Tuesday, September 25, 2012

Seattle / Green Bay Disaster - Incompetence or Worse?

The horrible call that ruled a Green Bay interception was actually a Seattle touchdown, giving the game to Seattle, was probably one of the most horrible calls ever in the history of the NFL.  Since it was committed by the replacement officials, it puts even more pressure on the league to settle the labor dispute before any more damage has occurred.  The story on this game and the video of the play can be found here.  But the officiating appeared to be very weird in that Seattle was the ultimate beneficiary.

Many people were unhappy about the result, but in the stories and other aftermath, do you know which group of people were happy with the result?  Bookies.  According to BeyondTheBets, 77% of the money wagered was on Green Bay, favored by 3 points.  The final score was 14-12 Seattle, so with the point spread, 14-9 Seattle.  Remember for this to happen, the referee had to rule a Green Bay interception was a Seattle touchdown.  If ruled correctly the final score would have been 12-7 Green Bay, or with the point spread, 9-7 Green Bay.

So let's take a look at how a bookie's economics look assuming 77% of the money is bet on Green Bay if Green Bay beats the spread or doesn't beat the spread, assuming a total amount bet of $1,000,000.  Also, we're assuming straight bets, where you need to bet $11 to win $10.

In this scenario, $847,000 ($770,000 + (.1)*($770,000)) is bet on Green Bay - 3 and $253,000 ($230,000 + (.1)*($230,000)) is bet on Seattle +3.  If the call was made properly, Green Bay wins the game outright and against the spread.  The bookie needs to pay the Green Bay bettors their $847,000 in wagers, plus their winnings of $770,000 - a total of $1,617,000.  The bookie can offset this with the Seattle wagers of $253,000, but that's not enough.  If Green Bay won, the bookie would lose $517,000 on every $1,000,000 in baseline wagers (not including the 11/10 vigorish) if 77% of the money was bet on the side that actually prevailed against the spread.  Ouch.

But that didn't happen here.  Since the officials ruled an interception was actually a touchdown for the other team, Seattle wins the game against the point spread.  The bookie does much better!  For every $1,000,000 wagered in this scenario, the bookie only needs to pay the winning Seattle bettors their $253,000 plus their winnings of $230,000 - a total of $483,000.  The bookie offsets this with the losing Green Bay wagers of $847,000, giving the bookie a profit of $364,000.  Big difference between losing $517,000 and profiting $364,000.

Assuming $100 million was bet on this game, with the weighting of bets and spread, that call turned a bookie LOSS of $51,700,000 to a bookie PROFIT of $36,400,000.  Don't let the stories in the news fool you to make you think that the money just went from one group of bettors to the other.  It indeed do that but you must take into account WHERE that money came from.  If to Green Bay, money would have to have been PAID by bookies out of their pocket but since Seattle won, no money had to come out of their pocket as the Green Bay bets ensured a big bookie profit.  If a book is balanced with equal bets on both sides, the bookie gets a 4.5% profit.  On $100 million wagered, that would be a profit of 4,500,000.  Not bad.  They got in this case about 8 TIMES as much profit.  Think about that...

So, you may say, $#!+ happens, right?  Well if you watched the game, this wasn't the only interception Green Bay had that was wiped out.  Also, it appeared the calls were very much in favor of Seattle whenever the game outcome against the spread was in doubt for Seattle.

When Green Bay took the lead, they intercepted Seattle on their first play after the Green Bay kickoff, deep in Seattle territory.  An official, however, called Green Bay for roughing the passer, negating the interception.  I saw the play - no roughing.  The Seattle QB was throwing and the Green Bay player was actually at the QB's feet trying to tackle him by grabbing the legs as opposed to a hit up high which can lead to typical roughing activity like contact with the helmet.  Didn't happen and it wasn't a late hit.

