College Football Cancellations Would Impact But Not Devastate Betting Industry

Posted on August 14, 2020 - Last Updated on September 1, 2020

The lines began disappearing from American sportsbooks the day before Big Ten and Pac-12 leaders heeded the advice of medical advisors and canceled their 2020 football seasons on Tuesday, Aug. 11.

National championship futures had begun vanishing from other betting establishments in the hours before athletics directors and university presidents from the Big 12 Conference — a crucial third member of the so-called “Power 5″ that seeds the college football playoffs — conducted a teleconference to decide their course. The remaining two Power 5 members, the Southeastern and Atlantic Coast conferences, would reportedly be unable to forge ahead with their leaders’ stated goal of playing, with most of their fellow power brokers sidelined until the spring at best.

And sportsbooks wouldn’t rightly be able to post championship odds with highly ranked preseason darlings Ohio State and Penn State (Big Ten) and Oregon (Pac-12) out of the equation, even though Clemson (ACC) and a score of SEC schools including Alabama, LSU and Georgia were being marched toward September kickoffs by obstinate administrators.

Sports betting industry assesses impact, awaits more developments

Ultimately, the Big 12 opted to continue forward. For now. But even with the Big Ten, Pac-12, Mid-American and Mountain West as the only football bowl subdivision conferences to cancel fall play so far, 53 of the 130 schools in the nation’s top echelon will be out of the mix for fans and sports bettors alike.

With numerous questions yet unanswered as to how schools can conduct sufficient testing and mitigate the new health concerns that have been discovered for young, healthy athletes, there is no assurance that any of the 130 will make it to a sunny Saturday afternoon in roughly a month. Maybe there will be football in the spring. Maybe not. Some college football players are lobbying hard to play. Others are sparring with the president of the United States on Twitter.

The financial impacts of a lost season are stark for Power 5 schools. 

The temblors suggesting how it would affect the sports betting industry were felt before anything even happened, from sportsbooks pulling back offerings and sportsbook operators suffering sharp setbacks on the stock market. A complete shutdown would reach deep into an American psyche groping for a little normalcy, but for those with a financial stake. This includes many of the states that legalized sports betting in the last 27 months since the repeal of the Professional and Amateur Sports Protection Act.

Sportsbook operators will activate contingency plans, as has been their new normal since the NCAA Tournament, Major League Baseball spring training and the final games of the NBA and NHL season crashed down within days of each other in mid-March. And this time, it might not be as bad.

In the spring, it was about leaning into unproven and unfamiliar sports betting markets like table tennis or exotic professional soccer leagues, or eSports. With the NBA and NHL undertaking playoffs in sequestration, MLB muddling through in- and outside the security of “bubbles” and the NFL now in camp, bettors and those who offer the bets at least have the “Big Four” back for now.

Sportsbooks now experienced at finding alternatives to favorites

PointsBet Vice President of Customer and Insights Ron Shell told PlayUSA that his company game-planned these scenarios long ago.

“We’re all massive fans of the sport, and we’d all love to see a college football season. Of course, it would be better to have college football than not,” he said. “But for the students, their health and safety is paramount, and we completely understand that. 

“And to be honest, this whole situation around COVID has led to a lot of planning, contingency planning. We’ve planned that there might not be college football in 2020 or college sports in general back when we were doing all that planning in the last few months.”

Shell said that PointsBet could repost college football lines in the weeks before games are scheduled to be played in late September, because there’s still a lot to figure out.

“Our customers obviously want to know what’s happening with their futures, and in a completely revamped season, all bets will be returned, and we’re just waiting and seeing. We want to see what the full picture is, especially from the Power 5 conferences,” Shell said. “And we’ll be happy to go back up [with lines], but until then, you’re not going to attract much betting attention because of the uncertainty anyway, so we have taken that down to avoid a poor customer experience.

“What we’ve learned as well, from the major leagues returning, even the couple weeks before the NBA bubble, for example, there were different people, athletes testing positive or deciding to opt out. And that makes a major difference on the odds and the line. For us, it’s waiting until we have that comfortable sort of certainty that we can put up the prices that our quant team can help us come up with from what we’ve learned with the NBA bubble, the MLB return and just how things can change in 24, 48 hours.

