Tuesday, December 28, 2010

Life-Changing Payouts From Fantasy Sports

Many people's only involvement with fantasy sports is with free games or low stakes entry fee games. However, don't think that there isn't big money to be won playing fantasy sports. This is true even though fantasy sports is not gambling. Yes, NOT gambling. People can bet on sports but playing in a fantasy sports contest is not gambling.

What makes fantasy sports different from typical sports betting is how fantasy sports contests operate. In a nutshell, fantasy sports games operate as contests. These contests can either be free or pay-to-play. We'll discuss the pay-to-play as one of the generally accepted elements for gambling isn't met - consideration.

To be gambling, typically an activity needs all three elements - prize, consideration and chance. For the free to play games, if there is no cost to enter, then there isn't any consideration and therefore it's not gambling. So, isn't pay-to-play then gambling because there's consideration? Not necessarily because of the element of chance. Fantasy sports generally is viewed as a skill game. Generally, because states can have different interpretations of what constitutes chance. Overall, in about 41 of the 50 states, fantasy sports are viewed as a game of skill rather than chance.

In the UIGEA, fantasy sports contests are defined as a game of skill and exempt from internet gambling restrictions if they operate within certain guidelines. Basically, you can't have a fantasy team be 100% of a real team, you have to explicitly state your prize structure and levels and not have them vary with the number of game participants, and the real-world games used as basis of games should be more than just a single game.

As stated at the beginning of the post, most people only deal with free games or games with low stakes and prizes. But there are some life-changing payouts out there playing fantasy sports, even in a contest format.

From the Fantasy Sports Business blog, they list a few of the high-stakes fantasy sports contests and top payout levels:

World Championship of Fantasy Football - $300,000
RapidDraft.com - $100,000
Footballguys Players Championship - $100,000
Fantasy Football Players Championship - $100,000
National Fantasy Football Championship - $100,000

So, the top prizes for these five non-gambling fantasy football contests total $700,000. Life changing payouts for playing fantasy football and getting to watch LOTS of NFL games! How cool is that?

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Tuesday, December 14, 2010

Fantasy Sports Business Potpourri - December 2010

FantasySportsBusiness.com has an excellent post (Compete.com Reports Fantasy Reach for September) which you should read if you have an interest in the popularity of fantasy sports and which sites attract the most hits. Continuing their unique visitor dominance (based on my recollection) are Yahoo, ESPN, CBS Sports, with a newcomer - the NFL. These players are definitely the big hitters. Not to say that the next tier of fantasy sites aren't big, but the next 15 sites not affiliated with the Big 4 above you would need to aggregate to match the just the NFL's fantasy site unique visitor numbers. Of the Big 4, CBS Sports is the only site that has a big selection of the pay-to-play games. Fantasy sites can break down between games, information, prediction and support.

Game sites can break down between pay-to-play (entry fee) of various buy-ins and free-to-play games. If you are a game-heavy site that is relying on free games, you better have high traffic (e.g. Yahoo).

Information sites also break down between free and pay (premium). These sites that are relying on premium content may face difficulties going forward in my opinion as sites like Yahoo, CBS Sports and Fox's free fantasy information content is pretty good and the differential between free information and premium information may be very small.

Prediction sites may be of dubious value. I personally am not convinced. If interested, read my recent post on the accuracy of one particular website's picks for the 2010 NFL season. If a prediction site has got a really good track record, I can see folks paying for that knowledge, particularly if the fantasy sports player partakes in pay-to-play games. Really good accuracy on a consistent basis would be the key.

Support sites are sites that provide ancillary goods and services to the fantasy sports industry like trophies, draft boards and news blogs (like this one). This blog doesn't get high traffic, but those who like the content patronize the site and this site isn't geared to earn a living for anyone. For other support sites, they're selling their goods and services, so they are evaluated like a typical online storefront.

Lots of unique visitors is the likely cause of the death of a smaller pay-to-play fantasy game website, Sandbox.com. The affiliated story is here. The story relates that their unique visitor totals were in the 20,000 per month range. As a comparison, Yahoo's fantasy sports site had over 6,000,000 unique visitors in September 2010.

Let's take a swag at what Sandbox was facing economically. Taking their unique visitor number and saying all of those were customers that were on their $10/month subscription plan ($120/year revenue), that puts their fee revenue at $2.4 million. For the sake of argument, we'll assume the site has no other significant revenue streams. Since current pay-to-play fantasy games are contests where a decent portion of the entry fees are paid out in prizes, we'll assume that 80% of the entry fees are paid out to players in prizes, leaving 20% as gross profit. This puts their gross profit at $480,000. From that money, costs such as technical development (games and web development), hosting, information services (e.g. statistics feeds), personnel, marketing, taxes, etc., need to be paid. That may be a difficult budget to manage, so without really unique games (hard to come by in the current fantasy sports genre), getting by on just 20,000 unique visitors per month may not have been enough to keep the doors open.

The article finds it interesting that Sandbox is referring players to CBS rather than NBC, since that company is part of the NBC Sports umbrella. It does make sense because Sandbox operates pay-to-play games, which CBS Sports is the big player in that segment.

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Saturday, November 27, 2010

Harrah's Loveman Off Base in G2E Keynote Speech

Gary Loveman, the president, chairman and CEO of Harrah's (now Caesar's) Entertainment, gave one of the keynote speeches at this month's Global Gaming Expo in Las Vegas. The premise of his speech was that the casino industry is getting a bum rap and its not fair that the industry is more heavily and unfairly regulated as opposed to liquor and fast food industries. Really? I was there in person and I had a hard time not breaking out in laughter.

This wasn't the only poor reasoning expounded by the leader of the company that introduced 6-5 blackjack to Las Vegas and then whines how it's difficult to expand his business to get more people to play his chump games, but I digress...

He stated that due to regulation, casino businesses aren't that widespread. He showed a global map showing the relatively few locales around the globe that have casinos and used that to state that the industry has lots of room to grow, if not for politicians and regulators operating under unfair assumptions. Maybe there are some unfair assumptions regarding the casino industry, but the history of Las Vegas is history. Organized crime was heavily involved and therefore the casino industry due to that history will ALWAYS be heavily regulated and scrutinized. That's not going to go away.

But that's not my main criticism of this line of argument. Loveman claims that due to this regulation and restriction on casinos that people can't enjoy themselves with gambling when they want. THAT IS NOT TRUE. What these folks in the brick-and-mortar casino industry need to get through their heads is that if someone wants to play poker, a slot machine, bingo, roulette, etc., they can do that ONLINE....RIGHT NOW....FROM THEIR HOME. They don't need to come to your casino. If you have an internet connection, you can gamble - period. They don't need to travel to your facility. If your facility was someplace customers really wanted to visit, they'll come. If the games at your brick-and-mortar casino tend to nickel-and-dime your customers, regulations are the least of your worries, in my opinion.

