customers sign up, deposit and then wager. Gillespie said the platform allows operators to better maximize and identify their return on investment, as opposed to spending $100,000 on a TV campaign that might yield $50,000 or $150,000 worth of customer bets. It is just more difficult for sportsbooks to assess the yield from traditional TV ad spending, Gillespie said.

Maryland moves

Sports betting is available in Maryland through five casinos and at four off-track betting outlets, according to a spokesman for the state's lottery and gaming oversight agency. Sports betting revenues are taxed at 15% in the state, with proceeds supporting public education.

As for mobile betting, the state's Sports Wagering Application Review Commission, or SWARC, has approved 10 companies, including leading sportsbook operators DraftKings Inc. and FanDuel Inc. for licenses. Three local entities indicated they will not be ready when sports betting bows Nov. 23.

The state agency spokesman said another 11 companies are in various stages of the application and review processes.

According to estimates from SWARC, the 10 licensed mobile sports betting operators are expected to allocate $131.8 million in marketing support behind their businesses in 2023, with the outlays tapering off to just under $96 million in 2027.

Baltimore is Maryland's largest TV market. Its Big Four stations are WMAR, the ABC (US) affiliate owned by E.W Scripps; WBAL, the NBC (US) affiliate owned by Hearst Television Inc.; CBS (US) affiliate WJZ, owned by Paramount Global; and Sinclair's FOX (US) affiliate WBFF. Sinclair and other groups also operate stations in such markets as Salisbury and Washington, D.C./Hagerstown, Md.

Maryland's Nov. 23 mobile-betting launch is well timed for a robust sports calendar, highlighted by an NFL tripleheader on Thanksgiving, the FIFA World Cup still underway and a key college football matchup Nov. 26 between Ohio State and Michigan.

Ohio update

An Ohio Casino Control Commission spokesperson said the state has 25 mobile sports betting licensees, of which 16 have already received conditional approval. A "good chunk" of the other nine will gain such approbation at an upcoming meeting.

The state is also granting licenses for sports betting windows and terminals at brick-and-mortar outlets, like restaurants and bars and at kiosks housing more limited wagering at retail outlets, including grocery stores.

The spokesperson said licensees as of Dec. 2 must signify interest in having their equipment and systems checked and reviewed by year-end to meet state requirements to debut on New Year's Day.

Ohio sports betting revenues will be taxed at 10%, with most of the proceeds earmarked to benefit extracurricular activities at private and public schools. Other funds will be allocated to veteran initiatives and to underwrite programs for problem gamblers.

TV marketing and preregistering of betting accounts are underway in the state, according to the commission spokesperson.

California dreaming

In California, the defeated Proposition 26 would have allowed for more gaming activity and online-mobile sports betting at Native American casinos; the rejected Proposition 27, which was backed by major sports betting operators, would have permitted online and mobile sports betting across California. The measures' defeats keep the door closed to sports betting in the state — for now.

"Californians obviously drew the line and certainly didn't cover the point spread," said Steve Passwaiter, vice president and general manager for North America at Kantar Media Intelligences Inc.

Kantar estimates that some $380 million in advertising was spent on ballot measures in the state during the 2022 midterm election cycle, with the vast majority related to sports betting propositions.

The ballot failures in California were "a spectacular mess-up," said Gambling.com's Gillespie, who believes that the operators that supported Proposition 27 should have promoted it with better and more direct messaging.

"'Would you like to bet on the [Los Angeles] Rams game on your mobile phone?' That might have worked a little better," Gillespie said.

Gillespie expects that if the operators and tribes do not reach an accord to work together, a ballot initiative backed by different messaging will resurface in 2024.

Kantar's Passwaiter also believes that both sides will look to collaborate. But even if not, the operators are not going to give up.

"They will change tactics," Passwaiter said. "This is not going away."