“I think that’s going to be the way of the future.”

While college football fans and alums might be left to lament a lost autumn, insiders say the betting industry should overcome its latest setback.

How loss of college sports would impact legal sportsbooks

College football betting composes about 12% of national sports betting revenue, according to industry analyst Eilers & Krejcik Gaming

Nevada Gaming Control Board Senior Research Analyst Michael Lawson told the Las Vegas Review-Journal that “we have been told anecdotally that college football wagers account for approximately 40% of total football write.” That would constitute roughly a $50 million loss in profits for Nevada sportsbooks, the Review-Journal calculated.

Volume fluctuates by market, stoked in the young but expanding legal American market by the local interest in state schools, College of Holy Cross economics professor and gambling industry expert Victor Matheson said. Therefore, impact varies.

“So even if college football [handle] isn’t huge nationwide, if you start to open up sports betting in places like Alabama, you could imagine college football being a much bigger draw there than the old casino books at Vegas,” he told PlayUSA.

Football composes most of the yearly handle in Mississippi, where two SEC schools are located, but the National Football League and college handles are reported as a combined total. Sports betting is not legal in Alabama. But it is in Pennsylvania, where Penn State figures to attract a large following, and it is in Michigan, where the Wolverines should attract heavy interest. 

Shell said NFL and college football are “neck and neck” in handle at PointsBet, with expected fluctuations in states where the college game is more important to customers. PointsBet operates in New Jersey — where the law prohibits betting on in-state colleges or college games played within its borders — Iowa, Indiana and Illinois, with Colorado and Michigan “upcoming very soon,” Shell said.

“[The handle] really depends on the state, whether they have more tier-one college football teams, if that side is higher than the professional team,” Shell said. “But, yeah, definitely those are the top two sort of handle sports. So if you do remove college football, it puts the NBA, which is just below that, straight up into that top bracket. And that’s why it’s been great that that’s continued unhampered with everything that’s going on in the world and the playoffs starting Monday. Going to the next two months, it will be interesting to see how they compare to previous years.”

Matheson agreed that the loss of a favorite sport on which a fan makes an occasional bet, as compared to a menu item for a regular bettor, is a huge distinction.

“If you have college football fans who then decide to go out and make a bet, then obviously having college football not around has a huge impact on the amount of handle that’s going to happen,” Matheson said. “On the other hand, if you have bettors who are sports gamblers first and then they bet on whatever’s available, the fact that college football isn’t available, it doesn’t change the fact that these bettors want to bet as long as there’s something for them to bet on. And sports betting should be fine.

“So as long as the NFL happens or baseball or NBA or there’s something to bet on, then you’re OK.”

Brendan Bussmann, director of government affairs for Global Market Advisors, told PlayUSA in an email that “depending on the state, I am estimating about a 15% hit to sports betting overall with no college football.”

Regular bettors were not dissuaded by COVID-19 shutdowns

National legal sports betting handle has declined 36.2% year-over-year, according to an American Gaming Association study, hammered by the roughly four-month period that has come to be known as “The Pause,” with that avid group of bettors gravitating toward nontraditional sports. The industry has hardly had a chance to assess what constitutes a normal market, or a normal bettor, with COVID-19 changing everything as high-population states like Illinois and Michigan enter the market. 

“These are bettors first, and then they’re looking for something to bet on. So if the majority of gambling that happens happens because people love to sports gamble, and then they choose from the available options, college football being missing shouldn’t change anything, because these gamblers just switched from college football to NFL, to Major League Baseball, to NBA, to whatever’s available,” Matheson said. “On the other hand, if you think that your typical gambler is a college football fan who has always been a college football fan and now wants to spice up their football gaming or their football experience by gambling, then it might have an impact.

“And I don’t think we have good data yet on what the typical gambler actually looks like in legal gambling.”