The other off-base argument I'll mention is that he tried to equate gambling with constitutional rights such as freedom of speech and freedom of religion. Hey, Loveman, last I checked there's no "Lucky 7th Amendment" in the US Constitution prohibiting Congress from infringing the right of the people to bear the handle of a slot machine. This was a really stupid argument. Again I had a hard time not laughing. To be fair to the audience, they were well behaved and didn't laugh either...or they agreed with Mr. Loveman, which means the land-based casino folks are in really deep trouble when online gambling finally becomes legal in the US. When? Don't know, but it's only a matter of time.

The Las Vegas Sun has an article on Mr. Loveman's address, which you can find here if interested.

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Thursday, November 18, 2010

How are the Predictions from WhatIfSports Looking Now?

I wrote a post back in September at the beginning of the NFL season relating the predictions of WhatIfSports with regard to the division winners, wild card teams and Super Bowl participants and winner. Since ten weeks have transpired, let's take a peek at how accurate WhatIfSports' predictions are appearing to be.

They claim that in the AFC the division winners would be the Jets, Ravens, Chargers and Texans, with the wild cards being Tennessee and Indianapolis. The Jets and Ravens seems like decent picks to win their divisions, but the Chargers seem to be behind the 8-ball with regard to winning the AFC West and the Houston Texans are at the bottom of their division. The prediction that New England and Pittsburgh would NOT make the playoffs in the AFC also seems off base as well as their prediction that the top 3 teams in the AFC East - New York, New England and Miami would all finish with 8-8 records. Both New York and New England already have 8 wins.

In the NFC, WhatIfSports predicted that the division winners would be Dallas, Green Bay, San Francisco and New Orleans. Of this set, Dallas is totally out and it looks tough for San Francisco. The other two teams have a good chance but have strong competition in their division races. The wild card picks, Minnesota and Carolina only have 4 wins between both teams - they're not going anywhere.

Overall, the accuracy of WhatIfSports predictions is seriously lame. If they used their typical methodologies that they use for their core business to make these preditions, I think you know all you need to know about these guys. Maybe WhatIfSports needs to be renamed WTF Sports?

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Tuesday, November 2, 2010

Tribal Casino Lowers Gambling Age

UpperMichiganSource.com reports that the Little Traverse Bay Band of Odawa Indians has lowered the minimum gambling age at its Odawa Casino from 21 to 19. The change should be implemented by the end of the year.

It is apparent that there was no restriction from the State in order for the tribe to make this operational change to the casino on its tribal lands. However, the change did have to go through the tribal council. The Little Traverse Bay Band of Odawa Indians Tribal Council passed the bill and it was signed into law by Tribal Chairman Ken Harrington.

Since legal age of adulthood is 18, it may be only a matter of time for minimum gambling ages to be lowered to 18. In several jurisdictions, you can play the state lottery at 18, but not in a casino until 21. So, the age restriction for casinos may not be as much in order to protect innocent youth as opposed to the providing the state lottery the best chance to grab as much money out of a young adult's wallet.

It would be expected that tribes that have this latitude to change the minimum age to gamble to eliminate this state advantage, but not to lower the age below 18. Generally, the minimum age to gamble is in the 18 to 21 range, although in Missouri, a person as young as 16 can play charity bingo.

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Saturday, October 30, 2010

Arizona Tribal Gaming Revenue Stablizing

Unlike the continuing trouble with Nevada gaming, the tribal gaming properties in neighboring states are somewhat stable. Casino Gambling Web reports that current gambling revenue for the quarter will come in at around $22 million, about 1% higher than the same period last year, reversing the declining revenue trend of the last couple of years due to the economy.

The tribal properties in Arizona pay differing tax rates, depending on their compact with the state. The article states that there are 22 tribal gaming properties in Arizona, with each property paying a tax rate that varies between 1% and 8%, again depending on the compact.

Since Arizona stirred up controversy and a boycott due to its illegal immigration law, that seems to have not had a huge negative impact on gaming revenues.

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Wednesday, October 13, 2010

Atlantic City Gambling Revenue Takes Hit

Test Test Test

Bloomberg reports that Atlantic City gambling revenue fell 12% in September 2010 from September 2009 levels. Gambling revenue was $2.8 billion in the first 3 quarters of 2010, which was almost 9% less than the same period in 2009.

The economy is definitely a factor, but the impact of competition must be looked at as the primary factor for reduced gaming revenue. Surrounding states such as Delaware, New York and Pennsylvania have increased their gambling offerings for their local populations. No need to travel to Atlantic City if the gambler can play close to home.

Atlantic City needs to prevail in New Jersey's efforts to allow sports betting to provide the competitive differentiator to bring back this destination. Otherwise, the long term trend for Atlantic City may not look promising.

See previous posts on New Jersey sports betting here, here and here. The posts discuss New Jersey's efforts and surveys with regard to establishing sports betting and overturning PASPA.

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Wednesday, October 6, 2010

California Tribal Gaming Now Even More Competitive with Northern Nevada Casinos

This blog has discussed the threat to Reno and Tahoe casinos from California-based tribal gaming properties. The key advantage of the tribal casinos is that the tribal properties are much closer to the California population centers than Reno and Lake Tahoe. The New York Times has an article that highlights the proximity advantage as well as the upgrading of the tribal facilities to become more full-amenity hotel casinos.

I've posted a similar sentiment to the Times article a few months back. That post can be found here. The most controversial post on this blog regarding the topic can be found here. Specifically what do Reno and Lake Tahoe do to combat full-amenity tribal hotel casinos that are located much closer to California cities? In the last referenced post, I discussed that Nevada casinos may need to exploit the two things they can offer that California casinos can't - sports betting and legal brothels. Sports betting probably won't generate the level of revenue to make up for lost slot revenue, but legal brothels may be enough of a differentiator to pull sufficient traffic to the Reno and Lake Tahoe properties to hold their own. Right now, Reno and Lake Tahoe are hurting to the tune of a 25% decrease in gaming revenue since 2007.

The article describes that Reno properties are becoming more akin to the casinos that cater to the locals market, similar to how Stations Casinos operate their Las Vegas properties. The problem is that there may be too much casino capacity in Reno compared to the approximately 250,000 population base. In addition, the locations of the various Reno properties are not as well positioned as the suburban-located properties in the Las Vegas area.

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Wednesday, September 29, 2010

Slot Machine Myths

A pretty nice article from a Tunica, Mississippi television station helps burst the bubble regarding some myths regarding slot machines. The story is linked here. The essence of the bubble bursting is the presence of a random number generator inside each slot machine. It determines wins and losses.

From the article the myths are (with my commentary):

1. "Hot" and "cold" machines. The random number generator, being an electric component, can become warm when inside and operating in a machine, but other than that on a per-pull basis, the result is the result. What happened last pull doesn't have an impact on the result of the next pull. Sad but true. That being said, just because a jackpot was won the last pull, doesn't mean you won't get a jackpot on the next pull. Highly unlikely given the typical payout distribution of the machine, but it is theoretically possible.

2. Using a player's club card helps you win. Nope. Those cards help track your play, which if plentiful can earn the player benefits and perks, but the slot machine doesn't modify its payouts depending on who is playing.

3. Casino management controls who wins. If that were true, you'd be seeing LOTS of lawsuits. No, the machines operate independently from casino management's ability to control who wins and when. Machines typically go through vigorous regulatory testing to ensure proper operation before they are approved for use.

