MLB Lockout Could Cost Sportsbooks Millions in Revenue

MLB Nationals Player Hitting the Ball With a Money Background

Baseball fans around the US received bad news this week when the MLB announced it would be canceling the first two series of the regular season. The loss of games is also bad news for the budding sports betting industry. A reduced number of games means that baseball bettors will have fewer opportunities to place wagers.

The cancellation of games is a result of the ongoing lockout. Owners and players are gridlocked in CBA negotiations. This lockout is not unforeseen, as the MLB and MLBPA have been in discussions since 2019. The MLB is still trying to recover from a shortened season in 2020 and may have to deal with significantly reduced revenue once again.

Sportsbooks may also have to do without if the lockout does not end soon. Sports betting has exploded across the US in recent years. If a significant number of games are canceled, sportsbooks across the US stand to lose millions of dollars in revenue.

States also stand to lose a significant amount of money from the lockout. Many states earn tax revenue off of the winnings of their licensed sportsbooks. Reduced revenue from sports betting operators would mean states would collect less in taxes. The lack of games would also result in less money from travel and operating costs for states.

Why is Baseball in a Lockout?

Professional baseball is no stranger to stressful negotiations between players and team owners. However, this is the first time since the mid-90s that a lockout has led to the canceling of games. So far, a total of 91 games have already been canceled. The longer negotiations go on, the more that number will go up.

The source of the tension this time is that the current collective bargaining agreement has expired. Without a CBA in place, all league-related actions have stopped. The threat of a labor freeze caused many teams to rush sign free agents in the days before the CBA expired. Once an agreement is reached, MLB will need to resume its free agency period and have spring training before games can begin.

This season will be the second in three years to have a reduced number of games. In 2020, the pandemic reduced the number of regular-season games from 182 per team down to 60. The lack of games proved costly for the MLB and sportsbooks alike. It is estimated that teams combined lost over $3 billion that season.

Another shortened season this soon could prove catastrophic for MLB teams. Despite the threat of lost revenue, team owners have shown little urgency to end the lockout. The owners initiated the lockout and did not submit a proposal to the MLBPA for six weeks. Progress has been slow, so baseball fans could have to wait weeks, if not months, longer than normal for Opening Day.

How Does the MLB Lockout Affect Sportsbooks?

Nearly 100 games have already been crossed off the MLB schedule, and more could be canceled soon. For sportsbooks, that means less money coming in from baseball wagers. In 2020, many sports betting operators lost money when they had to refund bets for games that were canceled due to the pandemic.

A reduced regular-season schedule would decrease sportsbooks profits, but the loss would not be insurmountable. The MLB post-season, especially the World Series, is where most MLB wagers are placed. Still, the lockout could hurt revenues. DraftKings in particular could see majorly reduced revenue. The sportsbook recently signed a new partnership deal with the MLB that included streaming games.

Two years ago, when the season was reduced to a third of its normal size, sportsbooks found ways to overcome the revenue loss. When push came to shove, bettors still wanted to place wagers even amidst a pandemic. As a result, sports such as table tennis saw a dramatic increase in action.

The growing popularity of sports betting across the US should help the industry survive, and even thrive, through the lockout. In 2020, despite not having the MLB for the majority of the summer, sports betting broke revenue records. This time around, sportsbooks are less taboo and have more experience navigating a world without the MLB.

MLB Lockout Could Affect States as Well

Sportsbooks can survive without the MLB, but states may have a harder time getting by. The sports betting industry has become a great source of tax revenue for states across the US. With many states still recovering from the pandemic, a decrease in revenue will affect many state-run programs.

The lack of MLB games could negatively affect many cities as well. Teams spend millions of dollars each year on travel, lodging, and other costs. Without games, stadium workers will also be out of a job until the season starts. The MLBPA is doing its part to ease the hardship on stadium workers. Players have created a fund to help stadium employees that are unable to work due to the lockout.

Minor league teams are also affected by the lockout. Roughly a quarter of minor league teams’ rosters are made up of MLB prospects. Those players will not be eligible due to the ongoing lockout. So far, many minor league teams have announced they will continue to play despite the MLB lockout. The action should help alleviate some of the revenue loss for both sportsbooks and states.

Conclusion

America’s national pastime is once again facing a shortened regular season. The MLB and MLBPA have failed to reach an agreement on a new CBA. As a result, the first two series of the regular season have been canceled. In total, that amounts to 91 games across the league. If the two sides do not reach an agreement soon, the total number of canceled games will continue to grow.

The canceling of MLB regular-season games could represent a familiar obstacle for US sportsbooks. Without the games to bet on, sports betting operators are likely to see a reduced handle. When the MLB season was shortened in 2020, sportsbooks were able to stay afloat thanks to bettors exploring new sports. Table tennis and foreign sports leagues saw a major increase in betting action.

An extended lockout could also impact state revenue. A decrease in sports betting revenue would decrease the amount states bring from their taxes on the industry. Without games, the additional revenue from travel, lodging, and stadium costs will also be gone. In total, the loss of revenue could total hundreds of millions of dollars.