Shell agreed, noting that regulars at PointsBet have actually increased spending during this cornucopia of overlapping sports. But the loss of the Final Four cost the industry a key moment in any year, which makes the facilitation of a successful NFL season especially crucial.

“I think March Madness and NFL season — the start of NFL season — are traditionally the two biggest acquisition points for any sportsbook,” he explained. “So obviously, not having March Madness, you can’t shy away from that. That’s a hit in our industry. But what we’ve seen is that your loyal customers will pivot to whatever sports are available and they actually just end up taking more of their wallet than they would have.

“So, for example, all our NBA and MLB betting from customers that were here at the same time last year is significantly increased. It’s more of a shift away rather than you lose that full potential betting activity that college would bring.”

MLB continues to play despite its struggles to keep players virus-free, and the NBA and NHL have successfully ensconced in competition “bubbles” to facilitate fanless but otherwise normal-ish play, providing familiar markets to sportsbooks and bettors. The NFL, America’s true sporting and wagering pastime, began mini-camps last week.

Many sportsbook operators expect the NFL to fill the void completely, but the Sports Broadcasting Act of 1961, which in part ceded Fridays to high school and Saturday to college football, might prevent the league from filling more actual days of the week if some conferences play, Matheson said.

Sportsbooks lose ‘dumb’ money when college games vanish

Recreational bettors will lose the chance to back their fandom with cash in several nascent betting markets. That figures to ripple all the way to the state budgets targeted as beneficiaries of legalizing sports betting.

The impact will be particularly felt in the Midwest, the ancestral homeland of the Big Ten and where Iowa and Indiana have generated at least a combined $178,595,990 in football bets (Iowa doesn’t report breakdowns) since both went live last summer.

Iowans will lose the ability to bet on the beloved Hawkeyes, but Iowa State is still set to play a Big 12 slate. Indiana loses the Hoosiers but retains national lure Notre Dame, which contests an ACC football schedule.

Illinois, which opened betting on March 9, sees the Illinois and Northwestern and Colorado bettors, who saw their state debut sports betting on May 1, lose their first chance to bet on the Buffaloes, who play in the Pac 12. Air Force and Colorado State had their Mountain West seasons moved to the spring.

“With college football in flux, there will definitely be some current sports betting markets that will see reduced revenue because of local teams not playing. The market will rebound once these teams are back on the field and a bright future is ahead. In the interim, bettors may turn their attention, though, to other teams and leagues that do play this fall to get their football fix,” Bussmann told PlayUSA. “The passion behind college football fans is unmatched and why it equates to roughly 40% of the football wagers that are placed annually. As sports betting continues to expand throughout the heart of Big 10 Country, these states, like others throughout the country that have legal wagering, will likely see a dip, as games will not be played this fall in towns like Champaign, State College and Ann Arbor.”

Betting markets in college hotbeds like Michigan won’t be victors

Michigan may stand as the sports betting market most likely to suffer from the loss of college football because of local passion for Michigan and Michigan State. 

Dollars had been sliding through betting windows in Detroit for literally hours before sports began to spool down because of COVID-19 on March 12. And because the state is unlikely to launch mobile and online betting until the end of this year, shuttered casinos, which only recently reopened, meant that there was no way to make legal future bets on a Wolverines team that was ranked 15th in ESPN’s preseason poll. 

Pennsylvania bettors, who have mobile wagering as an option, won’t have a chance to back their affection for preseason No. 7 Penn State with some cash.

A Michigan Gaming Control Board spokesperson said the state does not differentiate between NFL and college bets. The loss of traditional brands with large national alumni bases will likely affect sportsbooks in Las Vegas, Matheson believes.

“We do know that there’s a lot of money bet on home favorites. I don’t mean in the betting sense. I mean that ‘This is my team that I like,’” Matheson said. “So you get a lot of betting on teams like Michigan and Ohio State simply because there’s a lot of people in Michigan and Ohio State that visit Vegas and would put down money on their teams when they’re there. And so you get a little bit less of that from Mississippi and Alabama and LSU and places like that, simply because the states aren’t as big. And so you don’t get quite as much; at least in Vegas, [we] didn’t get quite the same amount of handle on that sort of thing.