4. Machines alter payouts depending on how much money is bet. Again, the result is determined on a per-pull basis, not on a per-bet basis. Is it possible that if you had wagered on more lines than just the minimum you may have won on a particular pull? Sure. But remember you would be wagering a lot more money per slot machine pull, which may mean your bankroll would potentially go away a lot faster (unless you win of course).

5. You can determine the odds of the machine based on physical examination of the reels. Not even close to being accurate. Hate to break this to you but with newer games, the reels have no impact on whether you win. Huh? Yep. I posted this back in 2008 explaining this, which you can read here. What happens in modern slot machines is that when you push the button (or still pull a handle), the machine determines if you win and if so, how much, THEN the reels will spin and stop on various symbols in order to reflect that resulting win (or loss). A bit disappointing, isn't it?

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Monday, September 27, 2010

Internet Gambling Bill Has Dim Prospects

Pokernews.com is reporting that the internet gambling and taxation legislation proposed by Rep. Jim McDermott is not likely to move forward before the November election. Historically, not much legislation gets done in "lame duck" sessions, so the prospects for federal legislation to allow internet gambling are pretty dim.

In addition, I'm not aware that the Senate has any sponsors for the bill on their side. Both houses of Congress need to pass the legislation before heading to the White House for signature. With the election and not enough traction, I think we're not going to see a legalized and regulated internet gambling structure from the federal level anytime soon. If it happens, it will have to be at the state level or from the Indian tribes.

As is expected, Republicans will take over control of the House of Representatives. Historically, Republicans aren't in favor of internet gambling. That should put the prospect of federally regulated internet gambling on the back burner for several more years, or until the budget situation is so bad, that the money will just be too attractive to resist.

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Sunday, September 12, 2010

It's NFL Kickoff Weekend, But Someone Knows the Results Now!

Yes, indeed. Although the Week 1 games are still in progress, WhatIfSports thinks they know who will make the playoffs and even win the Super Bowl. Here's the teams WhatIfSports think will go to the playoffs, win the conference championships and win the Super Bowl:

AFC East - New York Jets
AFC North - Baltimore Ravens
AFC West - San Diego Chargers
AFC South - Houston Texans
Wild Card - Tennessee Titans
Wild Card - Indianapolis Colts

NFC East - Dallas Cowboys
NFC North - Green Bay Packers
NFC West - San Francisco 49ers
NFC South - New Orleans Saints
Wild Card - Minnesota Vikings
Wild Card - Carolina Panthers

AFC Champion - San Diego Chargers
NFC Champion - Green Bay Packers

Super Bowl - Green Bay Packers

They predict the New England Patriots don't even make the playoffs. We'll see. The company is touting its simulation technology, but I'm not convinced that it is that useful. I've done posts in the past which predicted fantasy rankings, based on the premise that stating what happened last year would happen this year. Individual performances may not vary significantly, but teams' performances can vary significantly from year to year. The recent Super Bowl loser slump is a great example.

Do you think WhatIfSports is correct? Do you think the top 3 teams in the AFC East will all finish with 8-8 records? I have doubts as to the usefulness of this approach with regard to team performance.

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Tuesday, August 31, 2010

California Horse Racing Committing Suicide?

California is in the final stages of approving two major changes to the horse racing industry in the state. The first is an increase in the takeout on pari-mutuel wagers known as "exotics." To simplify, wagers that include more than one horse (e.g. exacta, trifecta, etc.) will have the takeout increase by a couple of percent. I'm not sure how bad or good that change is, but my personal bias is that takeout is high enough already, and increased takeout (think tax) is likely to decrease handle (wagers), thereby making the net takeout revenue unchanged or perhaps reduced.

The second change is the most controversial and in my opinion could spell the demise of racing in California if not squelched. That is the allowing of exchange betting. Although touted by its major proponent, Betfair, I haven't seen a definitive study that shows how racing is benefited in any jurisdiction where Betfair can offer exchange wagering on races.

The way in which this bill added exchange wagering is highly suspect. One surmises that behind the scenes hanky panky was at play. This again is refuted by Betfair - equally and vehemently claimed by opponents that said the addition of exchange wagering only was inserted in the bill just two days before the deadline for amendments. Very fishy if you ask me. In my opinion, the Betfair doth protest too much.

If exchange wagering operates similarly to how it operates in other jurisdictions, the result will likely be the cannibalization of wagers from the pari-mutuel pools (at approximately 20% takeout) to the exchange (at approximately 5% takeout). Good for bettors, but bad for the industry. You see, if the industry now has problems distributing the revenue from 20% takeout, how can it survive dividing up 5%? Doesn't make sense.

Here's one way to describe a potential future. Assume that all the takeout on California racing now is 5 bets of $1 each. At 20% takeout, that gives 5 20-cent takeouts to divide up among tracks, ADWs, horsemen, purses, taxes, etc. Also assume a typical distribution of bettors where the high-rollers are conducting 3 of those bets, with the rest of the horseplayers conducting the remaining 2 bets.

Enter exchange wagering with a 5% takeout. For a $1 bet, only 5% is retained. Given that scenario, it is more than possible that the high-rollers will transfer some of their wagering activity from the 20% takeout pari-mutuel pools to the 5% takeout exchange pools. Let's assume 2 of their 3 bets move that way. What will result is that the 5 20-cent takeouts are replaced with 2 5-cent takeouts and 3 20-cent takeouts. An overall reduction in revenue to the industry by 30%. How in the heck does that make any sense?

For exchange wagering to provide MORE money, overall betting would have to increase by around a factor of 4 times just to be even. Do you really think that will happen? If it did, Betfair would have had that information published all over the place, and this legislation wouldn't have to been snuck in at the last minute.

If the Governor signs the legislation as I think he will, the only way to save California racing is to make sure the tracks and horsemen stick it to the exchange wagering companies to increase their takeout on exchange betting to EQUAL amounts to the current pari-mutuel pools. This way, any cannibalization of pari-mutuel wagering won't hurt the industry - the money will just be coming in from a different source.

Let's see how cooperative Betfair is then when faced with that takeout structure...

Update...the California Horse Racing Board has a press release discussing the bill here.

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Wednesday, August 18, 2010

Singapore Casinos Not Content Limited To Asia

The new casinos in Singapore are doing quite well. You can see my previous posts on the Singapore casinos here and here. The UK Independent has an article that states that Singapore is doing so well they already the 2nd largest casino market behind Macau after barely 6 months in operation.

What is amazing is that they may actually surpass Las Vegas as the 2nd largest casino market behind Macau in the next few years. This is great news for Singapore and bad news for Las Vegas. Las Vegas is getting losing business that formerly came from Asia, making its current economic slump even worse.

To put numbers behind the popularity, Resorts World Sentosa is quoted as guest numbers are now exceeding 1 million per month, with an expectation of 13 million visitors per year. Great news for Singapore. I've said before Singapore is a great locale.

Las Vegas needs to be concerned.

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Monday, August 16, 2010

Horse Racing Looking to Fantasy Sports?

