The NFL Has a Gambling Problem

Don’t think the owners are ready at all Rusty
When these critically important calls are being made by Part-Time workers( because you know Billionaire owners need to save costs) and massive sports betting is going on, well that’s an obvious narrative that seems likely to be really happening.

Warning: Following comment is tangential, possibly irrelevant, not particularly original – but all I’ve got.

My husband counsels people with actual opioid addictions and he sez: Sports gambling is the new opioid crisis.

Send in the clowns.

No disagreement with your detailed points Rusty, and your point differential curves were very interesting, but a couple points to add some broader context.

1. Don’t have dispositive evidence readily at hand, but I think your claim that conventional wisdom hadn’t recognized the NFL’s huge dependence on gambling is wrong. Local newspaper have been publishing the NFL point spreads that fueled office pools forever. Hard core gamblers could wager on other sports but NFL wagering was a mass-market activity. Which inflated TV contract values because the NFL was the only sport where national audience cared about the result of largely meaningless out-of-market games. It wasn’t a highlight of media coverage because everyone who cared already understood what was going on. Just as the idea that corporate lobbying money influences legislation wasn’t breaking news. Football gambling (like corporate lobbying) was just part of the water we were all swimming in.
2. We are in the wild exuberance/bubble phase of online gambling growth. Every company that ever thought it could become a big player in this industry is pumping millions into aggressive marketing in case this is a winner-take-all market where one company could realize mega-billions in equity value. None of know what things will look like in five years, but this flood of spending by online startups explains the big increase in gambling mentions in the media.
3. The biggest driver of the opening of the online gambling floodgates is the coming total collapse of the professional sports revenue model. The huge inflation in the equity value of sports teams (and the smaller but still impressive growth in player salaries) was driven by rights payments from broadcast partners (RSNs, ESPN/TSN/Sportsnet, traditional TV networks) who thought that the value of sports to advertisers would increase infinitely, and that those networks could use artificial market power to force people who don’t watch sports to massively subsidize sports programming (e.g. every cable viewer was paying for ESPN although only 20% watched it). As everyone knows, the huge increase in cable TV fees have crippled demand and led to cord-cutting, There never was any way the sports leagues could maintain their revenue flows if fees were only collected from the viewers who actually cared about specific sports. With legitimately sustainable, subsidy-free user fees between 15% and 50% of MLB, NBA, and NHL franchises would soon be bankrupt and all team values would plummet overnight. The online gambling bubble is a desperation move to delay this collapse a bit.
4. Given this confluence of big corporate interests (online gambling investors hoping to get rich, sports teams owners desperate to maintain unsustainable cashflow), we should take WhiteRaven’s opioid warning very seriously.
5. But this points to the opposite of what I took to be Rusty’s main conclusion. The NFL is the least vulnerable league, not the most. The NHL and NBA are hugely dependent on RSN fees that are about to collapse. MLB is somewhere in between. They need to do everything possible to rapidly increase the level of gambling on their sports and to keep the online companies happy to pay for commercials and tie-ins. All of the high-level incentives suggest oversight will fail and corners will get cut. The NFL has much greater equity values to defend, has understood for decades that those values depend on the perception that games can’t be thrown, can survive fine without sucking up to online interests in the near term, and has much greater experience/expertise monitoring these types of corruption threats. NFL games get scrutiny from tens of millions more people than other sports, and any problems (real or imagined) would engender much broader public outrage. If you wanted to organize a major criminal gambling conspiracy would you try to get refs to influence the outcome of Packers-Cowboys type games, or would you focus on Orioles-Pirates and Blue Jackets-Ducks type games?
6. Not a gambling point, but the current Chicago Blackhawks sexual abuse debacle starkly illustrates the ineffective oversight in many pro sports of similarly critical (if not existential) issues. It also illustrates how seemingly powerful corporate interests can myopically ignore major changes in conventional wisdom in order to protect self-serving views as to how the world ought to work.
7. I would personally enjoy a more exhaustive discussions of Rusty’s very reasonable analysis of ref leverage, even if it is not the biggest single driver of potential gambling problems. His points about the inherent structural problems with the rules in each sport are important. But I’d look closer at league efforts at ref quality control—ensuring all refs are interpreting the rules as intended, grading ref performance against agreed standards, providing feedback, and weeding Angel Hernandez performers out. None of the leagues are especially good at this, as none have ever prioritized spending money on these issues, and each league has major areas where they can’t agree as to exactly what rules they want enforced. The idea that MLB has much clearer rules (on paper) than the NFL may not really be true. There’s nothing in the rules that an objective outsider could use to determine the difference between a check swing and a full swing, and thus no way to judge whether umpire calls are “correct”. I’ve seen several good articles digging into attempts to use laser-guided technology to call balls and strikes in the low minors. The problem isn’t technology, its that umpires have never called the rule book strike zone, and no one can deal with the changes when robots try to call it. And all of these create leverage that could be corruptly exploited. In the NHL and NBA refs are to some extent managing the overall flow and competitiveness of a game, and an anal lawyers’ interpretation of the rule book would render a lot of games totally unwatchable. But this obviously creates a lot of other messy problems.

you’ve got that right

I unequivocally subscribe to the big picture thesis of this article, which is: the NFL’s wholehearted embrace of gambling will lead to unintended consequences that threaten its viability.

I also concur with the premise that the referees are the vulnerable target were someone to devise a game-fixing scheme, given their outsize influence on the outcomes (as Rusty demonstrated) and their meager financial compensation. This is easily remedied, however, simply by increasing their pay (and potentially by adding an incentive comp plan). Closing this loophole would not even cost that much - maybe $1m per team. Yes owners are cheap, and often foolishly so, to the point of self-harm, but there are other constituents in the value chain here - the NFLPA, the broadcast partners - who could be made to chip in.

At the end of the day, there is simply not that much money to be made in game fixing - not enough to tempt the players, or at least anybody good enough to be worth bribing. (The days of Arnold Rothstein possessing the power and wealth and Shoeless Joe needing some pocket cash are long gone. Today the eighth guy off the Miami Heat bench makes more than any gangster.). Legalized sports gambling is highly regulated. There is KYC compliance requirements and the casinos are highly attuned to irregular wagering patterns. The private (illegal) gambling market is small. No neighborhood bookie is taking $1m action on a single game. So the cost of paying the refs enough to blunt their financial motivation to fix games is by no means very expensive. If someone can pay Tony Romo $17m to blabber; they can find a similar amount to supplement the officials’ pool for guys who actually matter to the game.

Tangential: officiating in the NFL DOES suck. Not in the sense that the calls are bad or blown; but in the way officials so frequently and inelegantly intervene in the game. They are full on participants. And nobody wants to see it. As an entertainment product, pro football is significantly harmed by referee interference. If I were an owner or member of the competition committee, my top priority would be putting that genie back in the bottle.