FBS Power conferences generate millions of dollars each year from the sale of their broadcasting rights to national and cable networks. The size of these contracts have risen sharply over time and represent massive guaranteed revenue streams which help fund the operation of programs, coaching salaries, and the construction and renovation of facilities.
To illustrate the size of these contracts, let’s take the SEC as an example. In the most recent fiscal year, the conference reported $420M in revenue from the sale of its broadcasting rights. This is roughly $30M for each SEC program and represents approximately 30% of total annual revenues for the low-end SEC revenue generators and 15-20% for the high-end revenue programs. It is clear that consumer interest in elite college sport is strong and television revenues are vital to the manner in which athletic departments currently function.
One component of consumer demand that has long been disregarded by the mainstream is the interest that stems directly from the sports betting market. The link between betting market interest and television viewership has been hypothesized for decades, but because sports gambling is largely illegal and widely considered taboo in the United States, professional leagues and the NCAA have openly opposed its presence.
This has left the nature of the link between sports gambling and television viewership to perception and anecdotal evidence. Recently however, my co-authors and I published two peer-reviewed articles which 1) verify that there is a statistically significant relationship between the college football betting market and television viewership and 2) produce estimates of the size of this relationship. In other words, we find that uncertainty in betting market outcomes is directly related to size of television viewership audiences and the magnitude of the effects are substantial.
In a paper I wrote with Scott Tainsky (now in the Mike Ilitch School of Business at Wayne State University), we illustrate that local market television ratings are sensitive to the point spread outcomes of Pac-10 (now Pac-12) games. We made the decision to focus on games that were not anticipated to be close, nor in actuality were close, in order to eliminate match-ups where the actual outcome of the contest would drive viewership interest.
We find ratings are significantly higher in contests where late in the game the actual scoring margin moves closer to the point spread. More specifically, if a fourth quarter touchdown moves the scoring margin closer to the point spread (i.e. – USC was favored over Oregon State by 21 and Oregon State scores a touchdown to cut the USC lead to 44-21), local market ratings, on average, increase by approximately 30% of the full-game rating.
In a second paper written with graduate student Katie M. Brown, we again show that viewership is strongly associated with the point spread outcomes of contests – this time using national viewership figures. We find a viewership increase of approximately 78,000 viewers when a seven point scoring change moves the game’s actual scoring differential closer to the pre-game point spread.
We also repeat the process after varying the sample of games analyzed based on both absolute and relative quality. The results are robust to these alternative approaches, which indicates that consumer interest in betting market outcomes is not just associated with select sub-samples of match-ups.
Both papers produce strong evidence that uncertainty relative to point spread market outcomes is directly tied to television viewership. This indicates not only that the offshore sports betting market is easily accessible to American customers, but also that this wagering market interest is directly translating to viewership – which unequivocally impacts the finances of both television networks and athletic departments.
These results provide empirical support that conferences and athletic departments are benefiting from consumer availability to gamble on college football. While conferences and athletic departments do not directly collect revenues from this market, they instead indirectly receive them from the sale of broadcasting rights – a product that sees its value elevated due to the demand for sports wagering and the subsequent consumer interest in viewing the outcomes of these wagers in real time.
What may be less obvious is that the betting market serves as a form of insurance for both networks, conferences and its member institutions. We know people watch games for a myriad of reasons – they could be a pure fan of the game, they could have an allegiance for or against a specific school, they could enjoy watching upsets, they may prefer games with uncertain outcomes, or they might be interested in a game because they have a wager on it.
Our results show that even when the actual outcome of a contest has already been decided, consumers remained tuned-in to games to view outcomes with respect to the betting market. This is particularly important in college football due to the fact that there is so much same-sport substitute programming on any given regular season Saturday. By my calculations, someone that has DirecTV and purchases the regional sports channel package usually has 17 different live college football viewing options at the 3:30pm EST start time window.
The ability to wager on a contest may keep a particular set of viewers tuned into a given game (or given network) when an otherwise uncompetitive game may facilitate them changing the channel or using their time in another manner.
Despite this, the NCAA has long taken a stance against sports gambling and any movement associated with its legalization. The organization has refrained from hosting championship events in Nevada as it is the only state legally authorized to offer single-game sports betting. It has taken an even stronger position against New Jersey by disallowing it from hosting major NCAA events and also serving as a plaintiff in a case against the state as it seeks to obtain US Supreme Court approval to offer legalized sports wagering.
This stance is particularly interesting given that it appears the legalization of sports betting is gaining public support. At current count, there are over ten states which are in the process of introducing legislation that would legalize sports wagering. This is in line with increasing media coverage of the industry.
ESPN is a notable example of this movement as the network introduced “ESPN Chalk” – a portion of the main website devoted to information, data and analysis related to sports betting. The network has also reinvented its late night SportsCenter slot around Scott Van Pelt and made a concerted effort to include a sizable dose of sports wagering content.
The positioning of the NCAA is also intriguing considering there should be at least mild concern at the individual university level surrounding recent trends in college football attendance. If attendance related revenues drop moving forward, athletic department administrators will certainly look to make up those lost revenues in other areas. One would expect that preserving the currently strong television viewership numbers – and the revenues they generate – would be at the top of the list.
This raises the question of whether the sports wagering market could be a source of new revenues in the future. The existing evidence shows a significant effect on viewership in an environment where single-game sports wagering is illegal in all but Nevada. It’s reasonable to expect that improved access to legal sports wagering would at the very least help maintain consumer interest in college football. More than likely though, it would increase consumer interest as additional avenues in which the consumer could stay engaged with the product would become available.
Though we shouldn’t hold our breath expecting NCAA or conference administrators to confirm the financial benefits indirectly stemming from the college football wagering market, it is clear that fans of the sport are interested in wagering. They are also interested in viewing the outcomes of those wagers live on television. It will be interesting to see whether key stakeholders in these two industries are able to form working relationships in the future or whether they continue to travel on their separate paths, only to “indirectly” influence the financial status of each other.