BloodHorse magazine in their July 24, 2010 issue had an opinion piece titled "Fantasy Sports: An Opportunity - and a Competitor." The article described the size and growth of the fantasy sports market, the typical demographic, a warning about the potential threat and the potential opportunity. I think the author pointing towards fantasy sports isn't that bad, but his findings are off.

The quote from the article takes recent information from the Fantasy Sports Trade Association's research. There are approximately 27 million Americans and approximately 3 million Canadians that play fantasy sports. That's a pretty good size group of people. With regard to the American player, he is male, 37, college-educated, and has a household income of $94,000 - a great demographic that the horse racing industry would love. As is well known by the typical horseplayer demographic, you would think you need an AARP card in order to place a bet.

Here's where the author is off the mark. The author lays out a decent overview of TVG's Fantasy Horseracing product, which allows players to create a league of horses, trainers and jockeys. He thinks that horse racing would be a great fantasy sports vehicle, which would attract fantasy sports players, who may then become horseplayers to some extent. Wrong, wrong, wrong. No chance.

Why? Super simple.

As anyone who knows fantasy sports (i.e. me) can tell you, fantasy enthusiasts are primarily FANS OF THE SPORT. If you are a fantasy baseball player, odds are you are a baseball fan, then you got into fantasy baseball. The same is true for football, basketball, NASCAR, etc., etc. Fantasy sports players play fantasy sports to get more out of the sport they enjoy. Only the most geeky would have statistics be an attractant. For those, baseball is king...and in my opinion cricket probably isn't far behind - but cricket isn't as popular in the US.

What will not happen is horse racing fantasy being a big draw and sucking in new fans like Washington DC sucking in your tax dollars. Nope. Fantasy horse racing players are horse racing fans who got into fantasy horse racing. If you're not into horse racing, you're not going to play fantasy horse racing. This is where the author is way off.

The author is correct that the demographic would be very attractive to horse racing. They are younger, affluent and intelligent - exactly the kind of new handicappers the industry needs. I've got an idea of how you get these folks, but it's not this way. More on that in a future post.

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Tuesday, July 27, 2010

Would This Be an Indicator of the Most Accurate Fantasy Football Prognosticator?

Over the last couple of years, I've done a few posts regarding fantasy football projections, which you can see here. here. here and here. I have a pretty strong bias that fantasy football magazines aren't significantly more accurate than just predicting what happened last year would happen this year (at least for quarterbacks). Do I buy fantasy football magazines? Of course! Hey, it's fantasy football season! Now I do recognize that I am paying for historical information and a nice paper-based reference. I am not paying $7.95 for rare insight. Nowadays you can get pretty good fantasy info for free.

With regard to accuracy, I've been thinking of what indicator could be a good "tell" that the magazine or publisher might have more on the ball than the competition. Yes, being accurate in every player and position is the objective, but if you could choose just one position and if that accuracy was good, could it be an indicator? I've got an idea here that I will share and you can determine if it has any merit.

I'm thinking that the fantasy prognosticator that does the best with regard to projecting kickers is likely to be accurate with the other positions as well. The reason I say this is that the kicker generally participates in every scoring drive, offensive or defensive. Of course, kickers on good offensive teams will likely score more points, but would they score the most kicker points? Maybe not.

For example, if Kicker 1 on a good team and Kicker 2 on a not so good team are playing each other this week. Team 1 beats Team 2 28-16. Kicker 1 scores 4 extra points or 4 points. Kicker 2 gets 3 field goals and 1 extra point or 10 points. See? Kicker 2 generates more fantasy points.

If a prognosticator gets kicker rankings (and maybe even point projections) correct, they are likely to get other position rankings correct. If they can determine that a kicker is going to get a good number of field goal opportunities but not extra points, that will help paint the picture with regard to quarterback, receiver and running back stats for that team as well. Get the kickers right, and the other positions will follow suit.

That's what I am going to look at this year. I am going to do a follow-up post to lay out a few fantasy football magazines and their Top 15 kickers. We'll see how accurate they are.

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Tuesday, July 20, 2010

A Horse Racing Article That Is Right But Wrong

BloodHorse.com has an article that discusses various means by which racetracks can counter declines in handle. I took a look at the article, penned by a couple of authors known in the industry. There are a couple of decent points made, but nothing in the article is that innovative or new. Stating conventional wisdom may fill some pages in a magazine, but doesn't do much if you are a racetrack executive looking for sage advice.

The secondary headline - how to move beyond a broken model - isn't really a "news flash." The decline in handle and the profitability pressures being endured by tracks are well known. For those so inclined, my "critically acclaimed" analysis of the racetrack industry can be found here. The revenue model for horse racing doesn't work anymore given the explosion in competing forms of gaming available to US consumers, compounded by the stupidity of the horse racing industry to not see the threat or even react to it, other than complaining, whining and fighting among the various industry constituencies for an equal or larger share of a decreasing pie.

There really isn't anything wrong with the pari-mutuel wagering method. It's been used in the US and around the world for around a century. If there was some kind of flaw, it would have appeared by now. If the argument is that takeout is too large, perhaps there is an argument. I am of the opinion that takeout should be somewhat lower, on the order of 15% for all types of wagers, straight and exotic.

The article discusses three concepts: reduced takeout, new pari-mutuel wagers and betting exchanges. Again, some decent points are made but miss the mark and in and of themselves aren't likely to be the "killer app" that will save the industry. In addition, some of these concepts have been discussed before in other industry venues, such as RTIP. Nothing new.

The biggest error in the article is the argument that betting exchanges will supplant the pari-mutuel betting model. Not a chance. The reason is obvious. If the industry can't survive with tracks, horsemen, ADWs and state and local governments fighting over how to split a quarter, how is it going to survive with the same folks fighting over how to split a few pennies? If handle, which is declining, would have to double if takeout was reduced to 10%, what about requiring handle to increase by a factor of 7 to obtain the same takeout with betting exchanges? Yeah, right.

Betting exchanges for horse racing aren't a high probability. Betfair can hope and pray and lobby all they like, but I think a snowball has a better chance in the nether regions than betting exchanges for horse racing being approved in the US. Couple that with their purchase of TVG with its ADW operation, what makes Betfair think that the purchase of an ADW would make them more endearing to the tracks?

All these approaches miss the salient point which is that bettors have other options and options they know. They are not horseplayers. The core attractant is the event, not the betting method. Do you really think that people will flock to horse racing just because of a betting method? Hardly. People bet on SOMETHING. It's the SOMETHING that attracts them and they bet on it. If the SOMETHING isn't interesting, they are not going to bet on it given the other SOMETHINGS that exist that have proven to be interesting to bettors (e.g. sports, poker, lottery, casino).

The final paragraph is classic stating the obvious. It reads, "imaginative strategic thinking, multiple tactical approaches, calculated risk-taking, and perseverance in the face of barriers are the ways forward. No single line of attack is a panacea, but maintaining the status quo is untenable." Wow, such wisdom. Too bad the authors didn't mention any of those in the article. I guess they're saving that for the racetrack operators that hire them as consultants. I sure hope that their clients get their money's worth.


