Gaming and Fantasy Sports Blog

Nevada Super Bowl Betting Results Good

2012-02-11T08:47:00.000-08:00

In addition to New York, Nevada also won the Super Bowl this year. Nevada sports books (with the majority of the action of course in Las Vegas) pulled in just shy of 94 million dollars in wagers ($93.8 million), "winning" $5 million. The hold percentage was 5.4%, which beat the theoretical hold percentage on typical 11/10 straight wager sports bets of 4.54%. Part of that could be due to slightly more money wagered on the losing side of the point spread, but most likely that is due to the books actually coming up short on the point spread portions of the wagers, but making that money back on losing parlay and proposition bets, which have better hold percentages for the sports books.

The Las Vegas Sun article also touts that this year's handle was the second-largest Super Bowl handle in the last decade. Before too many champagne corks pop, do realize that what is wagered legally in Nevada is but a small fraction of illegal sports betting in the United States. My estimate that for the Super Bowl, the illegal betting was about ten times the legal betting, or about ONE BILLION DOLLARS (now put your pinky to your lips like Dr. Evil).

As part of the National Gaming Impact Study Commission effort, the FBI estimated that one billion dollars was illegally wagered each week of the NFL regular season. That study was published in 1999 - this is 2012. Yahoo has a decent overview article regarding sports wagering and the position that legal sports betting should be expanded in the United States. I agree.

If interested, other previous posts on sports betting are available for view, with my recommended choices here, here and here, with the first post discussing the softening view of the NBA to potentially expanded sports betting.

Hawaii Back Again Looking at Gambling

2012-02-06T13:58:00.001-08:00

KITV in Honolulu is reporting that Hawaii is again taking a look at legalized gambling. Joe Souki, a leglislator from Maui, introduced a bill to allow a single standalone gambling facility in Waikiki. Why? Money, naturally. Here's the key quote from Souki, "We have that great liability with the state Employee’s Retirement System that we need to take care of, and we have a health problem. We have an education problem. We have these needs. Nobody wants to raise taxes and we need the money."

Having a large, first class casino in Waikiki is a huge winner, in my opinion. The article points out the Hawaii Convention Center as a good option being that it is 15 years old and in need of a "facelift." Also, according to the center itself, bookings are down this year. A casino at that property should bring higher activity to the convention center as well as higher tourist numbers overall. Singapore materially benefitted from the two casino resorts opened a couple of years back. Waikiki already has the resort properties but doesn't have gambling.

I have previously posted on the great opportunity Hawaii has in regard to adding gambling to its overall hospitality offering. Those posts can be found here and here. With the increased attraction of Macao and Singapore due to gaming, Hawaii might need to do this just to keep up with other premier Pacific locations.

BigLead Sports Blog Sold to USA Today

2012-01-31T15:53:00.000-08:00

BigLead Sports, now a property of USA Today, published the top online sports property rankings per number of unique visitors, for December 2011. Which is nice for BigLead Sports, they rank at number 6, at 19.38 million uniques. Very nice. Separately reported by the Fantasy Sports Trade Association in its most recent newsletter, is that the USA Today/Big Lead transaction was valued at $30 million. That may or not be nice. Probably nice, though, for the shareholders of BigLead, which allow them to exit.

Let's look at the comScore ranking and then discuss the valuation of the BigLead property and why or why not the valuation may be reasonable:

Top 15 Online Sports Sites (December 2011)
Unique Users (USA) (000s)
Source: www.comScore.com

1. Yahoo 53,239
2. ESPN 43,252
3. Fox Sports 37,836
4. NFL 26,286
5. Sports Illustrated 20,132
6. BigLead Sports 19,384
7. CBS Sports 18,097
8. USA Today 15,646
9. NBC Sports 14,891
10. SB Nation 9,694
11. BleacherReport 9,178
12. Sporting News 8,798
13. MLB 7,132
14. Stack Media 5,832
15. JUMPTV 4,197

So, was the $30 million price for BigLead Sports a good one? Let's take a look. This site could be described as a blog and aggregator. It has some unique content, but it also pulls in selected material from other sites, to include other owned "partner" sites. It appears to rely on an advertising model as its primary revenue driver. Given the high number of monthly unique visitors, that isn't such a bad idea.

OK, so is the price fair? The assumed valuation for BigLead is $30,000,000 / 19,384,000 or $1.54 per unique visitor. If that is now the going rate for a sports website, that might put a downward bias on the value of similar properties. If the evaluated property had significant additional revenue streams, typical of pay-to-play fantasy sports websites, then $1.54 per unique visitor would have to be augmented by a more common metric associated with gaming sites, such as annual revenue per user or a multiple of gross gaming revenue. Overall, fairly well done by BigLead Sports as they started a blog in 2006 and just under 6 years later have a $30 million exit.

Zynga Exploring Online Gambling

2012-01-21T14:43:00.001-08:00

Wall Street Journal's MarketWatch reports that the the Facebook-focused social games provider Zynga is talking to potential partners with regard to expanding into bona fide online gambling. This follows last month's reversal by the Department of Justice on its position regarding the Wire Act. Until this reversal, the government's position was that the Wire Act prohibited all online gambling. Now, their position is that the Wire Act prohibits only online sports betting, which is actually in line with how the law was written.

Zynga, which is now traded publicly under stock ticker (NASDAQ: ZNGA), does provide an online poker game, which players compete for virtual chips, rather than actual money. According to the story, 7 million play this game daily. Zynga is wise to at least look at this possibility, as it is possible that their social games may not have much consumer growth left. In addition, they may be looking to spread out and not be as dependent on Facebook as a customer channel.

As explained in an earlier blog post, the gaming spectrum can be broken down into three component areas: entertainment, skill and wagering. Zynga operates now primarily in the entertainment area, with their poker for fun offering moving into the skill area. If as a public company, they now need to keep Wall Street analysts' lust for growth satisfied, a move into the wagering area may be required.

The issue for Zynga is if their brand is too tightly coupled to fun, social gaming and they would not be successful competing against true gambling brands such as Caesar's, Wynn and Las Vegas Sands. In addition, online gambling is likely to be approved on a state by state basis, with each only offering a few licenses. Zynga would have to compete with established gaming brands as well as tribes, for these scarce licenses. These licenses quite possibly may fetch triple-digit millions each. Zynga may be well served to try and locate unique gaming opportunities that will allow them nationwide exposure quickly, without having to battle on a per state basis. Also, if such gaming opportunities can be independent of Facebook, that would allow Zynga a direct channel to customers without having to pay the expensive Facebook "toll."

New Jersey Governor Signs Sports Betting Bill

2012-01-19T15:39:00.001-08:00

New Jersey Governor Chris Christie signed the recently passed sports betting bill into law. This does not mean that sports betting (the legal kind - I'm sure the Sopranos are still open for business) will be available at Atlantic City casinos and New Jersey racetracks anytime soon. It does mean that there is now a true controversy to allow a lawsuit challenging the constitutionality of the Professional and Amateur Sports Protection Act (PASPA) to proceed.

A similar lawsuit was filed by State Senator Ray Lesniak a couple of years back, but that was thrown out on procedural issues, namely sports betting wasn't currently allowed by law and the suit needed to be filed by the state. A November referendum, which passed by an almost 2-1 margin, the recent bill, and the governor's signature eliminate the procedural issues. The next step is for the Attorney General to file the revived challenge in federal court.

In my opinion, the federal government is going to have a very difficult time justifying a law which says that some states can engage in a particular economic activity, while others can't. And in addition, that prohibited activity has been historically within the rights of the states to control. Furthermore, this activity can be directly tied to how a state can raise revenue. All these factors are hugely in favor of the right of any state to decide how to control gambling within its borders and how to raise state tax revenues. Of course, highlighting the fact that the current prohibition basically ensures a monopoly for big Nevada casinos may have some impact on a federal judge who sits on the bench in New Jersey.

The CBS News article can be found here. Other posts regarding New Jersey sports betting can be found here, here and here.

New Jersey Legislature Passes Sports Betting Bill

2012-01-10T16:10:00.001-08:00

As expected, the New Jersey legislature passed a bill allowing betting on professional and college sports at casinos and racetracks. This was going to happen after the voters approved a non-binding vote wanting sports betting back in November by almost a 2-to-1 margin. The measure passed on the last day of the legislative session by wide margins, 73-0 in the Assembly and 35-2 in the Senate.

The next step in the process is for Governor Christie to sign the legislation, which is a given as he has made public statements in support of the bill. The hard work will then begin which is to revive the federal lawsuit challenging the constitutionality of the Professional and Amateur Sports Protection Act (PASPA). That suit could go either way, but on the surface, a law that allows 4 states to have sports betting but prohibiting the other 46 states doesn't seem logical.

If New Jersey can have sports betting, it will be a huge advantage for their state, at least until neighboring states do the same. There is a potential political maneuver that could extend New Jersey's advantage for a long time. That maneuver would be the federal government adds New Jersey to the allowed list of states, but keeps the law in place. Nevada may be in favor of this as it recognizes the writing on the wall, but limits the infringement on its de facto sports betting monopoly in the U.S.

The Press of Atlantic City article can be found here.

Montana Horse Racing In Huge Trouble

2012-01-06T16:49:00.000-08:00

Horse racing in Montana has been in trouble for quite a while. There have been efforts to revive the industry, most notably the passage of HB 616 in 2007, which authorized pari-mutuel wagering on fantasy sports. Unfortunately, the implementation of the fantasy sports game by the Montana Lottery (Montana Sports Action), can only be assessed as a huge disaster. There have been several posts on this topic, with the most recent here and here.

The last sentence of the October, 2009 post may have been extremely prophetic. It stated, "what is lost in this discussion is another loser - the Montana horse racing industry. By placing their trust in the Board of Horse Racing, they placed a bet that may have doomed live racing in the state." How true those words may have been. The Board of Horse Racing continued its cavalcade of errors by stripping the simulcast wagering license from Montana Simulcast Partners, an entity that had been profitable and providing needed revenue for approximately 20 years, with a new provider, which didn't even last 2 years before being shut down amongst a torrent of complaints. The Board then doubled down on stupid by not only NOT trying to revive Montana Simulcast Partners last year, but took over the simulcast wagering operation itself!

It did not turn out well. Barely a year later, the Board of Horse Racing, due to its mismanagement of its operations, to include the simulcast wagering operation, had generated a budget deficit of over $500,000. Those that looked into the Board's operation noted that the Board even lost money running the wagering operation. As a "closing the barn door after the horse has left" move, the Executive Secretary of the Board was fired. More details of this fiasco committed by the incompetent Montana Board of Horse Racing is contained in the story from the AP in this article published by the Washington Examiner.

What is being attempted is to try and figure out a way to revive the simulcast wagering operation within the next couple of months, in addition to implementing other fixes to the obviously disfunctional and inept Montana Board of Horse Racing. Will it be enough to save live racing in Montana, or is it too late to save the patient and the only thing to do is pull the plug?

Not A Surprise, Las Vegas Gambling Numbers Drop in 2010

2011-04-10T04:02:00.000-07:00

The Las Vegas Convention and Visitors Authority published its 2010 visitor profile which indicated the continued downward trend in gambling, due to the economy. From the report, "eighty percent (80%) of 2010 visitors said they gambled while in Las Vegas, down significantly from 87% in 2006, 84% in 2007, 85% in 2008, and 83% in 2009."

The report is quite extensive, and I encourage you to download and peruse as it contains information on gambling, entertainment, demographics and traveler statistics. The report can be found at this link. Although the report is focused on Las Vegas, in my opinion, the information contained should have some utility for any venue with brick and mortar casinos.

Wynn and Caesars Online Poker Push

2011-03-27T15:12:00.000-07:00

In a sign that the major brick and mortar casino operators in the US are making the move toward internet gambling, both Wynn Resorts and Caesars Entertainment lock up deals with internet gaming companies. Wynn announced a partnership with PokerStars and Caesars received Nevada Gaming Commission approval of a relationship with subsidiaries of 888 Holdings.

There shouldn't be any doubt that the trend in the US is that in the not too distant future, internet poker will be legalized. From that point, only a few years will pass and I anticipate full internet gambling (with the exception of sports betting) will be legal. If New Jersey prevails in its lawsuit against the US Government over the constitutionality of PASPA, sports betting could also become legal. This won't happen overnight, but the big US players are getting ready.

The Wynn Resorts story can be found here and the Caesars Entertainment story can be found here.

