Everyone is seeing dollar signs with the growth of online sports gambling in the U.S., and the lines between sports and gambling are going to get blurrier over time. Sports leagues, TV networks, casinos, and even streaming companies are seeing opportunities to exploit online gambling. 

Industry leaders like DraftKings, MGM Resorts, and Rush Street Interactive have established positions in the market for gambling, and FuboTV is trying to establish itself as the go-to for sports and gambling content. Nearly every sports, gambling, and media company is trying to wiggle its way in. The most daring is a collaboration between Bally's (NYSE:BALY) and Sinclair Broadcasting Group (NASDAQ:SBGI), which are attempting to bring sports betting into the homes of millions of sports viewers across the country. It's an odd pairing, and a do-or-die bet on sports betting as the future of sports broadcasting

Mobile phone with sports betting app on it on a table.

Image source: Getty Images.

Trying to find a piece of the action

Bally and Sinclair are an odd pair in the world of sports betting. Sinclair has traditionally been an owner of local television stations, but it entered the regional sports network (RSN) business in a big way in 2019 when it acquired 21 regional sports networks (or RSNs) from Disney (NYSE:DIS) for $10.6 billion. Since then, the company has lost distribution deals with YouTube TV, Hulu, and FuboTV, and AT&T is the only streaming company offering its service. Cable is still a big moneymaker for Sinclair, but cord-cutting is a real thing, and betting on cable while losing streaming sounds like a losing battle. 

To adapt to the new reality, Sinclair has seen sports betting as a way to pivot and grow. It's rebranded RSNs to Bally Sports and is planning its own streaming service for Bally Sports. Maybe that's why streaming companies aren't eager to pay to get Bally Sports back in their lineup. 

Meanwhile, Bally is a fairly simple company in the gambling industry. It owns and operates casinos primarily in the regional market. The wide number of regions it reaches could make it a strong online gambling company, because it has brand awareness and a path toward legalization in more markets than most casino companies. And having Bally plastered all over RSNs across the country is good marketing for the sports gambling platform. 

As sports and gambling have converged, these two companies have come to see each other as partners in need of help growing their respective businesses. And the ties between the two keep getting deeper. 

Deepening ties

Sinclair is now betting that the future of RSNs doesn't just include advertising for online gambling, but content as well. And Sinclair and Bally recently signed a deal to produce programming that will fill the airtime on RSNs.

The move isn't particularly shocking given the Bally Sports name now on channels. And ties between sports leagues and gambling sites have been expanding, with leagues like the NBA, NFL, MLB, NHL, and PGA each making deals with at least one gambling site. But this integration between a sporting event content delivery company and a gambling company is the next level. Remember, an RSN's most valuable asset is its distribution partnership with leagues and their franchises. This throws a potentially unwanted gambling partner into the mix. 

Sinclair's big risk

What Sinclair is hoping for with the Bally partnership and a bet on its own streaming service is that the added revenue from sports betters will offset any losses from people who are turned off by all of the betting talk. 

Let's put some numbers to this. According to Statista, 154.4 million people in the U.S. watched live sports at least once a month in 2019. Gambling numbers aren't as clear, because most sports gambling still isn't legal in the U.S., but the American Gaming Association estimated that 38.1 million people said they planned to bet on an NFL game in 2019, giving us a proxy for the biggest sports gambling event on the calendar. Still, only 39% of "avid" NFL fans said they planned to place bets.

Any way you look at it, over half of the sports audience is unlikely to be interested in betting on games. And if everything from the channel's name to the content on before and after a game is gambling-related, it could be a turnoff to customers. 

Sinclair may be addressing a big market of sports gamblers, but will it be turning off casual, non-gambling fans in the process? 

Partners are still key in the media business

There are two other stakeholders that Sinclair has to keep in mind. One is advertisers, and it's hard to see how gambling would make the advertiser pool bigger. It'll likely make it smaller, even if the change is only incremental. 

More important will be the deals RSNs have with local sports teams. If sports teams are being un-bundled as Sinclair tries to offer its own streaming service, that will reduce their audiences compared to what they would be if they were on standard cable services. Teams have an incentive to reach as many customers as possible, so Sinclair walling streaming off to its own service could be problematic. 

And remember that sports leagues have their own gambling partnerships to think about. If they're partnering with MGM or DraftKings, it may be less desirable to be broadcast on Bally Sports when it's time to renew RSN deals. 

A big bet on the future of sports gambling

It seems that everyone is trying to grab a piece of the action in sports gambling these days, but that may not be good news for every company. Sinclair's RSNs have already bet that there's more upside in a streaming service with a focus on gambling than there is in keeping streamers like YouTube TV, Hulu, and FuboTV among its distributors. That decision already resulted in a $4.2 billion impairment charge for sports networks only a year after the acquisition. So Sinclair is already having problems with its RSNs. 

Meanwhile, sports leagues are trying to maximize their benefits from gambling without turning off consumers who may not want to be inundated with gambling content. 

It's a fine line to balance, but Sinclair may have more riding on the future of sports gambling than investors anticipated when it bought RSNs from Disney. And if that bet is wrong, it could be extremely costly for the struggling media company. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.