Imagine if the CEO of Target insisted that all states who wanted stores within their borders pay the corporation one percent of all sales taxes generated by sales in its stores. Separately, consider the ramifications of Starbucks demanding public money to ensure that its coffee beans aren’t compromised by the interests of others who may wish to take advantage of the enormous demand. Those scenarios may sound ridiculous, but in light of what NBA commissioner Adam Silver is proposing in regards to sports betting, not that far-fetched.
On Jan. 24, speaking on the subject of the possible impending nationwide legalization of sports betting, NBA commissioner Adam Silver laid out the league’s designs for just such a financial windfall.
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It’s been called an “integrity fee” in legislative drafts in places like Indiana and Kansas. In those states, bills that would regulate sports betting have provisions that require sports books to pay a one percent cut of their handle to the leagues whose games are wagered upon. While Silver’s NBA has been fully supportive of this deal and opposed to any legislation which doesn’t include a similar provision, Silver took a different tone in this particular speech.
Instead of calling it an “integrity fee,” Silver referred to the cost the NBA of putting on a season’s worth of contests. Silver referred to all the content created in the course of those games as intellectual property that the league owns and controls. He argued that the league deserves to be paid for providing that content to sports books.
In some technical ways, Silver is correct. There is tremendous cost to putting on an NBA season. Silver pegged that figure at $7.5 billion. He is also correct that the league owns all of its content and deserves to be paid for sharing that. That’s where the merits of Silver’s comments end, however.
Silver conveniently leaves out the fact that the NBA endures the cost of putting on games because the league and its member franchises make a profit from doing so. Much of that cost is not borne by the coffers of the league or the pockets of the individual team owners, but by the season ticket holders, the corporate naming rights sponsors, the League Pass subscribers, the broadcast partners, etc. The NBA is already largely supported by public dollars.
The fact is that paying one percent of handle to the leagues would virtually make operating a sports book legally unprofitable. In Nevada’s robust sports betting operations, books average paying 95 percent of their revenue out to wagerers. A one percent cut in handle would represent 20 percent of their revenues and most of their potential profits going to the leagues. That could push many bookies to operate illegally and invalidate two of the primary reasons to legalize sports betting, which are protections for consumers and those with gambling addiction issues.
Silver commented that he is open to holding negotiations with sports book operators to develop mechanisms to achieve a “fair result.” He isn’t wrong in stating that the league deserves to be paid for sharing its intellectual property. The NBA should be able to profit off its content.
Where Silver’s comments are dangerous is they reveal a design to use that intellectual property as a new knife with which the NBA can bleed the masses dry in a new way. It’s the bottom line, not the desire to protect the product, that is the apparent motivation.
The weakest point of Silver’s comments is that there is very little that the NBA can do to enforce its will in this situation. The NBA games are going to go on whether state legislatures compel sports books to pay them one percent of handle or not. The NBA has no power to police sports books. The league has to depend on the states for that. If the states refuse to acquiesce, there will be nothing the league can do but lobby for change. In theory, the league could boycott states that don’t enforce the rules it desires, like it did with North Carolina over its bathroom bill for a short time. That will be difficult in states with established NBA franchises. The NBA eventually relenting and awarding Charlotte an All-Star Game is a great example of how its economic interests eventually outweigh everything else.
The NBA is a for-profit corporation that sees a new way to rake in millions of dollars by simply selling its existing product in a new way. In theory, that’s just business. Silver’s proposal is short-sighted, however. It fails to take into account the real consequences on the very people who are currently responsible for making the league profitable.
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