Internet Gambling Bill Reintroduced In Congress

2011-03-20T14:59:00.000-07:00

The blog at Onlinepoker.org posted that Barney Frank has teamed up with a REPUBLICAN representative from California, John Campbell, to reintroduce the Internet Gambling Regulation, Consumer Protection, and Enforcement Act. I'll give it to Barney for persistence, but the chance to get this bill through was last year, when Democrats controlled the House. With Republicans now in charge of the House power structure, this seems like a longshot.

It will be easy to predict that this bill goes nowhere and likely that will be the outcome. But not so fast. With the economy in horrible shape, and the federal budget in even worse shape, a strange thing may happen: economics will trump "morality." If Congress needs the cash, they'll grab at anything (usually they grab at our wallets - quite well I might add). Maybe they latch onto this as it might be easier to pass this initially than a tax hike. Congress likes raising taxes too but I digress...

A recent post highlighted some of the advantages of internet gambling. You can read that post here. Maybe you can get your Representative to read it and admit that internet gambling is here to stay, so why not regulate like the UK?

A very tough hurdle for the bill will be getting past the House Financial Services Committee, which has a staunch anti-internet gambling person now at the helm, Rep. Bachus. Will budget needs outweigh personal bias? Who knows?

Internet Gaming Is Good For The Gambling Industry!

2011-03-06T06:35:00.000-08:00

In the November, 2010 issue of Casino Enterprise Management, William Thompson extended his remarks made to the National Council of Legislators from Gaming States in June. He prefaced his hypothesis with the explanation of his gambling economic model and how the majority of his analyses show that gambling actually draws more money away from host communities.

With regard to internet gaming, his opinion is that "legal internet gaming will improve the value of the gambling product for the consumer, for the gaming operator and for the government." [1]

In sum, here are some of the generic reasons in favor of LEGAL internet gaming:

Will stimulate business for brick-and-mortar casinos as the internet gaming can promote visits/patronage of the host brand (big brands such as Wynn, Caesar's, LV Sands likely to benefit most)
Gives consumers more choice of internet gaming sites, games, odds and payouts
Consumers in total control of gaming environment (smoking, dress code, alcohol). Want to gamble naked? You can on an internet gaming site (do turn off your webcam...)
More visibility with regard to identification of consumer and level of play. Excellent for more control/amelioration of problem gaming.
Easier for governments to precisely determine how much gambling is going on in their jurisdiction from each site, making any taxation determinations very accurate and precise.

The key is that when internet gaming is authorized and operators are allowed to obtain licenses, that the licensing regime needs to be as inclusive and non-judgmental as possible, to allow as many sites as possible to come clean and turn over a new leaf. If that happens, maximum benefit to the government will accrue. Otherwise, the operators shut out of the licensing regime may just continue to operate in "outlaw" status, with local governments gaining nothing.

Citations:

[1] Thompson, W., (2010, November), Value Added: Internet Gaming, Casino Enterprise Management, 149.

References:

Thompson, W., (2010, November), Value Added: Internet Gaming, Casino Enterprise Management, 148-150.

Singapore Casinos Post Solid 1st Year Numbers

2011-02-26T09:42:00.000-08:00

AsiaOne News reports that for the first year of operation, the two licensed casinos in Singapore, Resorts World Sentosa and Marina Bay Sands have done quite well. Although specific casino revenue isn't directly reported by the Sentosa resort, estimates for combined casino revenue likely exceed $2 billion US dollars. This is a very nice result for just the first year of operation.

From the article, "PricewaterhouseCoopers predicted that Singapore would overtake South Korea and Australia this year to become the second-largest Asia-Pacific casino market behind traditional leader Macau." If accurate, Singapore is becoming a big Asia-Pacific casino player at breakneck speed.

Out of curiosity, I wanted to see how Singapore casino revenue compares to Nevada. I reference an article in the Las Vegas Sun, which states that Nevada gaming revenue to recover to pre-recession levels by 2014. From the numbers in the article, Nevada gaming revenues for 2010 are likely in the $10 billion to $11 billion range. Singapore, with just two properties, is already about one-fifth of Nevada's gaming revenue. Singapore has done quite well.

Should Dealers Keep Their Tips? Yes!

2011-02-13T14:24:00.001-08:00

Casino Enterprise Management is a good trade magazine. It is one I read cover to cover each issue. One of the regular contributors is Bill Zender, a gaming consultant and former Nevada Gaming Control agent.

He penned a recent article making the case that casinos should allow dealers to keep their tips. As of now, the vast majority of properties do not do this, but have dealers pool their tips. Of the casinos that do allow dealers to keep their own tips, Native American casinos are the trendsetters.

The article has a list of pros and cons. They are:

"Pros

Increases levels of customer service, which keeps the customer playing longer and motivates the players to return in the future. Also decreases the effect of player desertion based on gambling loss.
Increases game pace which increases decisions and revenue.
Gives dealer a sense of ownership. Ownership increases morale, attendance, job longevity and positive work conduct.
Helps to retain and attract better employees.
Allows the operator to increase each dealer's time on table which lowers payroll expense.

Cons

Increases the possibility for theft and illicit dealer help.
Increases the chance dealers might deviate from procedures with players who tip well.
May result in money layoff between the dealers and the person responsible for doing the scheduling.
If the tips aren't reported by the dealer accurately, this failure to report could result in a number of employees getting into serious trouble with the IRS.
If under the present tip pooling agreement the dealers receive vacation tips, allow adequate time for vacations before rolling into the new tip procedure." [1]

I don't have a beef with any of the pros. With regard to the cons, I think there are ameliorating factors that can lessen the impact or probability. As casino security and accounting measures have improved (CCTV cameras, RFID cheques, etc.), the risk to dealers of being quickly detected if stealing tokens or assisting players is much higher. If a fair and formulaic staffing procedure is implemented, that will help eliminate the ability for dealers to "tip" a staffing supervisor.

The last two con arguments are still valid. However, those cons still apply regardless of tip scheme. All of us need to accurately report income. With regard to vacation tips, implementing a bit of a runway before changing the tip procedure should take care of that issue.

Overall, Mr. Zender's argument is sound. With the increasing popularity of online gambling, brick and mortar casinos need to sell the experience. Great dealers are part of that experience.

Citations:

[1] Zender, B., (2010, December), Motivating Your Dealers: Letting Them Keep Their Own Tips, Casino Enterprise Management, 103.

References:

Zender, B., (2010, December), Motivating Your Dealers: Letting Them Keep Their Own Tips, Casino Enterprise Management, 100-103.

Hawaii Again Considers Gambling

2011-02-06T08:39:00.001-08:00

KITV reports that the Hawaii legislature is considering legal gambling. Specifically, the current proposal is to allow slot machines and video poker machines in hotel and resort properties. It is a good start, but not really the best. Hawaii should allow full casino gambling in their hotel properties. Slot machines and video poker will generate good revenue to be sure, but the addition of table games would be the attractant to pull the full measure of gambling visitors, particularly Asian patrons, who enjoy Baccarat.

I posted about this topic last year, which you can read here. Casino gambling is a great fit for resort properties. The patrons will enjoy outdoor activities during the day, and enjoy gaming during the evening. The property will garner great revenues both day and night.

The time for this has come. Hawaii, you have the chance to become THE gaming/resort destination in the US. If you added top-notch entertainment, you may beat Las Vegas at its own game. I don't think Las Vegas would want you legalizing gambling. If they don't, does that tell you something?

Evidence of Consolidation in the Fantasy Sports Industry

2011-01-30T17:51:00.001-08:00

The fantasy sports industry is moving to a maturing stage. The large growth numbers seen just a few years ago are gone. The current recession/depression has done its share of impact but also needs to be acknowledged is the fact that the large fantasy sports sites are taking over the lion's share of the industry.

Sports leagues and sites like CBS Sports, Yahoo and ESPN are becoming the top-tier/dominant players. See the previous post on the fantasy sports business. The site FantasySportsBusiness.com has a recent post regarding consolidation in another area - reporting. As the winners of the game sites are becoming clear, so also the winners of the content/news regarding fantasy sports.

The net of the story is that the freelance writers who were the more of the "pioneers" are being moved out when the big boys realized there was something here that had interest (and viewers/clicks/etc), and not just a bunch of loser geeks talking to themselves (like this blogger!).

Quoting from the article, "There are no plans for Sporting News to retain our freelance fantasy writers, sadly. I hope other sites strongly consider taking a look at these guys’ work."

This doesn't mean that fantasy sports is failing or becoming stale. Far from it. However, the early days are over and the teenage/adult years are upon us. The large operations, whether providing, games, news, analysis, decision support, will be the main drivers of the fantasy sports industry moving forward unless new entrants can provide some innovative spark that the big players can't match. That will likely have to be something that contains some kind of intellectual property as opposed to just content and opinion, which the big players can emulate.

Are there new kind of fantasy innovations on the horizon? Perhaps, but I won't say more at this time. Stay tuned.

Australian Gambling Snapshot

2011-01-13T15:03:00.000-08:00

Casino Journal magazine in its November edition published a synopsis of the Australia Productivity Commission's "Report on Gambling." This organization focuses on problem gambling, so the findings are used to help this agency and the Australian government to help ameliorate the harm. From my perspective, the findings just highlight just what a big gambling environment exists in Australia.

"The report found that 70 percent of Australians participate in some form of gambling. In 2008-09, total expenditure (losses) reached just over A$19 billion, an average of $1,500 per adult who gambled." [1] Seventy percent of a tier 1 economy that gamble? Awesome! Gamble enough such that per adult revenue to gaming purveyors is A$1,500 per year? Bonus! Australia is a great gaming market. I don't mean to make light of problem gambling and the devastation that accrues to the individual and their families. These numbers regarding how many gamble and how much is striking.

The report mentioned a few trends which are of note. The first is that real spending per gaming device player has risen over the years. In one jurisdiction, the rise in a ten-year period was over A$1,000 per player. Next, Australian casinos are facing competition for high-value customers due to increased Asian casino competitors. This isn't necessarily news as Las Vegas is likely facing the same threat from Macao and now Singapore properties. The final trends mentioned were that sports wagering has been growing and so has online gambling. With regard to online gambling, the estimate is that online gambling win in 2008-09 was in the A$800 million range. Compared to overall gaming win of A$19 billion, that is only about 4 percent, but the potential for online gambling to grow is there.

Overall, Australia is a strong and thriving gambling market.

Citations:

[1] Rutherford, J., et. al. (Editors) (2010, November), The Problem With Australia, Casino Journal, 10.

References:

Rutherford, J., et. al. (Editors) (2010, November), The Problem With Australia, Casino Journal, 10.

Conventional Wisdom Now Figuring Out Las Vegas Needs To Do Something

2011-01-06T16:54:00.000-08:00

The Las Vegas Sun had a recent article discussing how Las Vegas had to "reinvent the wheel" in order to adapt to the current economic and demographic reality. Here's the key quote from Bill Eadington of the University of Nevada, Reno:

“Newness, which has long driven Las Vegas growth, will not be part of the immediate future,” said Bill Eadington, director of UNR’s Institute for the Study of Gambling and Commercial Gaming. “Las Vegas may become yesterday’s news unless it can figure out a new way to reinvent itself.”

Let's take a peek at a few of the issues facing Las Vegas:

1. Beaucoup hotel rooms built during the boom added to a large existing base
2. Economic recession/depression (depending on if you have a job or not)
3. Competition for US casino patrons from tribal and other casinos closer to home
4. Competition for Asian casino patrons from newer, closer venues in Macau and Singapore
5. Vegas prices aren't all that inexpensive anymore like the old days

Other than that, what's the problem, right? We won't even mention the competition from online gambling.

With regard to the number of hotel rooms, I found this document on the Las Vegas Convention and Visitors Authority website. In Las Vegas, the current estimated number of hotel rooms is 150,732. That is a LOT of rooms. How many? Here's how many... If the hotel rooms in Las Vegas were its own city, it would be the 158th largest city in the United States, just ahead of Alexandria, Virginia (based on 2009 Census data). As another reference point, there are 276 cities in the United States with populations over 100,000. This is just assuming one person per room. Assuming 1.5 people per room, Las Vegas hotel rooms would be the 87th largest city in the US, just ahead of Lubbock, Texas. Assuming that a hotel needs 70% occupancy to break even, Las Vegas needs on average over 105,500 of those rooms to be filled every night. That is a tall order.