But Seattle apparently needed more help.  Later in this series, Seattle had a 1st and 25 (due to their miscues) and threw a deep pass.  The Seattle receiver actually interfered with the Green Bay defender, who had good position, was looking back at the ball and was trying to make a play himself.  The Seattle receiver grabbed the defender at the shoulder, twisting him and even appeared to grab his facemask.  The result?  The Green Bay defender was called for pass interference, a 32 yard penalty.

Now this series ended up at the Green Bay 7 yard line, where Seattle went on 4th down and didn't try a field goal.  If they had and made it, but didn't recover the onside kick, Green Bay would have won the game 12-10, but would have lost against the spread 13-12.  For the bookies to make money on this game, Seattle needed every single break that came their way.

One more thing, but just a conjecture.  Given the side of the field where the pass interference penalty and where the touchdown call was made, it's possible the same official made both calls.  Would have to see the games over again to try and find out the official's number for both of these calls. 

Do I think the game was fixed so Seattle would beat the spread?  I certainly hope not.  These replacement officials are bad.  Remember Hanlon's Razor:

   "Never attribute to malice that which is adequately explained by stupidity."

That being said, I don't think the NFL had the time to properly vet each of these officials from a security standpoint.  Recall the story a couple of weeks back where the NFL scheduled a big Saints fan to officiate a Saints game?  The story can be found here.  Given the money in professional sports here in the US, the players aren't the weak link - it's the officials.  Aren't paid that much and are fairly anonymous, not like players and coaches.  The NBA had a bona fide gambling scandal with officials a couple of years back.  You can read that post here.

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Monday, September 17, 2012

Social Casino Games Win Big

Source:  (2012, September) SuperData.

VentureBeat highlights the research findings of SuperData, which shows that social casino games will earn $1.6 billion in revenues this year, climbing to $2.4 billion by 2015.  Social gaming is coming on strong.  With the transition to more casino-type gaming for social gamers, this group is a key target for those operators in jurisdictions where iGaming becomes more prevalent, or even legal for the first time.  The SuperData report focuses on slots, poker and table casino games, so other skill games like fantasy sports doesn't appear to be included, adding even more revenues to this area.

You can find earlier posts that discuss the blending of skill gaming and wagering here and here.

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Saturday, September 8, 2012

US Horse Racing Economic Improvement 2012 vs 2011?

The Paulick Report published some year over year comparisons of US racing handle, purses and race days.  The story can be found at this link.  The story compares August 2012 to August 2011 as well as year to date 2012 vs year to date 2011.  All metrics show gains.  But is it all good news?  No.

Here's why.  Although a comparison on a monthly basis has value, the timeframe is too short to get a good feel for any trends, positive or negative.  Even publicly traded corporations tend to focus on annual and quarterly comparisons.  We can do that here by looking at the year to date 2012 vs 2011 numbers.

2012 vs 2011:

All Sources Wagering - +2.29%
US Purses - +8.39%
US Race Days - +1.81%

OK, so all positive, right?  Indeed.  But remember we need to take inflation into account.  Let's do that so we can figure out if in constant dollars, wagering is increasing.  Why is that important?  Well, wagering is the revenue that customers (horseplayers) bring to the business.  No wagering, no need for racing...

What is inflation so far this year?  2.23%  You can see historical inflation data here.  So, in constant dollar terms, wagering has stayed flat.  So, is this really bad news?  From 2003 to 2011, real handle has dropped 37% according to a McKinsey study published last year.  Flat handle actually can be considered good news.  Let's agree to that for now.

The question is at what price do we purchase that wagering handle?  You do that via purses and race days.  Taking inflation into account, purses increased just over 6% in real terms year over year.  Race days (with their overhead) also increased by 65.  So it took the industry an additional 65 race days of overhead as well as 6% greater cost in terms of purses ($57,852,060) to keep wagering revenue flat.  In terms of overall industry profit, it appears that the US racing industry actually is LESS PROFITABLE than it was for the same period last year as it cost more money to generate essentially the same amount of sales (wagers).

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