Shanklin, W. & Christiansen, E. (2010, July 10), Beyond Pari-Mutuel Wagering, BloodHorse.com.

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Sunday, July 11, 2010

Fantasy Sports a Recession-Proof Industry

The Huffington Post, of all sources, had a story this week listing ten recession-proof industries. Fantasy sports was one of them. The article is correct. Fantasy sports is a great fit for a recession-proof industry. Why, you ask? Here's why:

In tough economic times, entertainment is a great escape. Movies did exceptionally well during the Depression - so did sports. Of course there are more entertainment options today given the advances in gaming. Sports is just as popular as ever. What fantasy sports adds is the ability to allow the fan to utilize their skill to prognosticate performance of sports players and to pit those skills against others for bragging rights and even cash prizes. With the poor economy, the ability to get some additional cash is just a sweetener. Fantasy sports adds a bonus to the entertainment and escape value of sports.

There are fantasy games for just about every sport available. Football, baseball, basketball, hockey, golf, auto racing - even fishing have fantasy games. Research from the Fantasy Sports Trade Association estimate almost 30 million Americans play fantasy sports.

In these tough economic times, fantasy sports is something that can expand the entertainment value of sports viewership, extending the involvement of the fan to cover the entire week. That is a very good value.

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Wednesday, June 30, 2010

California Tribal Casino Opens Hotel Putting Further Pressure on Northern Nevada Gaming

The Sacramento Bee reports on the opening of a 300-room hotel, spa and amphitheater at the Thunder Valley Casino, north of Sacramento. This is bad news for gaming properties in northern Nevada. Northern Nevada has definitely been hit by the recession as well as the explosion of tribal gaming in California. By adding lodging to their property, Thunder Valley is even that much more of a draw for gamblers that want to spend the night at a property, but not drive all the way to Nevada. This is a good move for Thunder Valley and bad for Northern Nevada.

I had a post last year that discussed a radical approach to helping Lake Tahoe and Reno hotel casinos compete - putting legal brothels in the properties. That idea was discussed in a Casino Operations class at UNLV last spring and it was not rejected out of hand by the students. What should be noted is that I'm not the first to pose the idea. The mayor of Las Vegas, Oscar Goodman, posited the same idea for Sin City back in 2007. He took some heat for his position, but an opinion piece in the Las Vegas Review Journal supported him. I do too. It makes sense for Las Vegas but makes even more sense for Northern Nevada gaming properties. In fact, it might be a matter of survival.

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Thursday, June 24, 2010

New Jersey Still Looking at Sports Betting

The AP reports that New Jersey wants voters to decide this fall if sports and internet betting should be legalized in the state. Several Democratic legislators are pushing for a ballot initiative for the November ballot. In addition, they have called for a gambling summit that would assemble legislators, gambling industry figures and policy advisers.

The story quotes State Senator Steve Lesniak, " 'There are billions of dollars of gambling money that we're leaving on the table," said Lesniak, who represents a district in northern New Jersey, near where the Meadowlands racetrack wants to offer slot machines to attract new gamblers. That's something Atlantic City has vowed never to let happen.' "

Senator Lesniak has already sued the federal government over the Professional and Amateur Sports Protection Act (PASPA), which effectively bans sports betting in all but four states: Nevada, Oregon, Montana and Delaware. He is challenging PASPA based on constitutional grounds.

In recent years, other states have expanded their gambling offerings, pulling market share from Atlantic City. Senator Lesniak is quoted, " 'Atlantic City is dying,' Lesniak said. 'The Meadowlands is dying. Our racetracks are dying. We have time to get this right and craft a constitutional amendment that will maximize revenues for the state and for our tourist destinations.' " I think he is correct. If New Jersey doesn't do something, Atlantic City gaming will become a shell of what it once was.

Other posts on this topic can be viewed here and here.

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Saturday, June 12, 2010

Tropicana Adding Cantor Gaming's Mobile Product

The Las Vegas Sun reports that the Tropicana is the latest casino to add Cantor Gaming's mobile wagering system. Cantor's system is already installed at the Palazzo and M Resort. I believe that Cantor has an agreement with the Hard Rock, but the system may not be installed yet. Cantor isn't exactly taking Las Vegas by storm, but they are making progress and picking up casino installations.

The Sun story reports the deal to mobile gaming for the Tropicana's upcoming revamped race and sports book, as well as other public areas, such as pool areas, restaurants and bars. This installation is part of the Tropicana's $165M renovation. The Las Vegas Review Journal reports the deal is larger - that Cantor will actually RUN the renovated Tropicana sports book when it opens this fall.

If the Review Journal story is accurate, Cantor running the sports book is a bigger deal. Selling a wireless network coupled with their proprietary games is one thing; taking the responsibility and potential liability of operating a sports book is another. Cantor, if successful, will provide new competition to Leroy's and Lucky's, the two major sports book operators in Nevada. Cantor's mobile gaming system would be a differentiator.

Cantor is the only mobile gaming system approved by state regulators, so they are in the first-mover position in this application area. If Cantor indeeds leverages this and also enters the sports book market, they could easily become a real threat to Leroy's and Lucky's. With regard to the other nascent mobile gaming providers, they are definitely in the rear and losing ground fast.

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Thursday, May 27, 2010

Super Bowl In NYC To Increase Sports Betting?

Casino Gambling Web reports that having the Super Bowl outdoors in a cold weather venue will lead to increased gambling on the game, particularly with regard to proposition bets. The premise is that the weather will generate more proposition bets regarding the weather, such as temperature, snow, etc. I disagree. The same propositions can be offered for games in warm weather locations, with the proposition temperature being higher and rain being substituted for snow.

The article is correct in predicting that the total points scored over/under level will likely be several points lower and that the point spread may be tighter. The article also mentions that during the two-week betting window before the game, the forecast weather may radically change, putting sportsbooks in jeopardy. This could occur if the game weather forecast moves from inclement to clear and sunny, or vice versa, during the runup to the game. If sportsbooks have taken too much action on a side that would benefit from a weather forecast change, they could be hit hard if even more action on the wrong side for them came in the days right before the game, with no real chance to balance the action.

We won't have to wait long to see if this is true as the 2014 Super Bowl will be in New Jersey, at the stadium for the New York Jets and Giants. If this occurs, will the NFL stop having the Super Bowl outdoor in cold weather locations, or will they continue to stick to their story that for them, it's about the game and not the gambling money? My guess is that if betting is hampered or the sportsbooks lose big, the Super Bowl moves back to warm weather stadiums or indoors.

One of the biggest jokes in sports betting in my opinion is the position of the NFL that it is worried about gambling because of the integrity of the game and that the popularity of the game is solely due to the game itself and not any gambling. The NFL is a great fit for gambling. Do you really think all those Monday night, Thursday night, Sunday night and Saturday night games are scheduled because those games couldn't be played on Sunday? My sentiment is that the NFL and other sports leagues oppose sports betting primarily because they don't get a cut of the money. Some consider fantasy sports gambling and you see all the major US sports leagues having fantasy sports games. Interesting, yes?