I've posted quite a bit on Nevada, the impact of the economic downturn and increased competition. For those interested, you can read the most recent of the related posts, here, here, here and here.

The article discusses in very general terms what Las Vegas needs to do. The aforementioned Las Vegas Convention and Visitors Authority conducted a survey. The findings? Customers want transparency, value and variety. Forgive me for being obtuse but what the heck does that mean? Quoting again from the Sun article, "research indicated Las Vegas should focus its scarce marketing dollars on people who need an excuse to travel here and those interested in the city who don’t know much about it and need more details to be persuaded..." Who doesn't know about what Las Vegas is about? Go ask people at random, "what's Las Vegas all about?" You really think they'll say, "gee, I don't know anything about Las Vegas?"

Las Vegas needs to get back to fundamentals. What is Las Vegas' nickname? Yep, Sin City. The three B's - Booze (lots of it and low or no cost), Babes (see link to post below) and Bucks (good games, low takeout/don't nickel and dime your gambling patrons). That's what Las Vegas needs to get back to in order to survive, in my opinion. Unlike the experts, I give you concrete and thought out recommendations! I posted about this type of approach with regard to how the Reno and Lake Tahoe markets could combat increased competition from tribal casinos in Northern California. It may be time Las Vegas considers something similar.

Fantasy Sports Maturing as Lawyers Now Involved

2011-01-01T07:02:00.000-08:00

I suppose a sign of the maturity of any industry is the appearance of lawyers. In this case, the appearance fills a unique need - the disputes that can arise in fantasy sports leagues. Until now, if a trade appeared unfair, players added/dropped possibly outside alloted time windows, collusion by league participants, etc., the disputes had to be handled by the league commissioner, who more likely than not was also a league participant and in some cases was one of the parties to the dispute.

Now there is a venue for impartial hearing of these disputes - SportsJudge.com. For a fee of $15 per dispute or $100 for a season package (since when were lawyers this cheap), you can get your dispute heard. Not happy that your rival traded for Michael Vick for a case of beer, pizza and a date with his sister right before he played you in a crucial game and your commissioner is a wimp? Take them to fantasy court!

The concept is so new and interesting, even the magazine of the American Bar Association did an article on the site. The article can be found here. With fantasy sports having potential to deal with very large prize monies (see previous post on high-stakes prizes in fantasy sports), the potential for disputes to arise that have very large economic consequences. Right now, this is an informal forum, but the time may come where a high-stakes fantasy dispute ends up in a real court.

Life-Changing Payouts From Fantasy Sports

2010-12-28T08:24:00.001-08:00

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?

Fantasy Sports Business Potpourri - December 2010

2010-12-14T19:20:00.001-08:00

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.

Harrah's Loveman Off Base in G2E Keynote Speech

2010-11-27T14:29:00.001-08:00

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.

How are the Predictions from WhatIfSports Looking Now?

2010-11-18T09:00:00.001-08:00

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?

Tribal Casino Lowers Gambling Age

2010-11-02T10:13:00.001-07:00

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.

Arizona Tribal Gaming Revenue Stablizing

2010-10-30T10:57:00.000-07:00

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.

Atlantic City Gambling Revenue Takes Hit

2010-10-13T20:27:00.000-07:00

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.

California Tribal Gaming Now Even More Competitive with Northern Nevada Casinos

2010-10-06T18:34:00.001-07:00

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.

Slot Machine Myths

2010-09-29T14:44:00.000-07:00

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?

Internet Gambling Bill Has Dim Prospects

2010-09-27T07:01:00.000-07:00

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.

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

2010-09-12T13:41:00.000-07:00

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.

California Horse Racing Committing Suicide?

2010-08-31T17:03:00.001-07:00

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.

Singapore Casinos Not Content Limited To Asia

2010-08-18T17:02:00.000-07:00

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.

Horse Racing Looking to Fantasy Sports?

2010-08-16T15:49:00.000-07:00

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.

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

2010-07-27T17:26:00.001-07:00

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.

A Horse Racing Article That Is Right But Wrong

2010-07-20T08:20:00.000-07:00

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.

References:

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

Fantasy Sports a Recession-Proof Industry

2010-07-11T15:55:00.000-07:00

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.

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

2010-06-30T16:31:00.000-07:00

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.

New Jersey Still Looking at Sports Betting

2010-06-24T17:32:00.000-07:00

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.

Tropicana Adding Cantor Gaming's Mobile Product

2010-06-12T18:20:00.000-07:00

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.

Super Bowl In NYC To Increase Sports Betting?

2010-05-27T18:15:00.000-07:00

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?

Tropicana Undergoing Facelift

2010-05-25T18:35:00.000-07:00

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.

Delaware's Sports Betting Challenge Fails

2010-05-11T19:04:00.001-07:00

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.

2010 NFL Draft Breaks Viewing Record

2010-04-28T18:49:00.000-07:00

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.

Horse Racing Still In Trouble

2010-04-19T20:57:00.000-07:00

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.

References:

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

NCAA Tournament Betting Values Results

2010-04-12T18:00:00.000-07:00

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.

2009 Fantasy Football QB Prediction Results

2010-03-29T12:15:00.001-07:00

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.

Possible NCAA Tournament Betting Values!

2010-03-17T20:16:00.000-07:00

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.

Las Vegas Construction Meltdown Details

2010-03-16T10:43:00.000-07:00

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.

Nevada Casinos Post Rare Loss

2010-02-25T10:17:00.001-08:00

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.

First Casino in Singapore Opens

2010-02-14T06:56:00.001-08:00

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.

Las Vegas Sportsbooks "Win" Super Bowl

2010-02-11T23:20:00.000-08:00

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.

Fantasy Sports Market Metrics

2010-01-30T17:47:00.001-08:00

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..."

Sources:

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

Delaware Challenges To Supreme Court

2010-01-24T14:43:00.000-08:00

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.

Are Indian Casino Bonds Worthless?

2010-01-20T10:57:00.000-08:00

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.

Should People on Welfare Be Allowed To Gamble?

2009-12-20T15:05:00.001-08:00

Channel News Asia has a very interesting story regarding Singapore's upcoming casinos. There will be very strict regulations in place regarding the admission of prohibited persons. What will happen is that casinos will face penalties for admission of barred persons that could be as much as $1 million Singapore dollars or even the loss of the casino license. Other jurisdictions have policies and regulations regarding problem gamblers, forbidden persons and the like. Singapore is breaking new ground with what is called "third party exclusion orders."

What this means is that an outside party (like a government) is mandating certain persons to be excluded. Obviously known cheats or criminals would be normal persons subjected to a third party exclusion. In Singapore's case, the National Council on Problem Gambling is excluding people that don't fall in these obvious categories. They are excluding those that have undischarged bankruptcies and those on public assistance. This is a great idea. Why should deadbeats and welfare recipients be allowed to patronize casinos? They should be either paying their debts or getting a job, respectively.

This is something that should be implemented in the US but won't. Casinos want business and will scream if the states pushed this regulation on them but exempted state lotteries. Lotteries typically are played by lower income groups, many of which are on public assistance. People on welfare or disability really shouldn't be spending the money they get from taxpayers on gambling. Singapore, even though they are a small country, have a whole lot of common sense.

NBA Commissioner Stern Sees Possibility of Expanded Betting on NBA Games

2009-12-13T12:27:00.000-08:00

There has been a crack in the stance in the unified public front of the sports leagues in the US regarding betting on professional games. It should be huge news, but so far there is little significant reverberations of this disclosure. I'm guessing the Tiger Woods story has quite a bit to do with that.

Back to the much more positive sports gambling story. Ian Thomsen's Inside the NBA column leads with an interview with NBA Commissioner David Stern. One of the interview topics was the question of expanded legal sports betting given the Tim Donaghy betting scandal. Donaghy was a NBA referee that was investigated for betting on NBA games as well as perhaps directly influencing the games he was officiating. Another post discussing the Donaghy scandal is here.

In response to the question if sports leagues need to reevaluate their positions with regard to sports betting, Stern gave a very interesting answer. "The betting issues are actually going to become more intense as states in the U.S. and governments in the world decide that the answers to all of their monetary shortfalls are the tax that is gambling."

To the direct question if it is in the best interest of the NBA to legalize sports betting, Stern made the following quotes:

"It has been a matter of league policy to answer that question, 'No,' " he said. "But I think that that league policy was formulated at a time when gambling was far less widespread -- even legally."

"Considering the fact that so many state governments -- probably between 40 and 50 -- don't consider it immoral, I don't think that anyone [else] should...It may be a little immoral, because it really is a tax on the poor, the lotteries. But having said that, it's now a matter of national policy: Gambling is good."

"So we have morphed considerably in our corporate view where we say, Look, Las Vegas is not evil. Las Vegas is a vacation and destination resort, and they have sports gambling and, in fact, there's a federal statute that gives them a monopoly of types [on sports betting]. And we actually supported that statute back in '92."

"But it's fair enough that we have moved to a point where that leap is a possibility, although that's not our current position."

This is news. The NBA Commissioner recognizes times have changed, the public is gambling on sports regardless of legality and that governments have embraced gambling as no longer evil and as a source of revenue. He didn't go so far as to officially change the position of the NBA, but in my opinion, the leagues need to move in small steps. The NBA is more forward thinking than the other sports leagues, by allowing an owner of an NBA team to own a Las Vegas casino and offer sports bets as well as have the NBA All-Star game in Las Vegas. It would not be a surprise for me that the other sports leagues would prefer to have the NBA take the lead on this, with them following, without having to break the ice themselves.

In the interview, Stern stated that he didn't want the NBA to turn into a point-spread league (like the NFL). So, probably those kind of bet types is something that is giving the NBA pause with moving their positioning further. There are bet types available that could provide wagering on games, but avoid the issues with potential point shaving.

The first kind is betting on player performances similar to fantasy sports. The NBA sponsors fantasy games already, so this wouldn't be a stretch. The NBA could leverage YouGaming's patented concept of pari-mutuel fantasy wagering. This would allow win place and show betting, exactas, trifectas, etc., with regard to the statistics of NBA players. This kind of wagering doesn't involve the outcomes of any games. It would be very difficult to manipulate this kind of wagering as there would be so many variables to manipulate to get a certain outcome that it would be next to impossible. Also, since it is pari-mutuel, the more wagered on a particular option actually reduces the payout, which is a barrier to those who may want to wager large amounts on a particular option and reap huge odds. Another advantage to a wagering operator with pari-mutuel is that the operator gets their profit off the top, with the winners splitting the rest. A pari-mutuel system avoids the potential for loss which can happen with traditional bookmaking. The final advantage to this option is that it is patented, which can offer the NBA the ability to more actively control this kind of wagering in the US as patent law can be leveraged to shut down unauthorized wagering venues from being accessed from inside the US.

With regard to wagering on games, bets on a money line could be offered, avoiding point spreads. The operator will still have to ensure that the proper lines are set to obtain equal wagering on both sides, but there isn't a worry about by how many points a team wins.

A second option does involve total points, but in a different way than just a straight point total, which can be more easily manipulated. What might be offered is a point total option that pays out if the total is above a certain total or below a certain total, but loses in the middle. For example, let's say for a game the estimate is that a total of 180 points would be scored by both teams. Today, the total of 180 is offered as an over/under, which means you could wager on either choice, that more than 180 points are scored or less than 180 points are scored. This kind of wager was the wager exploited in the recent scandal.

What could be offered is a wager that would pay if the total exceeded, 187 or was less than 173. If the total points scored was between 173 and 187, the bet would lose. Maybe you set the lose spread a bit tighter to get more action, but you see the concept. If you set the spread tighter, maybe you can offer an option that paid if the total fell within a certain range, in the current example, the bet wins if the total points scored are within the range of 177 to 183 points. I think the best approach would be to explore the first range bet option first and then see how accurate the line setters are before offering the second option.

In both of the previous cases, there could be bet limits to satisfy the desire for wagering but not allow whales to wager huge amounts. Depending on the amount of risk desired, perhaps an upper limit of $1,000 per game. For the pari-mutuel fantasy option, since the operator cut is off the top, wagering limits aren't as necessary and probably aren't desired.

Again, the original SI story is at this link. Read more: http://sportsillustrated.cnn.com/2009/writers/ian_thomsen/12/11/weekly.countdown/index.html#ixzz0ZbchHIGb

UIGEA Hearing Held

2009-12-05T18:07:00.001-08:00

The House Financial Services Committee held an informational hearing on HR 2267, a bill that would partially repeal the Unlawful Internet Gambling and Enforcement Act (UIGEA), and would license and regulate some forms of internet gambling. The report from Information Week on the hearing discussed testimony that stated both pro an con positions. What is important to note is the difference in the stature and quality of the opposing testimony. I'll give two examples of each.

