Advertising and Sports Betting: It’s Not Done Till It’s Overdone

Threatening the sports betting operators with consequences if they don’t reduce the number of ads they run doesn’t work. Raising the price of advertising will. Let’s see fewer ads featuring JB Smoove.

Advertising and Sports Betting: It’s Not Done Till It’s Overdone

“If the people don’t want to come out to the ballpark, nobody’s going to stop them.—Yogi Berra

There seems to be a lot of discussion of late about the advertising surrounding gambling, especially involving ads on television. One of my favorite comments to make in Pennsylvania is that a series of gambling ads was recently interrupted by an effort to broadcast the evening news.

While there are certainly some interesting nuances to this, such as the apparent target market for these ads being fascinated by boobs and cleavage, hulking male figures, or some curious definition of masculinity as embodied in an apparent bro’ code of betting—the bigger issue appears to be the incredible frequency of these ads.

The amount of gambling advertising taking place across the American airwaves is celebrated once a quarter with the ritualistic staged drama in financial markets of the “Announcement of Earnings.” In today’s gambling environment, this would be better described as: “Quarterly Notice of the Incineration of an Amazing Amount of Cash.”

This incredible incineration of cash, in part fueled by a massive media buy for television, seems to be based on a religion that suggests that whoever wins the market share battles of today will be the winner of the market share battles of tomorrow, albeit without the need to incinerate massive amounts of cash in the future.

What I find interesting about all of this is that many people suggest there has been a substantial expansion of gambling in the United States. I think this is the secondary story. The primary story is that there has been a substantial expansion of gambling advertising in the United States and that expansion has really outpaced the expansion of gambling—in spades. This could be troublesome in the sense that over the years the public has generally been more comfortable with an expansion of gambling coming in gentle streams. Right now, it appears that it is coming at the public as if it is being delivered through a fire hose.

This firehose perception can be of concern to both the politicians and the regulators because, well, people don’t like to be fed by a firehose—especially when the product is gambling. It, therefore, becomes important for the politicians and regulators to start talking about this, knowing full well that talking about it will not slow down the advertising. It will, however, provide the regulators and politicians with cover by allowing them to suggest they are doing something about it. Perception often trumps reality in government and regulation.

The reason why just talking about it will not work goes back to the religion I mentioned earlier, and that is the apparent belief that the kings of the mountain in the betting world’s future will be the companies that buy the largest market share now—and television advertising is a leading tactic to buy market share. By extension, this seems to cause market participants to believe that stopping advertising now is a death sentence towards the goal of market domination, so the operators will not stop advertising.

What the regulators seem to be suggesting is like walking into a huge fistfight and saying that the participants should only punch with their left hands. The people who would listen to the regulator would be the first to get their asses beat in this brawl, and what we are seeing in sports betting advertising is a brawl. Think of it as a game theory exercise where if a person blinks, they lose, and the regulators are suggesting they all need to blink.

What becomes troublesome with all of this is the politicians and regulators will soon understand that using the bully pulpit to jawbone the industry into advertising less will not work. What will happen is that there will be fewer operators advertising because not all operators have enough folks handing them bales of cash to incinerate, thus they will disappear in the crush of this curious cash-incinerating competition. A likely outcome is fewer firms advertising more, continuing to leave us in the current status of advertising over-saturation.

The regulators and politicians will also want to keep the fact that they encouraged this activity by allowing cost offsets and deductions for these ads and other promotions well out of the public’s view. If transparency and disclosure were things that politicians cared about, many states would have disclosures on ads explaining that the operator benefited from the tax and accounting policies the states opted to incorporate because the operators gave them massive political contributions and hired great lobbyists.

My guess is this whole jawboning phase will have a short shelf-life. This will then run the risk of the U.S. regulators falling into the trap that their UK brethren did and they too will start more actively managing the advertising. Oh, and the only people who believe that anything good can come from regulators and politicians trying to manage advertisements are the regulators and politicians. The rest of the population knows better. They will screw this up beyond all recognition. Again, see the UK.

A characteristic of gaming regulation in the U.S. is that people who know little about gambling and have never worked within the industry are picked to regulate it. Fortunately, for important things like medicine and bridge building, this is not the case. But in gambling, knowing nothing about the subject matter does not disqualify either the regulator or politician from acting like an expert.

Moreover, most of the people who regulate gambling know little about markets, and the discipline of economics is full of stories of where well-intended people trying to interfere with market practices and exacerbating an issue into a problem—and exacerbating a problem into a disaster. Markets actually work, and some people do not appear to understand this—especially, it seems, regulators and politicians.

Back in the days of heavy cigarette usage, the best way to cause people to smoke less was not to talk to them about it but to materially raise the price of the activity. There have been analyses after analyses suggesting that as the price of cigarettes is increased, cigarette usage decreases. Well, to our rocket-scientist regulators and politicians, if you want to cut down on advertising, charge operators to do it. Stop all subsidies and deductions for the advertising of gambling. Moreover, attach a progressive surtax to gambling ads. In other words, the more you spend on advertising, the more you have to give to the government.

Now most politicians will see this as a brilliant idea, for now, not only will the gaming operators contribute more to the politicians to stop this tax, but so too will the suppliers of media products. Damn, the politicians can double their sources of political contributions. This will then probably work to ensure that the politicians, with their campaign coffers not only filled with gambling operators’ money but also contributions from media companies, will do absolutely nothing.

If by chance, however, there is a true desire to cut down on advertising, a market solution will work. Just make it very expensive to advertise. This also may have the side effects of raising money for public works and making markets more competitive by not rewarding the firm with the most cash to incinerate, but rather the operator with the best product.


Articles by Author: Richard Schuetz

Richard Schuetz started dealing blackjack for Bill Harrah 47 years ago, and has traveled the world as a casino executive, educator and regulator. He is sincerely appreciative of the help he received from his friends and colleagues throughout the gaming world in developing this article, understanding that any and all errors are his own.