“One thing that is interesting from a purely sports betting standpoint is we do know the casinos make a lot of money on the dumb bettor, right? The bettor who is in the bag for Michigan because they love Michigan and they will place a large amount of money on Michigan to the point that the casinos will take advantage of that dumb money.”

Sports betting losses will be felt much more severely in some areas

The loss of that “dumb money” is also a loss for states that in many cases were able to legalize sports betting because advocates made successful cases for a legal market as a budget booster. And the loss of college football would, in theory, come as a double blow to Michigan and Pennsylvania coffers in that highly ranked in-state teams — Michigan State and Villanova, respectively — never got the chance to woo fans and bettors when the NCAA Tournament, the most lucrative betting event of a year, was canceled. The loss is especially damaging given why it occurred, Matheson said.

“Normally, losing a little bit of your gambling revenue isn’t a huge deal for a state, but, of course, this is occurring at exactly the same time that your tax revenues from gasoline, from hotel and occupancy taxes, from rental cars and just general sales taxes, all of those things are collapsing at the same time as well,” he explained. “It’s kind of the worst possible time to also be losing your revenue that you were hoping for from legalized gambling.

“It’s such a terrible time for them. They’re trying to roll out sports gambling right at the time sports is closing its doors. It’s quite unfair. It’s unfortunate timing for everyone, but it’s specifically bad timing for coming just in the wake of the PASPA ruling.”

A PlayMichigan analysis determined that sports betting could generate up to $8 billion handle, $500 million in gross operator revenue and as much as $40 million annually for the state.

Shell said PointsBet’s diversification in Michigan — specifically, becoming the first official gaming partner with an MLB team, the Detroit Tigers — and an online casino skin helped offset a loss of opportunity with the Wolverines and Spartans. Indiana may also be a softer blow, he said.

“I think in Indiana, you’ve [got] Notre Dame, but it is, I think, much more of a college basketball [state], and we haven’t heard yet what’s happening with that,” he said. “And even if that starts early next year instead of this year, that’s still a great result, but that’s more of a wait and see.”

PointsBet also has partnerships with the Indiana Pacers and the several Denver franchises through a deal with Kroenke Sports & Entertainment.

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Stock market quakes after college football rumblings

Stock prices for gaming companies with sports betting operations suffered amid rumors that MLB’s season was in jeopardy because of a spate of positive COVID-19 tests. Prices were struck again on Monday as concerns regarding college football became public.

DraftKings dropped 7.2% and Penn National Gaming went down 7.3%, while Flutter Entertainment, the parent company of FanDuel, slipped 2.9% and William Hill 2.8%.

That the potential loss of a market that composes about 12% of legal American sports betting revenue could so impact the value of sports betting companies represents what Eilers & Krejcik Analyst Chris Grove described to Sportico as a “disconnect.”

 “DraftKings was never built to be profitable in 2020,” Grove told Sportico. “So the idea that a short-term revenue hit should somehow materially impact the value of the company doesn’t make a whole lot of sense. And all of these [companies’] valuations are based not on what they have done, but their long-term prospects [in the market].” 

Additionally, sports betting remains a low-margin endeavor for gaming companies, whereas online casino and poker are much more profitable. But since speculating on stocks became a replacement for speculating on games for many during the COVID-19 shutdown, new investors perhaps tend to react irrationally to perceived shocks to gaming companies’ market value. 

There’s been yet another spasm with the realization that Saturdays in autumn may be deferred to Saturdays in the spring, or resigned to another opportunity lost to the COVID-19 pandemic. But it’s one fans, bettors and operators hope is temporary, something they equally hope for the coronavirus.

Brant James Avatar
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Brant James

Brant James is a veteran journalist who has twice been recognized in the Associated Press Sports Editors Awards, most recently in 2020. He's covered motorsports, the National Hockey League and Major League Baseball among a myriad of others beats and written enterprise and sports business for publications including USA TODAY, ESPN.com, SI.com.

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