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May 14, 2018, 11:37 a.m.
Business Models

Congratulations, sports media: You just got a big business-model subsidy from the Supreme Court

By throwing out a ban on sports gambling in 49 states, the court opens up a giant opportunity for insider sports coverage — and a lesson on news business models.

In his 1957 classic An Economic Theory of Democracy, Anthony Downs wrote that there were only four types of information: production information, consumption information, entertainment information, and political information. Production information helps you make smarter business decisions; if you’re a stockbroker, The Wall Street Journal is production information for you. Consumption information makes you a better consumer; if you’re going to a movie this weekend, Rotten Tomatoes is consumption information for you. Entertainment information is self-explanatory — anything you consume primarily to be entertained, whether high culture (a great novel) or low (a Kardashian). And political information is anything that makes you a more informed voter. (That’s the toughest one to sell, as Jay Hamilton wrote about smartly.)

A key thing to remember about journalism is that the same piece of information can serve different information needs for different people. If you’re trying to decide who to vote for in November, a story in Politico might be political information. If you’re a political junkie who just loves reading about D.C. drama, that Politico story might be entertainment information. And if you’re a lobbyist hoping to get a bill tweaked, it might be production information.

Understanding this idea goes a long way, I think, toward understanding business models for news; the markets for different kinds of information tend to look very different. (For instance, there’s a virtually infinite amount of entertainment information available, so quality and user experience are super important. Political information is very important from a civic point of view, but can be a losing investment of any one individual’s time. Production information is often more valuable if fewer people know it; other types are more likely to be the reverse.)

All this economic theory is preamble to this: The U.S. Supreme Court struck down a federal law banning sports gambling this morning. The 1992 law had made Nevada the only state where you could bet on an individual football, basketball, baseball, or hockey game; the court declared that unconstitutional limitation of state power. (The five conservative justices were in the majority, as were the liberal Elena Kagan and, on part of the opinion, Stephen Breyer.) The ruling does not make sports gambling immediately legal everywhere (just in New Jersey), but it allows states to do so; a study last fall predicted that 32 states would do so if given the opportunity.

So why should the news industry care? Because an awful lot of sports reporting is about to move from entertainment information — stuff you read because you enjoy it — to production information — stuff you read because you think it’ll help you make money.

Whatever your thoughts on gambling — I tend to come down on the side that it’s a giant vacuum sucking money out of the wallets of middle- and working-class Americans, ruining a lot of lives in the process, but hey, that’s just me — the opportunity for sports journalism is clear.

The vast majority of sports fans have proven unwilling to pay for information about their favorite teams. At least for the major pro sports, there’s just too much free information out there — much of it produced by the leagues themselves — for a paid product to demand more than a niche audience. Lots of local papers have tried paid “Team Insider” products that offer extra coverage on their local pro teams, but for the most part, they haven’t been outsized successes. There’s a bit more of a market at the college level, where loyalties are more tribal and detailed recruiting information can justify an upsell. But it hasn’t been a business that blows anyone away.

What have been relative successes? Fantasy sites, both those that offer league infrastructure and those that promise inside dirt that will let you play Blake Bortles when the matchup is sneaky favorable or sit Alvin Kamara when you feel like making a bad decision. ESPN’s Insider offering is a mishmash of content, but one of its primary pitches is “best-in-class Fantasy tools” and info that will let you “get the edge in your Fantasy league.” Most fantasy leagues aren’t big-money endeavors, but players really want to win — and people are willing to pay for things that help them win.

So take that big and growing fantasy infrastructure and add legal sports gambling — not just in Nevada and on sketchy websites, but at the casino down the street, next to the video poker machine. The entire ecosystem of paid sports information is about to get a big boost. And because this is producer information, its exclusivity is a big part of its usefulness. If everyone knows Everson Griffen’s plantar fasciitis is acting up and he can’t get any leverage on his bullrush, the information isn’t valuable anymore. So there’ll be premium tier upon premium tier.

Unfortunately, most newspapers and other local outlets aren’t well positioned to take advantage of this shift, since if you’re hoping to retire off your gambling winnings, you’re unlikely to want insider dish only on the local team. But for national networks of sites — The Athletic, ESPN, SB Nation, maybe Gannett’s USA Today Network — the opportunity is very real. And for everyone in journalism, it’s a reminder that it’s worth thinking about the specific value your information provides. Is there a way you can get the folks willing to pay top dollar — the ones for whom the information has real, tangible value — to subsidize information gathering that also benefits a wider audience? If you can, that’s a win all around.

Photo of a Las Vegas sports book on Jan. 14, 2015 by AP/John Locher.

POSTED     May 14, 2018, 11:37 a.m.
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