On the pro side, there was the executive chairman of Youbet.com, a leading online gambling company based here in the US. Yes, you read correctly, there are companies engaged in online gambling right here, right now, in the US. Youbet.com handles online betting on horse racing, which is LEGAL in the US. This executive, Michael Broadsky, explained that technology that can properly regulate online wagering in the US exists today. That is obvious because how could this company process hundreds of millions of dollars per year in online wagers if the technology was insufficient?

The other cited example of pro testimony was the presentation of Professor Malcolm Sparrow of Harvard. He states, "combining a thoughtful regulatory scheme with education, technology tools, and support appears to be the most effective means of handling the realities and risks of online gambling," and "consumers in the United States would be better protected than they are now."

As opposed to the fact-based information provided by the pro-regulated internet gambling witnesses, the information provided by the anti-internet gambling witnesses was non-evidence based opinion and hyperbole.

The first example of this was provided by the head of the Morongo Band of Mission Indians, Robert Martin. Martin testified, "the legislation will do nothing but legalize off-shore gaming.” He further testified that this legalization would be at the expense of the "thousands of people" employed by tribal casinos. That sounds fine, at first, but his statement is false. You see, although offshore gambling firms may want to be licensed, the proposed legislation would mandate US-based facilities. US-based facilities imply US-based jobs, so Martin's opinion is only important if you care only about tribes, and not America as a whole.

There is more to the Morongo's position that you should know about. His tribe recently tried themselves to get ONLINE POKER LEGALIZED IN CALIFORNIA. So, within a few months, this tribe tries to get online poker legalized and then turns around and claims that online gambling should not be legalized and regulated. How does that make sense? It does if you are focused only on protecting your monopoly and not wanting competition.

At the Global Gaming Expo, some panel discussions regarding the online poker legislation in California implied that the proponents may have had a bill not well thought out...or was crafted too much to benefit a particular tribe or tribes. If that is the case, then the testimony is self-serving, not providing good data to provide informed decisions. I don't think tribes have a problem wanting legislative advantages at the expense of non-tribal casinos... Overall, this testimony isn't very helpful or credible. The story describing this in more detail is here.

The other anti-online gambling testimony of note was from the FBI. It is of note because of its stupidity. Quoting from the Bloomberg story:

"'There are several ways to cheat at online poker, none of which are legal,' Shawn Henry, assistant director for the FBI’s cyber division, wrote in a letter to Representative Spencer Bachus of Alabama."

"'Technology exists to manipulate online poker games in that it would only take two or three players working in unison to defeat the other players who are not part of the team,' Henry wrote. 'The online poker vendors could detect this activity and put in place safeguards to discourage cheating, although it is unclear what the incentive would be for the vendor.'"

Think about the genius that said this. There are ways to cheat at online poker and none of these ways are legal. As if there were LEGAL ways to cheat at online poker? You would think the word "cheat" would be a tipoff to the FBI? With mental giants like this fighting crime, I know I can sleep well at night. The FBI stated right after this that there were technology solutions that could detect and defeat cheating, so what's their point? However, they then claimed that they didn't know what the incentive for operators to implement these safeguards. They REALLY can't be this stupid, can they? Obviously, they are.

Let me help state the incentive since the FBI isn't bright enough to figure it out. Gambling operators can't survive if customers don't think the games are fair. Gamblers may win or lose, but they require fairly-run games. An online poker operator that is viewed as having unfair and manipulated games won't have customers and will be out of business. For the FBI to make this kind of statement is so vacant of logic that it is hard to believe that they have fallen this far with regard to talent.

Overall, the trend is that online gambling will be legalized and regulated in the next few years, with the exception of sports betting. My opinion is that all gambling should be legalized, but that will not happen. Poker will likely be legalized first, then other casino games. Sports betting will be legalized last. With the estimates of illegal sports betting being as high as $380 billion per year, it makes no sense to benefit offshore sportsbooks and illegal bookies by keeping this illegal. Now if the Morongo tribe wanted to make a cogent point, they could claim that keeping sports betting illegal benefits offshore operators. That would make sense.

For those interested in the topic, another article on the fallacy of prohibition can be found here.

Gaming Companies Cautious About Internet Gambling Legislation in the US

2009-11-28T09:05:00.001-08:00

Rep. Barney Frank is proceeding with moving HR 2267 forward, hoping to replace the Unlawful Internet Gambling Enforcement Act (UIGEA) with a licensing and regulatory structure for online gambling. However, companies that would benefit are keeping a cautious stance and avoiding becoming too public in the discussion.

A Wall Street Journal report discusses the public positions and opinions of three gaming companies that would benefit from liberalization of internet gambling within the US. The consensus opinion is that if this moves forward, it is likely to happen no sooner than a year from now, near the end of this congressional session.

From discussion panels at the Global Gaming Expo, their consensus is that if any game is legalized online, it would be poker, followed by traditional casino games. No one is foreseeing the expanded legalization of sports betting online in the US anytime soon. However, given the estimates that only 1% of sports betting in the US is legal ($2.5B in Nevada casinos), that implies that $250B in illegal sports betting occurs each year. That's a lot of money not being regulated and taxed. I don't think many can make the logical argument that keeping something illegal is somehow going to make that $250 billion of illegal sports wagers disappear. It's still going to occur.

As a trend, the approach to legalize poker and other games of skill, then move to legalize other traditional casino games and slots makes sense. Don't make too much of a change at one time. Start with these games, learn how the regulatory structure responds, improve the process and then consider expanding the available games. Ultimately, people should be able to spend their money for the entertainment they desire, as long as it doesn't impact others. The US the last I checked was supposed to still be a free country, with a constitution that recognized the people's God-given rights to life, liberty and the pursuit of happiness.

Should regulations be instituted to keep minors from wagering? Absolutely. Should programs be in place to help problem gamblers? Sure. Reputable online gambling firms in other countries have been doing this for years. There isn't a reason that the same kind of protections wouldn't be effective here. There has been online wagering on horse racing in the US for almost 10 years and they don't seem to have an issue with gambling from minors or from problem gamblers.

How Far Off-Reservation Should Off-Reservation Indian Casinos Be?

2009-11-27T14:51:00.000-08:00

The Associated Press reports on the cases of Indian tribes looking to off-reservation locales for new tribal casino properties. There have been some of these off-reservation locales applications in the past, usually involving tribes that have recently obtained federal recognition and needed to acquire lands for a reservation. Some of these locations could be located near lucrative population centers.

However, there are instances of tribes with reservations located great distances from population centers attempting to locate casino properties within close proximity to those sources of customers (i.e. you and me). The story discloses that the Bush administration decided that these off-reservation casinos could only be within commuting distance of the reservation. That seems like a reasonable restriction. The Bush administration, for example, rejected 20 applications for off-reservation casinos, one an astounding 1,400 miles from the reservation. Fourteen hundred miles? Well, you can't blame the tribe for trying!

Well there's a new administration in Washington, and the Bureau of Indian Affairs is reconsidering the commuting distance rule. If the rule is overturned, and tribes can extend their casino properties far from their reservations, tribal casinos could be even more of a threat to non-tribal casino properties. What if tribes could have off-reservation casinos on Fisherman's Wharf in San Francisco, the Gaslamp District in San Diego or Times Square in NYC?

There are two options in case this rule is amended. The first deals with the recently recognized tribes and tribes with no casinos yet established. The former will of course try and locate their new reservations as close to population centers as possible, but that wouldn't be required. The latter would be tribes with reservations in very sparsely populated, remote areas. It doesn't make sense to locate a casino on those lands as there is no customer base. They will be able to locate their new casino wherever they can obtain land.

The second option deals with tribes that have smaller, and perhaps not optimally located casinos. Those tribes might want to relocate their casino to a better location, closer to larger population centers. Why keep a location when a better location might be feasible? A recent post discussed the closing of a tribal casino, one not located in a prime locale.

If this change occurs, non-tribal casinos will be in even more peril. As discussed in a previous post, Nevada casinos have been suffering due to competition from California-based Indian casinos. Ceasar's Palace can't move from the Las Vegas Strip to LA, but tribal casinos might be able to do just that. This rule, if liberally modified, could open the door to Nevada casinos getting hurt to a much greater degree than what is happening now.

Further Evidence Smoking Bans Harmful To Gambling Revenues

2009-11-07T10:09:00.000-08:00

Several months ago, I posted on the topic of smoking bans playing into the hands of online gambling operators, to the detriment of land-based casino operations. The data from Illinois showed gambling revenues down approximately 20% after the smoking ban took effect. Montana has recently implemented a similar ban and the gambling revenue impacts are similar. According to the story by MontanaNewsStation.com, gambling revenues across the state are down 16% to 18%, just after one month. This is in line with the experience from Illinois casinos.

In my original post, I made the point that online gambling venues may benefit as if someone could smoke in their home and gamble might be a more attractive option than traveling to a smoke-free casino. Play the same games at home and smoke if you want.

In Montana, the competition can be online gambling, but a more clearly defined alternative is the tribally-owned casino in Montana. Tribally-owned casinos are exempt from the smoking ban as reported by the Flathead Beacon. According to a related story by the Great Falls Tribune, "some businesses on the state's Indian Reservations, which are not subject to the Montana Clean Indoor Air Act, are now marketing to people who like to have a cigarette with their cup of coffee, meal or adult beverage or while gambling - indoors."

What Montana has done in addition to eliminating smoking in more indoor venues is actually provide a sustainable competitive advantage to the state's tribal casinos, to the detriment of the other gaming competition. That likely wasn't an objective.

Most legislative bodies are chock full of lawyers. But like most lawyers, there is one law that they haven't been schooled in and continually run afoul of - the law of unintended consequences.

Lack of Parity in NFL Increases Sportsbook Risk

2009-10-30T13:37:00.000-07:00

The Chicago Sun-Times has a nice article on the lack of parity in this NFL season. The NFL has been touting the "any given Sunday" line for years, stating that any week any team can beat any other team. This year, that tagline has been shown to be completely inaccurate. Do you really think the St. Louis Rams or the Oakland Raiders have a snowball's chance in hell of beating the New England Patriots, Minnesota Vikings, Pittsburgh Steelers or Indianapolis Colts? Nope.

Now TV ratings are not suffering, but there has been some impact with regard to attendance at the home stadiums of the poor teams. The lack of on-site attendance will have a future impact with regard to finances of the poorer teams as although there is sharing of television revenue, the teams use attendance revenue to assist with singing bonuses, etc. So, in this case the rich get richer and the poor get poorer.

Sportsbooks also suffer from lack of parity. That's due to the particulars of spread betting. Bettors put up $110 to win $100. So, for example if the Raiders and Chiefs were playing, with the Chiefs favored by 3 points, if you bet the Chiefs, they would have to beat the Raiders by more than 3 points in order to win the bet. If they won by just 3 points, the bet would be returned and if they won by less than 3 points (or lost the game outright), you would lose.

The sportsbook makes money by taking $110 from bettors on both the Raiders and Chiefs. They take in $220, pay the winner their $110 plus the winnings of $100, and the sportsbook keeps $10, or about a 4.5% profit.

This system works to ensure the sportsbook makes money if you can get equal bets on both sides - in the example equal bets on both the Raiders and Chiefs. Point spreads are set to help ensure this occurs. When the two teams are evenly matched, the spread is low, with the converse when they are unevenly matched. In theory, you can set the spread large enough to attract equal action. In practice, that doesn't always happen.

This is the problem with the current lack of parity in the NFL. If some teams are just horrible, they are just not going to attract betting interest, unless the spreads are set to a dangerous level. Usually, a very high spread may be 13 points. With the current disparity, a game between between a top team and a bottom team might have to have a spread of 20 points or more to attract ANY betting interest on the poor team. So far, favorites are winning and underdogs (particularly of the poorer teams) aren't winning (even against the spread). If all the betting action is on the favorites and the favorites win, there aren't losing bets on the underdogs to finance paying the winners. That means the sportsbook has to pay out of their pocket, which means the sportsbook actually loses money.

Parity in the NFL isn't just good for the fans - it's good for the sportsbooks too.