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Tuesday, May 25, 2010

Tropicana Undergoing Facelift

The Las Vegas Sun reported that the Tropicana will be undergoing a renovation that will cost upward of $165 million. Part of the thrust of the article is that the Tropicana will be losing some of its history, which is accurate. Of course, recent history for the property hasn't been that good, as it emerged from bankruptcy just last summer.

What the management team wants to do is retheme the Tropicana to a South Beach theme from the mix and match of decor installed over the 50 year history of the property. This is actually a very good thing. As the article states, often properties get "renovated" by blowing them up and rebuilding from scratch. The Tropicana will spend a fraction of the cost of a new build to refresh the property.

In addition, management is focusing the market position to a "best in class" position, which means that in their market tier, they are tops. That is also a good thing. The Tropicana isn't going to be able to compete with Wynn or the Bellagio, but they can compete with the mid-tier properties. Also, since the Tropicana is on the northern end of the Strip, their close competition, the Sahara, Circus Circus, Stratosphere (and the Las Vegas Hilton to the east), appear to be beatable properties. The makeover could put the Tropicana as the top property in this area.

I, for one, look forward to visiting after the renovation is complete.

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Tuesday, May 11, 2010

Delaware's Sports Betting Challenge Fails

The AP reports that Delaware has lost its challenge to the legal ruling that limits them to only offering parlay bets of 3 or more NFL games. Delaware has a grandfather exemption under the 1992 PASPA law, along with Nevada, Oregon and Montana. The exemption allows the grandfathered state to offer only those kind of sports betting options previously offered. Delaware offered a NFL sports lottery back in the 1970s.

Last year, Delaware revived its sports betting offering, but wanted to expand the options to allow single-game sports betting on the NFL as well as other professional sports. The sports leagues objected and filed for an injunction to keep Delaware from expanding their offering. The US 3rd Circuit upheld the leagues' arguments and instituted the injunction on Delaware, which they appealed to the US Supreme Court. The Supreme Court declined to take the case, ending the issue. Delaware will be limited to what they have offered last year.

The State of New Jersey is fighting PASPA on constitutional grounds. Delaware did the same, but did not take the same tack as New Jersey. What Delaware wanted was their ability to expand sports betting without being bound by PASPA, but have all the other non-grandfathered states still be bound by the law - wanting their cake and eating it too. The court saw through this and didn't allow this expansion. If the state wants to operate within PASPA, they need to stay within the stated safe harbors.

New Jersey is fighting to have PASPA declared unconstitutional, which would allow any state to decide for itself what gambling is allowed within state borders. Delaware didn't challenge the entire law, just the portion they didn't like. That approach likely doomed their chances of success. Either they join New Jersey and attack the whole PASPA law, or they need to be satisfied with NFL parlays.

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Wednesday, April 28, 2010

2010 NFL Draft Breaks Viewing Record

The Associated Press reports that more than 45 million viewers watched a portion of last month's NFL Draft. The draft changed to a prime time format for this year, with round 1 on Thursday night and rounds 2 and 3 on Friday night, with rounds 4 through 7 on Saturday. This experiment of the NFL to leverage its popularity year round was successful. Last year, there were a record 39 million viewers, easily eclipsed by this year's mark. The NFL Draft has increased in popularity along with the rest of the league. In 2001, the draft attracted 23.5 million viewers. Viewership has just about doubled in a decade.

With this large viewership, the next step would be to craft a skill contest that could extract revenue from these rabid NFL fans. The game concept would allow viewers to win prizes by correctly predicting draft picks. There is a particular contest scheme that would work extremely well for the NFL draft, which will be discussed in a future post.

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Monday, April 19, 2010

Horse Racing Still In Trouble

Horse racing in the US has been in trouble for some time. In the old days, racing was the only legal gambling activity in the US outside of Nevada. With the advent of expanded casino gambling, Indian casinos and lotteries - not to mention online gambling - racing is just one of many gambling outlets competing for market share.

In addition, the racing fan is older. A previous post discussed the age of racing enthusiasts. They're not getting any younger, which will be the end of racing if not reversed as generally dead people don't bet on the ponies, but have been known to still vote.

Not to brag too much, but I wrote a "critically acclaimed" post analyzing the racetrack industry according to Porter's Five Forces model. Who were the critics? Well they were a friendly audience to be sure, but I did receive positive feedback from a noted industry expert, who is quoted in the Casino Journal article which will be subsequently discussed.

Casino Journal magazine had a great article in its February 2010 issue regarding racing. The article does a good job of highlighting the indicators of racing's decline and does a fair job of analyzing why racing is in decline. Adding this blog's post regarding Porter's model will add additional color to the reader's inquiry.

What surprised me in a negative way was that my incorrect impression that racing handle was at least keeping static, albeit not growing. Not the case. The article states that total racing handle (i.e. bets) fell from $15.2 billion in 2003 to $13.6 billion in 2008. Even the off-track handle, which was supposed to be the strongest element (on-track handle was known to be an issue) fell from $13.3 billion in 2003 to $12.2 billion in 2008.

The article touts the promise of off-track betting, betting exchanges and racinos to help racing's future. Not including betting exchanges, the other concepts have been in place for several years and racing is still in decline. Betting exchanges have a flaw in that they are peer-to-peer bets with a low commission (takeout). They are not going to be able to generate sufficient revenue to save the industry and quite possibly will cannibalize the existing higher takeout pari-mutuel wagering base.

What is important to note is that none of these concepts do a thing to address the core issue facing horse racing - the increasing age of the racing enthusiast demographic. The sport needs younger horse players. No one has come forward yet with a concept that holds the promise to do that. There is a new concept that is in early stages of development that might "crack the code" to solve the need for new horse players while also generating increased pari-mutuel revenue for the industry.


Doocey, P. (2010, February), Post Time for Change: Racinos won't save racing - Some fresh ideas might, Casino Journal.

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Monday, April 12, 2010

NCAA Tournament Betting Values Results

Well the 2010 March Madness is over and let's find out the results of my previous post which identified some potential betting values. To recap, I bet a hypothetical $100 for Duke to win the tournament at 8-1 and bet $50 on the lower seeded choices to win their first game. I arbitrarily chose Richmond over St. Marys in their game (they played each other), but really I should have stuck with the underdog theme and chose St. Marys (which actually made it to the Sweet 16).

I didn't take a look at point spreads and just looked to see who won their game outright. So from that perspective, only Murray St in the lower seeds won their game. If you took spreads into account, I am thinking I would have picked up another game. So for the lower seeds, betting a hypothetical $50 on each of those 5 teams, I won two of those games, so overall lost $50.

But Duke actually won the tournament! With a hypothetical $100 on Duke at 8-1, that's a nice win. Overall, I bet a hypothetical $350, $100 on the tournament winner and $250 on the first round lesser seed game winners. On the lesser seeds, down $50, but on the tournament winner up $800 for an overall tournament betting profit of $750. Not shabby at all.

Next year, I'll perform this exercise again, but get firmer numbers on the point spread on the first round games. To see the March Madness bracket results, click here.

