Last year U.S. online sports betting broke all records. 2022 also saw five states launch online sports betting, including New York, bringing the number of States who have legalized its use to 26. Ethical considerations aside, should publishers now embrace sports betting firms? Adam Fiske, the CEO and Co-Founder of Cipher Sports Technology Group weighs up the pros and cons.
Ever since the Supreme Court struck down a ban on sports betting in 2018, the U.S. betting market has expanded at a rapid rate. Some 26 states in the U.S. have legalized online sports betting and, with more than $80 billion being wagered on mobile sports betting alone in 2022, it’s easy to see why publishers are interested in the revenue possibilities.
For online publishers, this market expansion has opened new revenue opportunities through affiliate partnership deals with sports operators. That said, this can be a tricky market to navigate for publishers who are new to it. Also, there may be ethical considerations about promoting gambling practices to their audience.
How should publishers respond to these affiliate partnership offers? Are they worth it? And what even represents a good deal?
Working with betting operators
With each passing year, the relationship between sports publishers and betting operators has become increasingly close as more publishers recognize the potential revenue gains from partnership deals.
For example, in July 2022, Gannett, the largest mass media publisher in the United States, signed a five-year partnership with European sportsbook Tipico, in a deal worth $90 million in fixed cash. By the terms of the deal, Gannett gained the ability to earn affiliate revenue on new betting customers that it sends to Tipico, as well as the opportunity to own up to 4.9 percent of Tipico stock based on a variety of performance goals. In return, Gannett will provide Tipico with access to its 250 local sports markets and its 50 million monthly visitors through branded columns, newsletters, blogs, and other sports media coverage.
While certainly one of the largest deals of late, Gannett is far from the only publisher that has jumped into the sports betting game. Other big players include Fox Corporation, which acquired 18.6 percent of betting operator FanDuel in November 2022. ESPN is on the verge of signing a licensing agreement with DraftKings, a deal that could be worth as much as $3 billion. On a slightly smaller scale, Boston Globe Media just wrapped up a revenue-sharing partnership with European sports betting operator Better Collective.
Tough times for publishers
The last decade has been difficult for the news industry as declines in print readership and revenue have forced the closure of many newspapers. Digital news media are also facing challenges, as competition for viewers remains stiff, leaving many publications with little choice but to lean more heavily on partnerships and revenue sharing to keep their books out of the red.
Partnering with a sports betting operator can help ameliorate these revenue challenges by providing a passive form of income. At the same time, entering the betting market can be seen as a natural extension of a publication’s sports coverage, one that allows for greater engagement with their audience through live interactive data on betting odds. That said, this approach also needs to be balanced with transparency with the audience on how affiliate partnerships work, and perhaps even content on safe betting practices.
As for betting operators, they need these affiliate partnerships to draw in new customers and expand their market reach. Over time, the current growth rates in the betting market will level off, leading to a shift in marketing efforts from acquisition to retention as betting operators try to extend the lifetime value of each customer. By partnering with a publisher that understands its viewership, betting operators are more likely to develop retention strategies that are mutually advantageous.
Choosing an affiliate
Setting up an affiliate partnership is relatively simple. What’s not so simple is choosing from the growing number of betting operators that offer such partnerships. Fortunately, publications can narrow down their search by focusing on a few key indicators: good reputation, successful case studies, and demonstrated growth potential.
But perhaps the most important indicator to consider when choosing an affiliate partner is their commission structure. Today, most affiliate deals are moving away from the cost-per-acquisition model, which pays a fixed commission to the publisher for each customer that clicks through to the betting operator. This model has worked well with audiences with a high propensity for sports betting, but it has worked poorly with more general audiences.
For example, someone who isn’t a regular bettor may be enticed to make use of a first-time offer that provides no-risk bets up to a certain amount, say, $100. But they are less likely to continue placing bets once they’ve used up their $100 worth of credits, which is often the threshold for triggering a commission payout. Instead, betting operators are now looking into other payment models, such as revenue shares or flat fees.
Meanwhile, publishers are looking for deals that can offer them more guarantees on how payouts are triggered. For example, a 10 percent commission for every $50 that a customer wagers after their free credits are used up.
In all likelihood, a revenue-sharing model based on the individual value each customer brings to the betting operator will become the industry norm as the market begins to cool and stabilize. This is good news for publishers as it will incentivize them to develop more effective retention strategies that will lead to long-term growth.
Even though the U.S. sports betting industry is in its infancy, with many of the most populous states such as Florida and California still on the fence about legalization, there is still momentum for further market growth in 2023.
That said, publishers do need to weigh their options carefully in choosing a reputable affiliate partner that has proven expertise and can offer a commission structure that suits their needs and audience. All these features can help you succeed and even thrive in this challenging but potentially lucrative market space.
CEO and Co-Founder of Cipher Sports Technology Group and Dimers
Cipher Sports Technology Group creates true value for its partners by increasing trust, engagement, retention, and turnover through cutting-edge opportunities and integrations, available via effective and quick-to-market API and custom solutions.