Audit Determines Montana Lottery Breaking State Law

2009-10-24T19:27:00.000-07:00

Montana station KFBB and the Helena Independent Record reported on the results of an audit by the Audit Division of the Montana Legislature. The audit focused on the implementation of fantasy sports wagering by the Montana Board of Horse Racing and the Montana Lottery.

The basic findings are that:

The Board of Horse Racing's agreement with the Lottery circumvented rule-based procedures;
The Board of Horse Racing and the Montana Lottery did not proceed according to statute in implementing HB 616; and,
The involvement of the Montana State Lottery is not in compliance with statute.

According to the well researched and public legislative audit as opposed to the allegedly poorly researched (if at all) and non-public "due diligence" from the Board of Horse Racing and the Montana Lottery, the Lottery is outside its statutory authority to offer a gambling game of this kind. Since Montana gambling law is very strict, in that all gambling is illegal unless specifically authorized, the audit found the Montana Lottery is breaking the law. Because of that, the Montana Lottery may be considered to be an illegal gambling enterprise, a term that has specific liabilities in both Montana law and federal law.

A previous post discusses how in Montana bettors that lose money participating in an illegal gambling enterprise can sue to get their money back. This audit could make the persuasive case for an attorney with some time on their hands and a desire to perhaps pick up some contingency case cash.

What has not been reported and was kept out of the audit findings is going to be revealed. This blogger assisted in the audit by providing internal YouGaming.com information that showed to what extent other parties could have offered a pari-mutuel fantasy sports gambling game compliant with HB616 well before the beginning of the 2008 NFL season, completely negating the lame arguments from the Board of Horse Racing that no one else but the Lottery and their vendor partner could offer a game and therefore were deserving of the "sweetheart" 8-year sole source agreement.

If a private entity in Montana was operating a game like this, it is very likely that entity could be facing both Montana and federal criminal charges of operating an illegal gambling enterprise. However, it appears that according to Montana law, it doesn't matter if the improperly operating entity is a government or private entity. Illegal gambling is illegal gambling.

The current game is not very popular, as discussed in previous posts, here, here, and here. With several horse racing board members' terms expiring in January, we'll see if some new and more competent thinking will come to the fore and put an end to the joke that is the Lottery's fantasy sports gambling game, Montana Sports Action.

What is lost in this discussion is another loser - the Montana horse racing industry. By placing their trust in the Board of Horse Racing, they placed a bet that may have doomed live racing in the state.

Tribal Gaming Is Good, But Not Invulnerable

2009-10-13T19:46:00.000-07:00

The Kitsap (WA) Sun had a story back on September 28th that reported on the closing of the inaccurately named Lucky Dog Casino, owned by the Skokomish Tribe. It wasn't a large property, but even the modest employee base of 120 people losing their jobs is very sad. The casino management is stating the closure is just for the winter, but with the economy in its current state, there are no guarantees for next spring.

Management is pointing to the economy as the key driver of the closure. The general manager is quoted as saying, "people who used to come in three times a week were coming in three times a month." That's a very telling indicator regarding slowing patronage. With their winter slow season approaching, that was the final straw to move to close.

Not all tribal casinos in the state are doing that poorly. Net revenue for 2008 was $2.11 billion vs. $1.96 billion in 2007, according to state gambling commission records. It is possible the Lucky Dog may have had issues other than just the economy.

The story further reports that certain gaming products, such as lottery, are holding up well in the economy. Other products, like bingo and card rooms, are suffering. This recession is putting to rest the notion that gaming is a recession-proof industry.

NBA Owner Seeks to Build Casino

2009-09-28T19:05:00.001-07:00

Sports leagues generally oppose gambling. UNLESS...they get a piece of the action.

The Cleveland Plain Dealer reports that the majority owner of the Cleveland Cavaliers would be in the catbird seat with regard to casinos in major Ohio metro areas if Issue 3 passes in November.

The article states that the proposed casino in Cleveland would cost approximately $600 million, so not a small investment. As a comparison, Forbes.com estimated the value of the Cleveland Cavaliers NBA franchise at approximately $477 million. The Cavaliers are listed as the 5th most valuable franchise, after the Knicks, Lakers, Bulls and Pistons.

So when you see sports leagues wring their hands regarding the evils of gambling, can you be certain that the angst has more to with their inability to get their hands on that gambling money rather than the gambling itself?

Delaware Lottery Shows Montana Lottery "How It's Done"

2009-09-23T21:39:00.000-07:00

Although Delaware is limited to NFL parlays as its sports betting option, they launched their offering for week 1 of the NFL season. The handle wagered wasn't as high as hoped but still a promising number - $257,870. The story from Philly.com is here. They have a ways to go to reach the desired level of better than $1.2 million per week in handle. At current rates, the state will net only approximately $600,000 for the current NFL season. Delaware has recently appealed the recent decision of a panel of the 3rd Circuit and requested the entire 3rd Circuit hear the case. That story can be found here.

Let's compare this sports betting game offered by the Delaware Lottery to what the Montana Lottery is doing with their game, Montana Sports Action. Currently Montana Sports Action has games for racing and football. Where the Delaware game generated over $250,000 in handle, the Montana game generated a pathetic $6,500. How sad. What is sadder is that the geniuses in Montana have been running games for over a year and this is just the first week for Delaware.

If you think that this paltry sum is just a bad week for Montana, think again. This is probably one of their BETTER weeks. You see, when the Legislature was debating the law to allow to allow pari-mutuel fantasy sports wagering, they were estimating that the games would generate about $11.9 million in handle per year, or about $230,000 per week. That's similar to what Delaware did in its first week. Unfortunately, since inception, Montana's sports betting game, Montana Sports Action, has only generated around $190,000 in handle. Talk about lame. Delaware did in its first weekend what Montana hasn't done in over a year. The Legislature's Audit Division just completed an examination of this game, which is posted here.

The people in rural areas often get viewed as "rubes," fairly or unfairly. Using Montana Sports Action as a measure compared to Delaware, the term may have merit, particularly with regard to the Montana Board of Horse Racing, the Montana Lottery, and perhaps even the Governor's office.

Tribal Gaming Important Economic Engine

2009-09-14T19:24:00.000-07:00

The gaming industry definitely has an impact on the US economy. This post will focus particular attention on the impact of tribal gaming. Gaming is generally on a for-profit basis with exceptions for certain charitable organizations, e.g. church bingo. One could claim that the church is definitely a for-profit enterprise, but I'll leave that argument aside.

Tribal gaming proceeds are applied to improving the general welfare of the tribes. Typical areas of focus are law enforcement, health care, education, water and housing. Specific guidelines are outlined in federal law, the Indian Gaming Regulatory Act.

According to the National Indian Gaming Association 2008 economic impact report, tribes:

generated almost $26 billion in gross gaming revenue
generated over $3 billion in related hospitality revenue (lodging, F&B, etc.)

which in addition to helping the economic and quality of life of the tribes:

$150 million to local charities
$100 million to local governments
$2.5 billion to state governments
$8 billion to the federal government

Oh, and not to be underestimated, tribal gaming directly and indirectly support 636,000 jobs nationwide. To put in perspective, that number of jobs is comparable to the total employment of the US Postal Service.

Some states are particularly impacted by Indian Gaming. A recent editor's letter in Casino Journal magazine reported that the two major tribal casinos in Connecticut, Foxwoods and Mohegan Sun are responsible for 12% of the entire state's job growth since 1992! Also, just these two Indian gaming properties are contributing 60% of what the state of Connecticut receives in corporate tax revenue. Would you think that just two tribal casinos would have that large of an economic impact to a state? Huge impact.

In addition to providing revenues to charities, local, state and federal governments, tribal gaming provides revenues to help tribes help themselves develop after centuries of oppression and neglect. A true win-win.

References:

IndianGaming.org (2009). The Economics of Indian Gaming. Retrieved September 14, 2009, from: http://www.indiangaming.org/info/pr/press-releases-2009/NIGA_08_Econ_Impact_Report.pdf.

Rutherford, J. (2009, September), A sharing problem, Casino Journal, 4.

2009 NFL Fantasy QB Rankings For FREE!

2009-08-28T23:31:00.001-07:00

If you liked last year's post concerning the accuracy of fantasy football prognosticators, you'll like this one. Remember in that post, we empirically showed that taking the previous year's performance as the projection for the upcoming year wasn't significantly more inaccurate than the projections the "experts" (which many of you pay $$ for) provide. We'll take the hypothesis that saying that QB performance for this year won't be significantly different from what happened last year and apply that to this year's QB projections.

But it's a new year and what the heck do I know, right? Go ahead and pay out that money to buy magazines and subscribe to sites that provide "projections based on research," "most up-to-date rankings," blah blah blah. I took a couple of magazines and flipped through the pages. The first magazine had a page that introduced the magazines' staff. They had pictures, some generic personal information and some very high level fantasy predictions. OK...I'm not sure how really important that is to a fantasy player. Does anyone during a draft pore over a magazine's publishing staff page?

It gets better. I pick up another magazine, supposedly from another dot com fantasy company. They also have a staff page with the same kind of information. I looked at the pictures...they're the SAME PEOPLE! Yes, of the twelve people on the staff of the first magazine, eleven are on the staff of the second magazine, supposedly from another dot com fantasy company. What's up with that? Both magazines cost $7.99. If you think that picking up a couple of magazines, from different dot com fantasy companies will give you a more balanced and robust perspective? Not necessarily true.

I will give you some FREE fantasy predictions! You will, at least, get your money's worth... :-)

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 place Favre in the position of the top rated Minnesota QB (#27).

Shown below is my FREE 2009 NFL QB fantasy "Top 30" quarterback ranking! To show you the comparison with the two "different" magazines, I will also place the ranking the "experts" project for that player (with the Favre adjusment explained above). I don't promise accuracy. I don't promise that you'll be a "fantasy god" or that you will "dominate your league." However, I also don't charge you $7.99 and provide you my picture either!

#	Quarterback	Magazine A	Magazine B
1	Drew Brees	1	1
2	Aaron Rodgers	3	3
3	Jay Cutler	13	12
4	Philip Rivers	5	7
5	Kurt Warner	6	6
6	Peyton Manning	2	2
7	Tom Brady	4	4
8	Donovan McNabb	8	8
9	Matt Cassel	18	16
10	David Garrard	14	15
11	Chad Pennington	25	26
12	Tony Romo	7	5
13	Eli Manning	16	14
14	Brett Favre	27	27
15	Matt Ryan	9	9
16	Jason Campbell	17	19
17	Kyle Orton	19	18
18	Joe Flacco	20	21
19	Ben Roethlisberger	10	10
20	Jake Delhomme	24	24
21	Matt Schaub	12	13
22	Byron Leftwich	31	30
23	Trent Edwards	23	22
24	Kerry Collins	26	28
25	Shaun Hill	28	20
26	JaMarcus Russell	21	23
27	Marc Bulger	29	29
28	Ryan Fitzpatrick	41	41
29	Mark Sanchez	30	34
30	Matt Hasselbeck	15	17

Early 2010 Super Bowl Odds Posted

2009-08-20T19:38:00.000-07:00

For those of you looking for pre-season guesses as to who will win Super Bowl XLIV in January 2010, SBR Global Sportsbook has posted early odds. They are:

Arizona 30/1
Atlanta 23/1
Baltimore 23/1
Buffalo 50/1
Carolina 23/1
Chicago 18/1
Cincinnati 63/1
Cleveland 75/1
Dallas 18/1
Denver 63/1
Detroit 150/1
Green Bay 30/1
Houston 40/1
Indianapolis 12/1
Jacksonville 40/1
Kansas City 63/1
Miami 50/1
Minnesota 14/1 (before Brett Favre's addition)
New England 4.5/1
New Orleans 18/1
New York (N) 11/1
New York (A) 40/1
Oakland 80/1
Philadelphia 10/1 (before Michael Vick's addition)
Pittsburgh 8.5/1
San Diego 8.5/1
San Francisco 63/1
Seattle 50/1
St. Louis 100/1
Tampa Bay 41/1
Tennessee 18/1
Washington 40/1

New England, Pittsburgh and San Diego are the early favorites, which make sense since Tom Brady is back for New England, Pittsburgh is the defending champion and LT and Shawne Merriman are back for San Diego. To me, Green Bay at 30/1 and Arizona at 30/1 seem like good bangs for the buck, but the oddsmakers aren't dumb.

The odds on both Minnesota and Philadelphia are likely to drop with the adds of Brett Favre and Michael Vick (aka Ron Mexico), respectively. Given that Detroit didn't win a game last year, I'm not so sure that 150/1 odds are high enough...perhaps 1000/1?

