This week, a look at the opportunity for luxury brands to advertise and partner with the fast-growing — and controversial — world of sports betting, including the benefits and risks. We also take a look at LVMH’s recent acquisition strategy across watches and CEO Bernard Arnault’s new minority stakeholder status in Richemont.
In 2018, the Supreme Court struck down a longstanding federal law disallowing sports betting in the U.S. Six years later, platforms like DraftKings, FanDuel and ESPN Bet have quickly turned sports betting into a huge part of sports culture, with more than $120 billion worth of bets placed last year. FanDuel alone has tripled its profits over the last year.
And according to Kyle Christensen, CMO of Splash, which owns several sports and gaming-related companies like Splash Sports and Run Your Pool, the audience on these platforms is growing, highly engaged and willing to spend on big-ticket items. That makes them a perfect overlap for luxury brands. But while luxury brands have been active across sports and sports media and in partnerships with athletes, sports betting is still new and carries with it a potential stigma that may be hard for brands to shake.
Here’s a look at what luxury brands stand to gain and the potential risks of dabbling in the growing sports betting world.
First, the benefits. Sports betting is undeniably popular. Over a quarter of all Americans placed a bet on the Super Bowl earlier this year. And according to Christensen, the average user of his platforms is a perfect match for luxury brands. Their average income is well over $100,000 a year, they skew slightly male but there’s a strong female audience as well, and, most importantly, they are 3-5 times more likely to spend on big-ticket items like luxury goods than the average consumer. Christensen shared analytics from the platform’s customer data of 16 million users which showed that its male users are 4.5 times more likely to buy high-price apparel than the average consumer, and its female users are 3.3 times more likely.
“We did a partnership with [the high-end golf apparel and equipment brand] Taylor Made where they gave away some of their new drivers to winners,” Christensen said. “We had 35,000 people in that contest and only three people won the driver, but the brand followed up with all 34,997 people with a 20% off code and free shipping and saw a 4x return on their investment.”
Christensen said Splash’s various platforms have a retention rate of 70-80%. Splash also differs from platforms like DraftKings in that it’s geared toward casual small-scale bets among friends and coworkers, rather than the more intense, high-stakes betting that happens on other platforms.
In addition to Taylor Made, ultra-luxury brands like Italian auto manufacturer Lamborghini, Emirati resale and concierge service Luxury Vault have all advertised with betting platforms like Splash and DraftKings or offered products and services as prizes in contests.
Adam Ortman, founder and president of creative agency Kinetic319 said there’s a clear audience overlap between sports betting and other luxury categories.
“Through my experience marketing private aircraft and automobiles, the ultra-high net worth individual does tend to live a lifestyle that includes fine dining, private or higher-end travel, and typically competitive sports, which is also why gambling fits their consumer persona,” he said.
But there are also risks involved for brands getting into the sports betting space.
Annalise Fowler, the senior creative director at the marketing agency rEvolution, said that the space is not just new, but it’s also fragmented. Sports betting is only legal in 38 states and each has their own rules about how the sector can work. REvolution has worked with luxury brands like Lamborghini, sports leagues like the NBA and sports betting platforms like Betfred.
“There’s a lot of testing the waters happening right now,” she said. “It’s a ‘ripe for the taking’ kind of space. Brands still need some time to figure out if it’s effective and how to do it.”
There’s also the fact that gambling is an addiction and one that’s on the rise. The Ohio Problem Gambling Network, a support group and hotline for people struggling with gambling addiction, saw a 55% increase in calls about addiction last year. Similar support centers across the country have seen a rise in the number of people with gambling problems commensurate with the legalization and mainstreaming of sports betting. Sports betting has also surpassed casinos and slots to be the most common form of gambling addiction in the U.S.
In addition, gambling could be a brand safety issue for some companies. TikTok recently included an option in its advertising tools for brands to exclude gambling and betting content when placing its ads to avoid such an association. The growing calls for stricter government regulation of sports betting, particularly as gambling addiction rises, also presents an issue.
“There’s always a risk to brands when you associate yourself with gambling,” Fowler said.
LVMH’s new acquisitions
LVMH, one of the most valuable companies in the world and the most dominant across luxury, made news this week for two big investment moves.
The first was the acquisition of the luxury Swiss clockmaker L’Epee 1839. The acquisition comes as LVMH has made several moves toward strengthening its watches division under the new leadership of CEO Bernard Arnault’s son Frederic Arnault.
The younger Arnault was appointed head of the division in January and has quickly gone to work attempting to make LVMH more competitive in watches. At Louis Vuitton, he has cut the number of models down and increased their prices to place the brand alongside comparable high-end Swiss watch brands. The acquisition of L’Epee adds some much-needed Swiss horological expertise to LVMH’s increasingly large stable of watch and clockmaking brands.
The second bit of LVMH-related news is more ambiguous, in terms of its implications. A report from the Financial Times found that Bernard Arnault has become a minority stakeholder in Richemont. It could be interpreted as a sign that the acquisition-hungry LVMH has an eye on acquiring its Cartier-owning rival. But representatives for LVMH said the investment was a personal one and should not be understood as an indication of a potential larger takeover.
Even if it were the case that LVMH wanted to buy Richemont, that move would almost certainly come under immense scrutiny from regulators who have been more than willing to crack down on potentially monopolistic mergers in the luxury space. Both Tapestry and Capri are far smaller than LVMH, yet their merger triggered an FTC lawsuit earlier this year.
LVMH has continued to make acquisitions throughout this year, including the Parisian bistro L’Ami Louis and the American streetwear brand Chrome Hearts, and it will likely acquire the influential magazine Paris Match soon, as well, according to Paris Match’s current owner Lagardere.