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Monday, March 29, 2010

2009 Fantasy Football QB Prediction Results

In a previous post, I provided some fantasy football QB rankings and compared them to a couple of fantasy football magazines. The intent was to test the hypothesis that basically saying what happened last year would happen this year wasn't radically different from the "deep analysis" provided by fantasy football information sources, which you need to pay for. To recap the methodology stated in last year's post:

"I will take last year's QB rankings and use the premise that the rankings from last year will be the same as this year. There will be a couple of adjustments. If for example, a QB moves from one team to the other and will be the starter, I'll keep that QB at the same ranking, even though they changed teams. QBs coming back from injury will be replaced with the highest rank position from the best of their replacements (i.e. Brady for Cassel). They will be projected at the ranking level that their substitute had last year. Finally, I put in Mark Sanchez in the slot held by Gus Frerotte (#29). Frerotte is not in the league at this point and Favre is now in Minnesota.

Could that cause some inaccuracy? Yes, but to keep the level of my "expert analysis" to a minimum, I'll keep the adjustments paltry and simplistic. You will also see by doing this just the few instances where you can intuitively (i.e. for free) make your own adjustment and not pay $7.99 to read something you basically already know. I made one adjustment to be fair to the magazines, dealing with Brett Favre. They didn't have him in their top rankings so I assumed that they would placed Favre in the position of the top rated Minnesota QB (#27). "

"The stats were based on total performance (passing and rushing), not just TDs. The league I was in counted passing TDs for 3 pts instead of 6 pts, so QBs that maybe didn't pass as well but got some stats rushing may show up higher in this list than the rankings your league has. The ranking lists of the magazines also were based on a performance model, not just TDs, to keep the comparison consistent."

Here's the results for my projections and fantasy football magazines A and B (names omitted):

YouGaming Blog
Correct within 5 or less spots - 12 (40%)
Correct within 10 or less spots - 21 (70%)
Incorrect by 11 or more spots - 9 (30%)

Fantasy Football Magazine A
Correct within 5 or less spots - 15 (50%)
Correct within 10 or less spots - 24 (80%)
Incorrect by 11 or more spots - 6 (20%)

Fantasy Football Magazine B
Correct within 5 or less spots - 18 (60%)
Correct within 10 or less spots - 23 (77%)
Incorrect by 11 0r more spots - 7 (23%)

The fantasy football magazines were able to beat the performance of simply stating what happened last year would happen this year, but not by very much. Overall results to get rankings within 10 spots is pretty much the same. So, at least compared to the magazines considered, you could have simply taken last year's QB stats rankings as your cheat sheet and likely not done much worse. What this analysis doesn't take into account is the actual numbers produced by the quarterbacks. It could be that even though a QB is off by several spots in ranking, the actual difference in performance stats may not be drastically different, particularly after you get past the top tier of quarterbacks.

What is fairly consistent but not reported in detail is that after the top 20 quarterbacks, no one did very well in terms of accuracy. If a prognosticator could do a very good job of predicting quarterback rankings from 15 to 30, that would be a great value as often those players would be your bye week QB or your QB that can keep your team solid if your top QB on your roster has a nagging injury or a tough weekly matchup.

I may consider this year looking at actual projected stats to see how well the fantasy football magazines do in that area.

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Wednesday, March 17, 2010

Possible NCAA Tournament Betting Values!

It's March Madness time again! The NCAA men's basketball tournament draws betting action almost on a par with the Super Bowl. MySportsBook.com has posted the odds for the various teams to win the tournament. The odds vary from 2-1 for Kansas to 500-1 for Utah State.

Like last year, I calculated the average odds per seed level. This year, all the 14th through 16th seeds are combined as a field entry, with a payout of 50-1. You may think that is a great deal. If you do, maybe you could send me your money and perhaps I could pay 60-1, LOL. In other words, there are only two chances a 14th seed or worse will win the NCAA tournament - fat and slim. The 13th seeds had two teams with posted odds and two teams in the field category, so their average odds are lower than you would expect. No matter. 13th seeds aren't likely to win the NCAA tournament either.

Here are the average odds per seed level:

1 - 4.75
2 - 15
3 - 43.75
4 - 53.75
5 - 76.25
6 - 83.75
7 - 175
8 - 175
9 - 175
10 - 175
11 - 250
12 - 287.5
13 - 175
14 - 50
15 - 50
16 - 50

I looked for teams at a particular seed level that had posted odds 50% higher than the seed average. I found a few, mostly in the South bracket:

1 - Duke 8-1
7 - Richmond 300-1
8 - UNLV 300-1 (Go Rebels!)
10 - St. Marys (CA) 300-1
12 - Utah State 500-1
13 - Siena 300-1
13 - Murray St. 300-1

What I am going to do is make some hypothetical bets. I'll wager $100 that Duke wins the tournament and $50 each that the other teams each win their first game, with the exception of St. Marys. This is due to the fact that Richmond plays St. Marys in the first round. Since Richmond is a 7 seed, I'll go with Richmond. Are these good bets? Who knows but we'll see if the higher odds are an accurate portrayal of team strength, or reflect more of a bettor bias toward some teams with better name recognition. Duke has a great program, but I believe they are viewed weaker this year than Kansas, Kentucky and Syracuse. However, it could be that Duke may have the easiest path to the Final Four.

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Tuesday, March 16, 2010

Las Vegas Construction Meltdown Details

To say that Las Vegas' construction has taken a hit is one thing, but to see the details of the crisis makes it quite poignant. The Las Vegas Review Journal as a great article that discusses the current status of several large construction projects halted mid-construction due to the economic downturn.

What drives the point home are the pictures of project after project showing building frames and skeletons. One of the buildings looks more like something you would see from a war photograph rather than Las Vegas. Very sad.

Las Vegas gaming revenue is still down significantly, with Nevada casinos actually posting a loss last year (you can see the blog post here). I don't see the Las Vegas construction situation improving anytime soon unfortunately which is disappointing because Las Vegas is a great town.

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Thursday, February 25, 2010

Nevada Casinos Post Rare Loss

KNXT reported that for only the second time in history Nevada casinos lost money on an annual basis. The first year that happened was in 2003, while the economy was recovering from the dot-com bust and 9/11. In that year, the 260 largest Nevada casinos lost a total of $33.5 million.

This year?

This year, the 260 largest Nevada casinos lost $6.8 billion, 202 times as much money as they lost in 2003. Huge loss. $4 billion of that loss was by casinos on the Las Vegas Strip. President Obama telling people to stay away from Las Vegas wasn't helping things any. Now you know why the mayor of Las Vegas was so peeved.

The Record-Courier reported additional data concerning the Lake Tahoe and Stateline area, which lost $19.3 million. They define large casino as an operation that earn revenues of over $1 million, so the smaller operations aren't counted in this metric.

Who says that gambling is recession-proof? Not any more. Not that this was completely unforeseen. Nevada gaming revenue had been declining for a while, but to actually incur a loss of this magnitude has to shake up Nevada. You can read previous posts on this topic here and here.