Las Vegas Gaming Revenue Hasn't Hit Bottom

2009-08-13T06:32:00.000-07:00

The struggling economy continues to pound Las Vegas as well as Nevada overall. Las Vegas isn't the only gambling center suffering - Atlantic City and Macau are also suffering revenue declines. The advantages of those other venues is their close proximity to very large populations. Nevada is still a draw, but not a quick commute from Southern California as Atlantic City is from New York. The Bloomberg article has the full details.

With jobless claims still rising, the economy has not bottomed. The temporary slight drop in the unemployment rate is just that, temporary. Do not be surprised if unemployment doesn't break the 10% level or higher before the economy turns.

Perhaps the folks in Las Vegas should read an earlier post concerning what Nevada can do to exploit a latent sustainable competitive advantage. What Vegas can't do is think they can just ride out this storm. There are secular trends that are impacting Nevada that can't be ignored. If they just keep offering what they offer, or cut prices, that will easily be matched by competing venues and the final result will be worse than the situation before the price cutting.

However, if you would like to visit Las Vegas, you are likely not going to get any better deals than now.

MLB, NFL, NBA, NHL and NCAA Sue Delaware to Stop Sports Betting

2009-07-25T11:57:00.001-07:00

Yesterday, the major sports leagues (MLB, NFL, NBA, NHL) and the NCAA sued Delaware in an attempt to block the state from offering single-game sports wagers, and keep Delaware limited to offering only parlay sports wagers. The USA Today article has more information on the history and quotes from the various parties as well as a link to the actual pleading.

This blog has previous posts which discuss issues with the Delaware effort, particularly the problems with the government tax structure and the parlay-only offering. Those posts can be found here and here.

The leagues can't stop Delaware from offering parlays, as even the federal law, the Professional and Amateur Sports Protection Act (PASPA), allowed Delaware as one of the four states grandfathered (the others being Nevada, Oregon and Montana) to offer sports betting. Delaware, having offered parlays before, can resume that game whenever they wish. Offering single-game betting is being viewed as an expansion of previously offerings.

From the lawsuit, the leagues claim single-game sports betting in Delaware "would irreparably harm professional and amateur sports by fostering suspicion and skepticism that individual plays and final scores of games may have been influenced by factors other than honest athletic competition." OK...but Nevada's been doing this since like...the 1940s. If any harm would have occurred, wouldn't it have occurred by now?

Besides, the leagues know gambling is an important component to their games' popularity. Why are point spreads published in just about every newspaper in the country, even though sports betting only happens (legally) in Nevada? Why does the NFL publish their injury reports publicly and not just send them confidentially to the various teams? Because they want information in the hands of sports bettors, both legal and illegal.

According to the federal law, the sports leagues have the authority to seek an injunction against operators of sports betting operations - those that aren't grandfathered in. Since Delaware is looking to expand, this might appear to fall outside the grandfathered area. Until now, the leagues have never tried to exercise the law. This is where the situation could get very interesting, and very dangerous for the leagues.

PASPA had some very strong arguments during its deliberation that it is unconstitutional. In essence, the argument was that you can't say 4 states can do something the other 46 can't. Also, since when does the goverment say a private entity has the authority to enforce federal law? States generally have sovereign immunity, so by and large they are immune from being sued unless they allow it. That immunity could be an easy defense. New Jersey has recently challenged the constitutionality of PASPA. A post discussing that case is here, which I recommend reading to learn more of the flaws in this law.

It is in Delaware's interest to keep PASPA in place so that Delaware would have a competitive advantage over neighboring states. It could have sports betting where the others could not. With the New Jersey suit challenging PASPA, Delaware was not likely going to join in as it would not be in its best interest. With the leagues going after Delaware, Delaware will have to fight back. If successful, it will be able to allow single-game sports betting. If unsuccessful, it will only be able to allow parlays.

Here's something very interesting. What if Delaware was too successful in its defense? What if it succeeded in throwing out PASPA? If that happened, every state could offer sports betting if it wanted and Delaware's current advantage would disappear. How Delaware responds to the lawsuit will be telling. They may use the sovereign immunity defense as well as use their constitution saying that a single-game sports bet is basically a one-game parlay. They may not challenge PASPA, or if they do, limit the challenge to the ability of private entities to enforce federal law...not challenge the law in its entirety. Delaware wants the competitive advantage. For that to be maintained, PASPA needs to stay in force.

It will be very interesting to see how this case turns out.

Some Advantages of Online Casinos

2009-07-09T22:03:00.001-07:00

The convenience of online casinos is well known. Where else can, in theory, you can hang out in your pajamas and play slots, blackjack or poker? Or, if you're the boss, play the same at work (I do not recommend this if you are NOT the boss). What you don't get online is the true feel of the crowd and the gaming experience. But that may actually be an advantage.

The Casino Journal reports that casinos and bingo parlors in several provinces in Argentina have been closed due to fears over the Swine Flu. Apparently that government has just publicly declared a health emergency for the month of July, due to the flu. Those brick and mortar operations are closed, not generating a dime of revenue. Online casinos are still open! Can you get sick from a person sitting next to you in an online poker game? Not likely. Advantage online casino!

That's not all. GamingIntelligence.com cites a news item from the Remote Gambling Association, referencing a study from MHA Consulting of money laundering in online gambling operations. The essence of the study that "the absence of cases and examples of money laundering and terrorist financing within the remote gambling industry indicated that the risks were low, highlighting a strong commitment within the industry to prevent and detect any occurrences, to comply with the various legislative and regulatory requirements, and to co-operate with the authorities."

In addition, "online gambling is not a likely accessible avenue for money laundering because the identities of the gamblers are known, the financial transactions between the bettors and operators are all in electronic format, and all of the wagering is recorded." Again, advantage online casino!

If you wanted to launder money in small amounts over a period of time, you likely could do that anonymously in a brick and mortar casino. If you didn't sign up for a Players Club card, used cash, and kept your wagers under a few thousand per day, it is possible that you would not attract much attention, particularly if you did not frequent the same property.

So for a player at an online casino, you get convenience, some protection from disease transmission and knowledge that the site has the capability to hinder the improper use of the facility for money laundering for nefarious purposes. All that and entertainment! Woo Hoo!

Losing Money at Montana Sports Action? Can You File a Lawsuit to Get Your Money Back?

2009-07-03T14:34:00.000-07:00

The Montana Lottery and the Montana Board of Horse Racing have been fighting off questions and complaints about the new sports wagering game, Montana Sports Action, for almost a year - even before the game was commercially launched. In 2007, Montana passed a law legalizing pari-mutuel wagering on fantasy sports in an attempt to help put more funds into the declining Montana horse racing industry. There are related posts regarding Montana Sports action in this blog, with the three most recent being found here, here and here.

One of the key issues that is brought up against the Lottery running this game, in addition to the pathetically poor revenue, is the issue of the legal authority the Lottery has to run a game of this nature. Montana law is that gambling is prohibited unless specifically authorized. Article III, Section 9 of the Montana constitution states:

Section 9. Gambling. All forms of gambling, lotteries, and gift enterprises are prohibited unless authorized by acts of the legislature or by the people through initiative or referendum.

Following the constitution, Montana code Title 23-5-151 states:

23-5-151. Gambling prohibited. Except as specifically authorized by statute, all forms of public gambling, lotteries, and gift enterprises are prohibited; and,

23-5-111. Construction and application. In view of Article III, section 9, of the Montana constitution, parts 1 through 8 of this chapter must be strictly construed by the department and the courts to allow only those types of gambling and gambling activity that are specifically and clearly allowed by those parts.

Now a lottery is authorized, but only under certain parameters. Montana code Title 23-7-102 states:

23-7-102. Purpose.
(1) The purpose of this chapter is to allow lottery games in which the player purchases from the state, through the administrators of the state lottery, a chance to win a prize. This chapter does not allow and may not be construed to allow any game in which a player competes against or plays with any other person, including a person employed by an establishment in which a lottery game may be played.
(2) The administration and construction of this chapter must comply with Article III, section 9, of the Montana constitution, which mandates that all forms of gambling are prohibited unless authorized by acts of the legislature or by the people through initiative or referendum. Therefore, this chapter must be strictly construed to allow only those games that are within the scope of this section and within the definition of "lottery game".
(3) The state lottery may not:
(a) operate a slot machine or carry on any form of gambling prohibited by the laws of this state; or
(b) carry on any form of gambling permitted by the laws of this state but which is not a lottery game within the scope of this section and within the definition of "lottery game".

The Lottery Commission has restrictions on what games it can operate. Montana code Title 23-7-302 states, in part:

23-7-202. Powers and duties of commission. The commission shall:
(1) establish and operate a state lottery and may not become involved in any other gambling or gaming.

So, what's a "lottery game?" Remember Montana authorized a lottery in 1985, so the concept of a lottery at the time was a game such that each entry had the same chance of winning as any other entry, where the winner was determined at random. No skill is involved - a game of chance.

Montana code Title 23-7-103 states, in part:

23-7-103. Definitions. As used in this chapter, the following definitions apply:
(4) (a) "Lottery game" means any procedure, including any online or other procedure using a machine or electronic device, by which one or more prizes are distributed among persons who have paid for a chance to win a prize and includes but is not limited to weekly (or other, longer time period) winner games, instant winner games, daily numbers games, and sports pool games.

It may be problematic for the Lottery Commission to claim that fantasy sports wagering doesn't fall into the "any other gambling or gaming" category. Or does it? Doesn't the law allow sports pool games? Wouldn't Montana Sports Action fit into this category? Assuming yes, then why does the Lottery claim to be running the game in accordance with the pari-mutuel fantasy sports wagering law passed for the benefit of the Board of Horse Racing? That law specifically is not designed to be a game of chance, but of skill. Besides, as stated during a legislative hearing, if the Legislature intended for the Lottery to run this game, they would have made that clear.

OK, so then let's take another viewpoint and state that the Lottery is merely donating money to the Board of Horse Racing and is actually operating a sports pool. Will that excuse fly? Maybe not. If you look at sports pools in Montana and how they operate, they appear to be different from how Montana Sports Action operates.

Here are pertinent excerpts from the Montana code regarding sports pools:

23-5-501. Definitions. As used in this part, unless the context clearly requires otherwise, the following definitions apply:
(1) "Sports pool" means a gambling activity, other than an activity governed under chapter 4 or chapter 5, part 2, of this title, in which a person wagers money for each chance to win money or other items of value based on the outcome of a sports event or series of sports events wherein the competitors in the sports event or series of sports events are natural persons or animals; and,

23-5-503. Rules.
(3) (a) Except as provided in subsection (3)(b), the winners of any sports pool must receive a 100% payout of the value of the sports pool. The winner of a sports tab game must receive at least 90% of the total cost of the 100 sports tabs. The operator of the sports tab game may retain the remaining money for administration and other expenses.
(b) A nonprofit organization that maintains records and opens the records to inspection upon reasonable demand to verify that the retained portion is used to support charitable activities, scholarships or educational grants, or community service projects may retain up to 50% of the value of a sports pool or sports tab game; and,

23-5-512. Sports pool design -- department rules.
(1) A sports pool must be designed to ensure that:
(a) there is at least one winner from among the participants in the pool; and
(b) each participant has an equal chance to win the pool.
(2) Competitors in a sports event or series of sports events must be randomly assigned to each participant in the sports pool.

So, for a sports pool, outcomes of sporting events are the basis of the game, 100% of the proceeds are paid out in prizes (except if run by non-profits), each participant has an equal chance to win the pool and competitors in the event(s) must be randomly assigned to each participant. This isn't at all like Montana Sports Action. I think that it would be difficult to prove that Montana Sports Action is a sports pool game envisioned by the language that authorizes what games the Montana Lottery can operate.

If Montana Sports Action falls outside those boundaries, then the Lottery could be considered to be offering a game outside its charter and the Lottery Commission could be considered to being involved with another gambling game in violation of its powers and duties. This might be construed to find that the Montana Lottery is operating an illegal gambling game. Not that another party could operate the same game legally, but the Lottery has certain restrictions, which according to Montana law, must be STRICTLY construed.

What does all this have to do with anything, you may ask? Maybe plenty, if you have bet money on Montana Sports Action and lost, or you are an attorney with some time on your hands. If the Lottery is not specifically allowed by statute to operate Montana Sports Action, it might be considered to be an illegal gambling enterprise, even if it is a state agency.

