Wednesday, May 27, 2009

Different Sport, Same Result: The Failure of Montana Sports Action

(Data Source: Montana Sports Action)

This is another post that discusses the implementation of a fantasy sports wagering game by the Montana Lottery (Lottery), on behalf of the Montana Board of Horse Racing (BHR or Board). You can review the other posts in order of publication here, here and here. I strongly recommend reading them because in my very humble opinion, they are quite good. Actually, one of these posts was read into the record (not by me) as testimony to the Montana Legislature earlier this year during a committee hearing on HB 503 that sought to amend the fantasy sports wagering law.

After promises of improvement from the Lottery after their inept fantasy football wagering game last year, they perform even worse with their current game based on NASCAR. Although the pitiful result could have been easily predicted, to be fair, enough races needed to be completed to have a reasonable base of results in order to make an assessment.

Now I don't want to brag about my prognostication skills, but I did predict that the auto racing game would be less attractive than the football game with a similar handle trend - some initial interest, realization that the game is poor, and a steady gradual decline in handle. The chart above appears to bear out that hypothesis. To the racing game's credit, it is generating almost 90% of the football game's handle, but 90% of little isn't really that much of an accomplishment.

As disclosed in one of the earlier posts, projections for fantasy sports betting were on the order of $12 million in handle per year. So far, being in operation almost 9 months, the geniuses at the Montana Lottery haven't even generated $150,000 in handle with a SPORTS BETTING GAME. There are possibly bookies in Billings generating that kind of handle. If the game was generating handle as projected, approximately $9 million would have been wagered to date. The game under current management is only generating one-sixtieth (1/60) of the handle projected.

Relevant statistics for the racing game (after 12 races):
  • Cumulative Handle (Est) - $58,660
  • Horse Racing Revenue (Est) - $9,385
  • Lottery Revenue (Est) - $3,520
  • Retailer Commission (Est) - $2,345 (divided among approx 175 retailers)
This is pretty sad since fantasy sports betting was supposed to generate sufficient revenue to keep the Board of Horse Racing operating and allow live racing to survive in Montana.

Given the continued contraction of live racing dates, perhaps someone at the Board of Horse Racing might be bright enough to figure out that the Lottery handling this isn't working? Oh, that's right, those Einsteins at BHR signed a sole source agreement with the Lottery for, as it is understood, 8 YEARS. Horse industry in Montana, don't worry! Apparently the Board can exercise an out clause giving 1 year notice. However...the Board had the chance earlier this year to do just that, but didn't, when given a bona fide request by a party in January to offer a game in compliance with HB 616. That story will be told in more detail in a future post.

Add to Technorati Favorites


Robin Tooke said...

Sad, but true. This is nothing more than another lottery game and has nothing to do with Fantasy Sports. The board of horse racing kicked the people that could have made the whole thing work to the curb. Then they broke their own rules to allow the Montana lottery an 8 year contract. said...

Thanks for the comment! I find it odd that the Board didn't do any queries, RFIs, etc., to see what kind of vendors could have provided a compliant pari-mutuel fantasy sports game, then used that lack of due diligence to justify handing this over to Lottery claiming there wasn't anyone else available.

With regard to YouGaming, the RFI/RFP was eagerly anticipated so that an official response and proposal could have been presented. Unfortunately no such solicitation, common in public sector contracting, was undertaken by the Board of Horse Racing, a public agency.

What is also odd is that the Legislature seems to be dragging its feet with regard to an audit of the Board of Horse Racing regarding its performance in this matter.

Can the live racing industry in Montana survive until this mess gets sorted out? I feel bad for the horsemen that put their faith in these folks to make sound decisions. The horsemen will ultimately suffer the consequences with regard to this fiasco.

Robin Tooke said...

Ya - what about the audit? Seems only the IRS gets away with those. Would love to see that happen.

John Tooke said...

The promise of HB616 was derailed by a "perfect storm" of politics, impatience, and people who were ignorant of the nuances of this type of game. The underlying purpose of 616 was to provide for a symbiotic, mutually beneficial relationship between Montana's tavern industry and horse racing, which could enhance and hold bar traffic, give racing an income stream, while at the same time, develope players for racing through parimutuel fantasy betting. The Board of Horse Racing together with the State Lottery have provided a game which does none of the above, and have poisoned the environment by delivering a lousy game with a short shelf life, causing most meaningful gaming businesses to run away from this activity because these bodies have demonstrated that they are questionable business partners. To the Lottery's credit they have grown their revenues by selling traditional lottery products in venues where they previously had no exposure. The lottery has stated they sold $400,000 in lottery tickets versus $85,000 fantasy products. Racing gets none of the revenue from traditional lottery products. The marketing costs of fixing this mess make it almost impossible to consider investing the capital necessary to offer a more attractive game. Unfortunately, Montana's horse racing industry does not have much time to fix itself and may have squandered the best chance it ever had.