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Sunday, February 14, 2010

First Casino in Singapore Opens

February 14th marked the opening day of the first full-blown casino resort on Sentosa Island. Resorts World Sentosa, operated by the Genting Group, beat the Marina Bay Sands for the honors of being the first integrated casino resort open. The Marina Bay Sands should be open in the May timeframe. Perusing the website, the resort is not done. The resort will also be home to Universal Studios Singapore, opening on March 18th. Singapore is a great locale and this casino does nothing but enhance the attractiveness of Singapore.

Singapore licensed two large casinos in order to satisfy the growing gaming market, but only two in order to balance the benefits of gaming with the potential for abuse. An interesting wrinkle is the selective cover charge levied on Singapore citizens and permanent residents. Singaporeans and permanent residents pay a $100 Singapore dollar cover charge to enter the casino. No charge for visitors/tourists naturally.

In addition, a previous post discussed how Singapore is going to the extent of excluding patrons from the casinos that are on public assistance or have unresolved bankruptcies. That post is here. Overall, Singapore is entering the gaming market in a very measured, but well thought out manner. With Singapore's excellent central location in Asia (few major cities longer than a 7 hour flight) and excellent economy and business focus, I expect the casinos to be a success.

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Thursday, February 11, 2010

Las Vegas Sportsbooks "Win" Super Bowl

The Super Bowl scoreboard is final and so is the Las Vegas sportsbooks'. Las Vegas also won the Super Bowl, with winning (i.e. keeping) 8.3% of all the sports bettors' money bet. The details are in the linked Las Vegas Review Journal article. Due to the variances inherent in sports betting, there is a chance the house doesn't win. I discussed when that actually happened a couple of years ago with the Giants-Patriots Super Bowl in a previous post. The Review Journal article actually reports the handle and win percentage from the last 10 Super Bowls - you can see that there is a wide range of results. Over the last 10 years, Las Vegas sportsbooks had a win percentage on Super Bowl bets of 9.6%.

With typical spread betting, where the objective is to balance the amount of wagers on both sides, the theoretical win percentage is about 4.5%. What happens is that both bettors wager $11 to win $10. The winning bettor wins $10 plus gets his $11 back. The losing bettor loses his $11 and the sportsbook keeps the remaining $1. So 1/22 is 4.54%. But the sportsbooks are winning at a higher percentage. Why? There are a couple of reasons.

One is that the books don't exactly have even amounts of wagers on both sides. They will tend to let more wagers fall on one side or the other. If they can set a spread where the general public will bet more on the side that should have a lower probability of covering, the books will win more. They will lose more if the game doesn't go their way, but they are pretty sharp at figuring games.

Another reason is that sportsbooks offer other kinds of betting options that have a higher hold (win) percentage, parlays and propositions. Parlays are a means of having multiple bets where all have to be selected correctly in order to win. So, during the regular season, you may bet a few games, but if all of them are selected correctly, you would win perhaps $60 on your $10 bet as opposed to $11 on your $10 bet. But if you don't select all correctly, you lose. Sportsbooks do very well on parlays. Propositions are those kind of bets that seem more like coin flips if anything. You can bet on who wins the coin toss, who will score first, whether the first score will be a safety, etc. The sportsbooks also do well on propositions. The article touches on "ties lose" parlay cards, where if the books are smart (they are), they may place propositions on those cards where there is a very reasonable chance that one of the underlying propositions will land on the predicted number of the card such that all bets will lose and the sportbook wins all the money.

Add up all these things, and just like New Orleans, Las Vegas wins the Super Bowl.

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Saturday, January 30, 2010

Fantasy Sports Market Metrics

The Fantasy Sports Trade Association 2010 Winter Business Conference was held this week in Las Vegas. A recap of industry statistics was printed as part of the conference attendee booklet. Here are a few snippets to highlight the large size of the fantasy sports industry. The bulk of the fantasy sports industry is in the US and Canada, with the concept slowly gaining traction in the rest of the world.

Fantasy sports participants

USA - 27.1 million (age 12 and above)
Canada - 2.8 million (age 12 and above)

Economic impact

$800 million impact within the fantasy sports industry
$3 billion impact across the sports industry

Fantasy sports participation by sport - USA

Football - 22.2 million
Baseball - 12.5 million
Racing - 9.6 million
Golf - 8.4 million
Hockey - 8.1 million
Basketball - 5.4 million

Fantasy sports participation by sport - Canada

Hockey - 1.87 million (are you really surprised?)
Football - 672 thousand
Baseball - 476 thousand
Golf - 420 thousand
Racing - 350 thousand
Basketball - 196 thousand

Due to the current economic situation, the growth in the industry has flattened but overall there hasn't been a decline, which is actually good news. "Flat is the new up..."


FSTA Market Study, Ipsos, July 2009
FSTA Consumer Behavior Study, University of Mississippi, July 2008

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Sunday, January 24, 2010

Delaware Challenges To Supreme Court

As expected, Delaware is going to appeal the current restrictions on their sports betting offerings to the US Supreme Court. Delaware had hoped to offer single-game bets similar to what Nevada offers. The NFL sought an injunction under the federal PASPA law, which was granted that limited Delaware only to the kind of sports betting options that were offered when Delaware operated a sports betting operation back in the 1970s.

When Delaware operated a sports lottery, they offered 3-game parlays of NFL games. This sports betting offering only was in effect for one season, but that offering allowed Delaware grandfather status along with Nevada, Montana and Oregon. However, the 3-game parlay offering for the NFL is a fairly large disappointment considering the effort to reinstitute sports betting in the state. If the Supreme Court takes the case and rules in Delaware's favor, Delaware would be the only state other than Nevada to be able to offer a full range of sports betting. Given the large population base within a few hours' drive, sports betting could be quite lucrative.

Although Delaware likely has a states' rights argument, the odds are low that the Supreme Court will even hear the case as the Court only takes around 1-2% of the cases submitted to them for potential review.

The Sussex Countian newspaper article is located here.

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Wednesday, January 20, 2010

Are Indian Casino Bonds Worthless?

Professor I. Nelson Rose penned a very interesting article for the December issue of Casino Enterprise Management magazine. The article was titled, "Indian Casino Bonds - A House of Cards?" The current economy is showing that casino gaming is not recession-proof and also showing that even tribal casinos aren't recession-proof. This brings up the point of the article that inquires about what happens if a tribal casino goes kaput?

Tribes are sovereign nations and the US Supreme Court has stated that tribes can not be sued without their consent. So what happens when a tribal casino that is financed with loans or bonds is unable to service that debt. What options do the creditors have? It is quite possible that there may be little they can do other than moral suasion.

With a Las Vegas casino in this circumstance, creditors could force the casino into bankruptcy court, where potentially the creditors operate the casino until final disposition of the case. That can't happen with tribal casinos as the Indian Gaming Regulatory Act mandates that a tribal casino must be owned by a tribe. Therefore creditors likely can't take over a debtor tribal casino in default.

This potential situation came to light when it was announced that the Foxwoods casino was in danger of defaulting on its multi-billion dollar loans. If, for the sake of argument, such loans to tribes were basically impossible to enforce by seizing the casino property (the object of the investment), the there is a whole lot of money lent to tribes that there may be a very difficult time collecting. Along with that, there may be quite a few lenders sweating out this economy hoping that they don't have to write down billions in loans and bonds.

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