Montana code Title 23-5-112 states, in part:

23-5-112. Definitions. Unless the context requires otherwise, the following definitions apply to parts 1 through 8 of this chapter:
(18) "Illegal gambling enterprise" means a gambling enterprise that violates or is not specifically authorized by a statute or a rule of the department.

Here's where it gets interesting to the losing bettor or attorney with time on their hands. Montana code Title 23-5-121 states:

23-5-131. Losses at illegal gambling may be recovered in civil action. A person, or his dependent or guardian, who, by playing or betting at an illegal gambling device or illegal gambling enterprise, loses money, property, or any other thing of value and pays and delivers it to another person connected with the operation or conduct of the illegal gambling device or illegal gambling enterprise, within 1 year following his loss, may:
(1) bring a civil action in a court of competent jurisdiction to recover the loss;
(2) recover the costs of the civil action and exemplary damages of no less than $500 and no more than $5,000; and
(3) join as a defendant any person having an interest in the illegal gambling device or illegal gambling enterprise.

To date, approximately $150,000 has been wagered on Montana Sports Action games. Not a lot, but in this economy, if you've spent some money and lost on this, maybe you might want your money back? If you were an attorney and could say the phrase "class action," maybe 1/3 of $150,000, or $50,000 is a nice payday? With the size and scope of the entities involved in offering Montana Sports Action, perhaps it might be viewed as a "target-rich environment" to an attorney?

Not that I foresee any lawsuits being filed along these lines anytime soon, but who knows? If it did occur, it would definitely stir up the government types and bring even more negative publicity to something that had the promise of helping the horse racing industry in Montana, but appears to be failing in that promise.

Goldman Sachs Predicts US to Legalize Online Gambling, a $12 Billion Market

2009-06-29T19:19:00.000-07:00

As reported by EGamingReview, a Goldman Sachs report predicts that the US will legalize online gambling, creating a $12 billion market. Not that this market doesn't already exist, but now the revenues can be captured (and taxed) legally.

The article focuses on poker and other casino games, and is silent on sports betting. That is where the REALLY large revenue lies. There have been old estimates from law enforcement that up to $1 billion is wagered illegally each week during the NFL season. That doesn't include any other sport, Super Bowl, March Madness, etc. Given the current politics, legalizing online poker and casino games is the easiest first step, not that you should diminish the prospect of legalizing a $12 billion market!

This prediction that online gambling will be legalized isn't that much of a stretch given the Democrats control both houses of Congress and the White House. There are polls and studies that support legalization. A post that discusses a poll supporting legalized online gambling can be found here. A post that reports on the university study recommending legalizing online gambling can be found here. In addition, this blog has other posts regarding this topic.

Mozambique Improves Gambling Climate

2009-06-24T21:17:00.000-07:00

AllAfrica.com is reporting that last week, Mozambican parliament, the Assembly of the Republic, on Wednesday voted to relax restrictions on gambling. The law will now allow casinos to be built pretty well anywhere in the country, updating the previous law that put certain areas out of bounds.

The new guideline for land-based casinos is that instead of a minimum room requirement (250), the casino must be built in association with one or more hotels with at least a four star ranking. So, align the casinos with quality properties, not just those of a certain size. The older minimum room requirement is actually similar to what still is on the books in Nevada.

Mozambique also legalized online gambling! Here we are in the US, with the UIGEA, which Congress is attempting to overturn, and Mozambique sees the situation clearly, and moves to improve their economy by allowing regulated wagering, even online.

They changed their regulatory structure by transferring the oversight of casino operations to their Tourism Ministry, while the former oversight organization, the Finance Ministry, still oversees the money aspects. That is probably a good move if the Tourism Ministry can ensure the proper licensing of casinos and key employees. In the US, the states usually have a separate department devoted solely to gaming regulation.

There is hope in the US to overturn the UIGEA in the political and the legal arena. There is currently a legal challenge to the UIGEA in the courts, which may hear oral argument in the near future. In Congress, US Congressman Barney Frank's bill to legalize online gambling, HR 2267, is gaining co-sponsors, bringing the total up to 30. The Online Casino Reports article is here.

With the change of presidential administration, and with Democrats in control of both houses of Congress, the chances have improved much, but the bill is still in its infancy and has not yet passed any committees.

NCAA Not Happy With Montana Sports Wagering?

2009-06-06T21:37:00.000-07:00

The NCAA is examining sports gambling in Montana to determine if the NCAA should adopt a policy that would ban any post-season or championship play within the state. A Montana TV station's recent article describes the issue, and the reaction by the locals.

According to the article, the NCAA policy is:

"No session of an NCAA championship may be conducted in a metropolitan area with legal wagering that is based upon the outcome of any event (i.e., high school, college or professional) in a sport in which the NCAA conducts a championship."

I suppose the easiest response from Montana is that since the population of the entire state is approximately 1 million, the concept of metropolitan area doesn't apply since there aren't any. Therefore, Montana isn't in violation of the policy. However, if you define the population small enough, any town can be considered a metro area. According to Census data, there are only 3 cities in the state with populations over 50,000, with the largest, Billings, barely topping 100,000. Compare that to India, where they cite the minimum population to be considered a metropolitan area to be 4 million.

Montana got ratted out when NCAA threatened similar action if Delaware approved sports wagering. According to an ESPN article, a NCAA spokesman stated that the University of Montana should not have been allowed to host playoff games last season due to an "administrative oversight." That is possible since the sports betting game in question, Montana Sports Action, was inaugurated in the fall of 2008. For those interested in Montana Sports Action, you can review several posts in this blog on that game.

What is a bit puzzling is how long it takes the NCAA to recognize administrative oversights. For example, how could the NCAA miss a bowl game that is played in Nevada, a state that until recently had a de facto monopoly on legal sports wagering? Perhaps the name of the bowl game was vague and NCAA officials never attended a game in person? How could the NCAA miss a bowl game called the Las Vegas Bowl, played in Las Vegas at the football stadium of the University of Nevada, Las Vegas? Perhaps the NCAA doesn't consider Las Vegas to be a metropolitan area or maybe that the NCAA doesn't know that legal sports betting occurs in Nevada? Of course, sports betting in Nevada has only been around since the 1940s, so perhaps it's too recent of an event for the NCAA to be aware.

Actually the policy is targeted at championship play, rather than general post-season play, so certain bowl games could get a pass. However, how can the NCAA be ignorant of the Western Athletic Conference routinely hosting championship play in Nevada? Approximately in the last year, women's soccer, basketball and golf all had their championships hosted in Nevada. Given the NCAA policy, maybe you can excuse soccer, but does Nevada allow bets on golf and basketball? I think yes.

If wagering on outcomes is the issue, Montana has a good story, whereas Delaware and Nevada do not. Fantasy sports, depending on the scoring methodology, generally is not tied to the outcome of an actual game.

Montana likely walks on this but the NCAA will go through the motions (but perhaps with a warning not to expand sports gambling to include betting on games). If the NCAA does place a ban on Delaware, they may have to do the same to Nevada. My guess is that they will let all of this go away and pretend it doesn't exist.

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

2009-05-27T18:52:00.000-07:00

(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.

Need to Brush Up on Math Skills? Gamble!

2009-05-17T16:58:00.000-07:00

What, you say? How dare I try to make a claim that gambling has a societal benefit? Don't take it out on me! Take it out on Teri Hatcher, one of the lead actresses on the television series Desperate Housewives. A news item reported on ContactMusic.com that Teri takes her daughter to racetracks (Teri's apparently a horse racing fan) and uses gambling problems to hone the youngster's math skills. As Teri is quoted, "I do use the opportunity to make her understand math and what you're betting and what you get back... so we work on math. It's fun."

There 'ya go. See, responsible gambling can be used to teach kids math! According to the American Academy of Family Physicians, alcoholism affects between 8%-14% of the population. But the Connecticut Department of Mental Health and Addiction services reports that only 2.7% of Americans suffer from problem gambling. Why is this relevant? Because you see much more opposition to gambling than you do to drinking. Seems to me that if these people wanted a more lucrative target, they would oppose drinking. Oh, wait...did that a few years back. How did that work out? Right, no one's drinking anymore. Hmm, tried something similar for internet gambling with UIGEA a couple of years back. How did that work out? Right. No one's gambling online anymore.

So what's going on here? What's going on is that an adult properly instructing her child using a form of entertainment for adults, handled responsibly, isn't such a bad thing. If anything, gambling would be a means to teach math. Addition, subtraction, multiplication, division, probability - gaming math covers all these things.

If you think this is a rare exception, think again. Now not gambling, fantasy sports is also mathematically-focused. There is actually a published mathematics curriculum used in schools right now that leverages fantasy sports to teach mathematics. Effective? Here's a couple of data points:

75% of the teachers agreed that students understand mathematical concepts more now than they did before they used Fantasy Sports and Mathematics

The percentage of 8th grade students who tested proficient at Woodbine School in New Jersey increased from 10% to 54% in one year after using fantasy sports

(FantasySportsMath.com)

There you have it. Find interesting and entertaining ways to teach kids - and they learn. What a concept. Isn't this better for the kids than handing out condoms and phone numbers to abortion clinics?

Delaware Sports Betting Bill Passes House

2009-05-10T10:00:00.000-07:00

The Dover Post reports that the sports betting bill, finally passed the House on Friday. Earlier in the week, the bill had actually failed. The rumor has it that the state's casino operators were in opposition to the original bill, due to the higher gaming taxes and unclear path forward for table games. This blog described other issues with the original bill in a previous post.

The modified bill reduces the increase in taxes so that operators now only will have to pay 43.5% of their gaming revenue. That is a problem. The state should have kept the gaming tax rate at the 37% level. What Delaware is doing is not just adding new gaming options, but increasing the taxes on all gaming revenue.

Let's consider a fast food example to clarify the issue. You have a burger joint. You sell hamburgers, fries and soda. For those items, you pay 10% of the gross profit (price of items minus cost of ingredients). Now, the county health department will allow you to sell cheeseburgers and milkshakes. The price for this expansion is that you will have to pay an upfront fee of $10,000 every year to give you the right to sell cheeseburgers and milkshakes. Not only that, but the tax rate for all food items moves up from 10% to 15%. So, you see in this example, it doesn't really seem like that good of a deal for the burger joint. It isn't.

The original bill was worse, but that was defeated earlier this week. The modification is only slightly better. The increase in the gaming tax rate was reduced to 6.5% from 8%, so the casinos will be paying 43.5% on all gaming revenue. The annual sports betting license fee was cut a paltry half a million to $4 million. The best improvement was putting the table game approval path on a 75 day track to hash out details to present before the legislature.

Politicians seem to live in a world of "orthogonal tuning" when it comes to taxes and revenues. For example, if taxing an item at 20% generates 10 million in taxes, then to a politician it is obvious that raising the taxes on that item to 40% would generate 20 million. Easy! Not so. The politicians, although experts at laws, most of them being lawyers, seem to be oblivious to the law of unintended consequences. When tax rates increase, that has impacts on behaviors and responses. What the government might find in this case that the increase in the tax rate actually results in the decrease in tax revenue.

With regard to the sports betting bill, the casinos will have to operate more lean and mean to survive. As stated in the earlier blog post, the parlay game may not be sufficient to generate lots of interest. Initially, sure, as it is new, but if the game isn't really that good, interest will wane.

What if the casinos, in order to survive, even with table games and sports parlays, had to reduce staff? Is that what Delaware wanted? They might get more revenue from the casinos, but what if one of the casinos close? Will all the revenue move to the remaining casinos? Probably not. With the new legislation in Washington looking to regulate online gambling, it may be in a year or two people can play slots and table games from their home. Why go to a Delaware casino when you can play at home? The only thing the Delaware casinos will have to differentiate themselves is the sports parlay game, which may not be enough.

New Jersey Residents Favor Legalizing Sports Betting

2009-04-29T22:00:00.000-07:00

Fairleigh Dickinson University’s PublicMind conducted a survey of New Jersey residents to get their opinions on making sports betting legal. New Jersey filed suit against the US stating the Professional and Amateur Sports Protection Act (PASPA) was unconstitutional and violated states' rights. You can refer to a recent post on this blog.

The topic is relevant, and the results are interesting. I would have assumed that, even if a plurality of residents favored legalizing sports betting, that a majority of conservatives would have opposed. That is not the case. With the sole exception of the question of online or internet sports betting, residents approved of the legalization of sports betting in casinos, racetracks and off-track betting (OTB) facilities.

