Why a Philly business decided to sit out the sports betting boom

In the last couple decades, sports betting has gone from rarely spoken taboo to near ubiquity.

These days you can barely turn on sports television and radio without hearing talk of betting lines or over/unders.

The turning point came in 2018, when the U.S. Supreme Court struck down a key federal law and allowed states to open the sports-betting floodgates.

Suddenly, media companies, sports personalities, and even sports leagues are striking massive deals with sportsbook companies. There is a lot of money to be made.

One local business had a chance to get in on the action — possibly raking in millions.

Instead, they turned it down.

Sports Reference LLC is a collection of seven uber-popular sports statistics websites. It’s run out of a church in Mt. Airy.

WHYY’s Avi Wolfman-Arent spoke with the company’s president, Sean Forman, about his decision to stay above the gambling fray — for now.

Note: The conversation below has been condensed and edited for clarity.

AVI WOLFMAN-ARENT: I wanted to first give people a sense of scale here. How many people visit your collection of sites in a given month or year?

SEAN FORMAN: We have around 17-to-20 million monthly users. We have statistics for basketball, baseball, hockey, soccer, and then college basketball or football, as well. If people remember the giant encyclopedias of sports statistics, we basically replicated all that online and added information to it.

Lots of sports broadcasters and media companies have what are called “affiliate” relationships with betting companies or sportsbooks. Can you summarize what an “affiliate” relationship is?

[In an affiliate relationship] media companies essentially receive a finder’s fee for every customer they can send to those sportsbooks. If you were to come to a website, click on an ad, make a deposit at DraftKings or FanDuel that website would probably receive several hundred dollars in an affiliate fee.

There are also relationships where that website would continue to earn money based on the amount of money that you wagered and lost over time up until two, three, four years down the road. And so those are more revenue share agreements.

Can you give a sense of what type of revenue a company like yours could generate from an affiliate deal?

I think if we really pulled out all the stops it could be in the millions of dollars a year. I would expect it to be.

So you’re running a successful small business — but still a small business — and there is this carrot dangling. And you all turned it down. You’ve said this isn’t a puritanical thing. You don’t have a moral aversion to gambling. So why did your company decide not to pursue an affiliate relationship?

In order to really blow this out and really do this in a way that maximized our return we would be banking on you and our users losing money. And it didn’t feel like it aligned us well with what the interests of our users were. I don’t begrudge other people. We’ve been pretty fortunate that we’ve been profitable and continue to be profitable. So it’s not a pressing need for us at this point. [That] made it a relatively easy decision.

All types of businesses — [WHYY] included — have traditional advertising. And basically you’re asking people to spend money on something else. Yet, this does feel somewhat different. But I can’t quite put my finger on how.

I’d say it’s subtle. I don’t know that I have a good answer for you. Part of it might be the certainty with which you know there will be losses. In a traditional advertising situation hopefully the person you’re advertising [to] is [getting] a useful service or a useful product. The customer will get something in return.

You can completely make the argument that sports betting is entertainment and so it’s no different than going to the movies. But there is this certainty — given the way sports betting is set up — that most bettors are going to lose money long term. There’s also an addiction argument.

So all of these things conspired together to push us in this direction.

For the moment, it’s clear there’s a ton of money to be made by media companies and sports leagues partnering with gambling companies. I wonder if you see some sort of slippery slope here — like it somehow could affect the product if folks get too close to the gambling industry.

I do think there is a concern. Back in the ‘50s there were many point-shaving scandals in college basketball. I fully expect we’ll have similar things happen. It’s really the Wild West in sports betting right now with all the states doing their own thing and having different rules and different things you can bet on.

Just to clarify terms…When you talk about point shaving you’re referring to the idea that players or referees or people involved in the game will manipulate the outcome of the game in order to privilege their own bets or the bets of people they know?

Or people who have paid them. And it can even be more subtle than that. There are all these “prop” bets, where I can bet on a certain player to have a certain number of catches in a game. I can bet on Joel Embiid to have 25 points in a game. You can do that at a college level. Maybe a player in college gets to 19 points and then starts missing shots just because the over/under on his point total is 20.

Among your employees was there backlash to the decision? Was it an open, hot debate? Because even if I’m just working at the company I might benefit from you guys bringing in a few million extra dollars?

People actually aligned pretty well with the decision we made. We actually surveyed everybody anonymously. Would you feel comfortable with this? How would you wanna approach this? I don’t think it was quite unanimous. But it was pretty close to unanimous among our 20 employees. We feel more comfortable taking this route that we did.

We’ll see how it plays out. But I’ve heard positive feedback from a number of people. Maybe this is a case where we benefit by zagging where everybody else is zigging.