Overall, men are in favor more than women, and liberals and moderates are more in favor than conservatives. But, all groups had a majority (and in some cases, strong) in favor of sports betting. Regardless of what the sports leagues may want, it appears that the people seem to approve of the concept.

The survey questions and responses, broken out by sex and political temperament are shown below, courtesy of the FDU PublicMind website.

a. Would you favor or oppose making sports betting legal in New Jersey at Atlantic City casinos?
	All	gender			ideology
	All	men	women	liberal	moderate	conservative
Favor	63%	69	58	70	67	56
Oppose	32%	27	36	27	28	38
Unsure	6%	4	6	3	4	6

b. Would you favor or oppose making sports betting legal in New Jersey at horse-racing tracks?
	All	gender			ideology
	All	men	women	liberal	moderate	conservative
Favor	63%	65	61	68	67	57
Oppose	30%	29	31	27	26	37
Unsure	7%	6	8	5	7	6

c. Would you favor or oppose making sports betting legal in New Jersey at off-track betting parlors?
	All	gender			ideology
	All	men	women	liberal	moderate	conservative
Favor	48%	51	45	52	51	46
Oppose	43%	42	44	42	42	45
Unsure	9%	6	11	6	7	9

d. Would you favor or oppose making sports betting legal in New Jersey by telephone and the internet?
	All	gender			ideology
	All	men	women	liberal	moderate	conservative
Favor	26%	30	23	34	27	23
Oppose	66%	63	69	63	65	70
Unsure	8%	7	7	3	7	6

(FDU PublicMind)

Harrah's Names New Online Gaming Head

2009-04-14T19:17:00.000-07:00

Some commentators may make more of this than just the obvious, but it is another indicator that the trend for online gaming in the USA is on the upswing after the disaster of the UIGEA. RecentPoker.com reports that Harrah's has named an ex-CEO of PartyGaming as chief of its World Series of Poker and Internet operations. The site quotes the Sunday Times as speculating that Harrah's, by combining these two divisions and installing a seasoned online gambling executive at the helm, may be preparing to possibly expand by acquiring other online gambling assets.

That is speculative, but it does appear that Harrah's is reading the legislative trends in the US, and that their view may be that online gambling is going to make a legal comeback. With the Democrats firmly in control of both houses of Congress plus the White House, the UIGEA could be very short-lived. Please refer to earlier posts here and here with regard to online gambling.

At the state level, it is rumored that California may pursue legalizing intrastate online poker and Delaware is moving ahead with legislation to legalize sports betting, as discussed in a recent post.
This momentum would most certainly been much more muted if the Republicans had won the White House. With the Obama administration, online gambling is viewed as a revenue source and not a vice.

Delaware Sports Betting Bill Progressing

2009-04-11T16:39:00.000-07:00

The legislation to authorize sports betting in Delaware passed a legislative hurdle this week. The Delaware House Gaming and Parimutuels Committee released the bill from their committee this week. Certain gaming interests, the NCAA, NFL and anti-gambling interests had been against expanding sports gambling, but the State's need for revenue to relieve a projected shortfall outweighed the special interests' lobbying. More detail on the bill can be found in the Forbes.com article.

The bill keeps the number of casinos at three, but increases the tax rate on slot revenue and institutes a $4.5M sports betting license fee, split among the three casinos. I understand the need for revenue, but increases in gaming taxes don't always translate to increased revenue. In addition, it is important that the casinos are able to generate a profit as well. They are the entities that are taking the business risk.

The sports betting license fee is a bit steep. Assuming the win % on sports betting is 5%, the casinos would have to generate $90M in wagers just to cover the license fee. That doesn't take into their costs of betting lines, sports book property, plant and equipment, advertising and labor costs. The sports bets provided had better be attractive in order to generate sufficient wagering interest. If Delaware just sticks to a sports lottery, requiring a parlay of two or more bets, that offering alone may not be sufficient.

Delaware needs to offer the full spectrum of sports wagers, to include the new pari-mutuel fantasy sports wagers. Fantasy sports is big business, and the three Delaware casinos are racetracks as well, very familiar with pari-mutuel wagering. Also, these tracks already have the proper pari-mutuel equipment in place, just requiring minor software modification to allow pari-mutuel fantasy sports wagers. With almost 30M fantasy sports players in the US, there's a large potential market. Since the population base within a 90 minute drive from Delaware is approximately 35M, there may be as many as 3.5M fantasy sports players as an addressable market by Delaware casinos.

With the pari-mutuel concept, the takeout is much higher than that for parlay bets or straight bets. Pari-mutuel takeout percentages are often 18% or higher. Assuming just a 15% takeout,
only $30M in pari-mutuel fantasy sports wagers would be required to generate the $4.5M to cover the annual license fee. Since the significant portion of the pari-mutuel infrastructure is already in place, this concept could be an easy and profitable portion of the overall sports betting offering.

To learn more about pari-mutuel fantasy sports wagering, see the YouGaming.com website.

New Jersey to Legally Challenge PASPA

2009-03-23T20:19:00.000-07:00

In 1992, Congress passed the Professional and Amateur Sports Protection Act (PASPA). It should have been called the Nevada Legalized Sports Betting and Illegal Sports Betting Monopoly Act. The law grandfathers four states that had some kind of legal sports betting to be able to allow sports betting, but restrict all others from having legalized sports betting. The four grandfathered states are: Nevada, Oregon, Montana and Delaware. Nevada, is by far the state with the largest amount of legal sports betting. Note that illegal sports betting wasn't hampered by this law. All the law did for 46 states was ensure the "Sopranos" didn't have any legitimate competition. How sweet of Congress to take care of the illegal bookies like that!

Congress knew the law was weak and had iffy Constitutional strength. The Department of Justice (DOJ) actually opposed this law on the grounds that it violated states rights. The reference to the DOJ is here. In addition, the DOJ highlighted the issue that the law allowed professional and amateur sports organizations to bring civil injunctions against states. Professor I. Nelson Rose in his article on PASPA mentions that the US Supreme Court has ruled that states can not be sued without their consent. Professor Rose makes the point that if a state can't be sued by an Indian tribe, what real chance would a sports organization like the NCAA have in getting their case allowed?

The law had never been officially challenged - until now. With state governments scrambling for cash, gambling is looking good. As gambling becomes more prevalent, competition for gaming dollars is heating up. Delaware, as mentioned in a previous post, is considering exercising its rights under PASPA and legalizing a sports betting game. This is causing concern among neighboring states which aren't allowed by PASPA to follow suit.

A New Jersey group comprised of gaming and racing interests filed suit challenging the constitutionality of PASPA in US District Court. The link to the Reuters article is here. It likely won't be decided for quite a few months, but the process is started. Will the DOJ fight the suit even though they are on record questioning the law's violation of states' rights?

I think PASPA should be declared unconstitutional and tossed. Then each state can decide if it wants to allow sports betting and get that betting that is currently unregulated going to bookies become above board, regulated and taxed. Everyone wins...except those with losing bets. Even if PASPA was declared invalid, that would not allow interstate sports betting. That would still be in violation of the Wire Act. This would allow intrastate sports betting. So, the betting books and pools would have to be contained fully within the state, similar to how sports betting in Nevada operates now.

If PASPA is declared invalid, it should increase the value of YouGaming's patents. YouGaming could offer very attractive games to these new markets. Fantasy sports is still growing and pari-mutuel wagering offers a higher intrinsic takeout compared to wagering typical of typical sports wagering.

What's the Best Betting Value in the NCAA Tournament?

2009-03-16T20:16:00.001-07:00

So, who will win the 2009 NCAA men's basketball tournament? I haven't a clue, but it will be one of 65 teams. I know, that's a great insight - you can thank me later. Looking at the initial odds posted by the Las Vegas Hilton (referenced in a story in the Las Vegas Sun), there may be some teams that based on the odds relative to their seeding, might be worth a gamble.

I took a look at the odds posted for the various teams and mapped them to their seeding. I averaged out the odds per seed level and looked for teams that the posted odds were significantly above the average. Before I give you the possible values, here's the average odds per seed level:

Seed Avg Odds

5.75
14.25
28.75
47.5
71.25
56.25
100
175
250
200
475
175
400
200
200
200

You can see that there is a natural trend that the lower the seed, the higher the odds, except for the lowest seeds. The LV Hilton sportsbook has most of the teams with discrete odds, with a field entry for everyone else. The field entry for this tournament consists of all 14-16 seeds, plus Northern Iowa and Akron. I don't think the field entry is a value bet, even though you get a chance on 14 teams.

Notice that the 5, 9 and 11 seeds on average pay more than the next lower seeds. We'll look there and also look at other seed levels to determine if a team or two is being offered at a significant differential to the average odds for the seed level.

If we set a level of differential to identify those teams whose odds are 75% higher than the average odds of their seed level, here's what we get:

4/Xavier - Odds 100:1/Seed Avg Odds 47.5:1
6/Marquette - Odds 100:1/Seed Avg Odds 56.25:1
9/Siena - Odds 500:1/Seed Avg Odds 250:1
11/Utah St - Odds 1,000:1/Seed Avg Odds 475:1
13/Cleveland St - Odds 1,000:1/Seed Avg Odds 400:1

If we lower the value threshold to 40% higher than the average odds of their seed level, these other teams appear:

5/Utah - Odds 100:1/Seed Avg Odds 71.25:1
5/Illinois - Odds 100:1/Seed Avg Odds 71.25:1
8/BYU - Odds 300:1/Seed Avg Odds 175:1
10/Minnesota - Odds 300:1/Seed Avg Odds 200:1
12/W. Kentucky - Odds 300:1/Seed Avg Odds 175:1

This will be interesting to see if any of these make a Cinderella run, or, if the oddsmakers are right, they make an earlier exit than expected.

To Combat Gaming Slide, What Do Reno and Lake Tahoe Do?

2009-03-11T19:15:00.000-07:00

As discussed in other posts, the gaming industry is learning that they are no longer recession-proof. By diversifying their revenue streams to rely more on lodging, entertainment and food and beverage, they now are more susceptible to the economic variances in the greater hospitality industry.

Even before the recession, Nevada gaming has been facing an increased threat from other gaming competition. Data provided by the American Gaming Association (AGA) states that casino gambling, at one time found only in Nevada, now exists in 33 states. Tribal casinos alone now exist in 29 states. According to the National Indian Gaming Commission (NIGC), Indian gaming generated approximately $26 billion in revenue in 2007. The AGA also cites that since the early 1990s, online gambling has grown significantly, generating just shy of $6 billion in revenues in 2005, before the passage of the Unlawful Internet Gambling and Enforcement Act (UIGEA). We'll discuss in an upcoming post whether that law actually impacted the patronage of online gambling sites by Americans.

Las Vegas, being a destination attraction in addition to being a gambling mecca, has fared better with regard to gaming competition than the Northern Nevada gaming markets, Reno and Lake Tahoe. These markets have definitely felt the impact of tribal gaming operations in Northern California. For residents in Northern California, if you want to gamble, why drive to Nevada when outstanding properties are less than an hour's drive away? In the last year, gaming revenue in Reno is down 10%, South Lake Tahoe down 23%, North Lake Tahoe 20%. For Reno, this continued the downward trend that begun back in 2007, not just with the recent recession.

It can be estimated that for a gaming property, market share is inversely proportional to the square of the distance from the population center to the property. In other words, the closer you are to the customers, the more customers you should get. As an example, consider two gaming properties near a major city. One is twenty-five miles away and one is fifty miles away. Based on the formula, the property that is fifty miles away would be expected to have a market draw one-fourth of that of the closer property.

The Lake Tahoe and Reno properties are essentially falling victim to their distance from major population centers. The only way to solve that problem directly is to have an earthquake severe enough to move San Francisco and Sacramento about 100 miles or so northeast. That likely isn't going to happen anytime soon. The casinos in these markets provide the same product that the population in Northern California can get much closer to home, with the sole exception of sports betting.

According to Michael Porter's theory, in a competitive market, successful participants can pursue one of three generic strategies. They can pursue either a low cost, niche or differentiated strategy. The Northern Nevada markets may be pursuing a low cost strategy, but it may not be translated to the casino floor. Proper application of this strategy would entail lowering the house advantages on their games to attract demand. People likely would be willing to travel farther to gamble at a location that gives them a better chance of winning.

At first glance, this appears to be a potential useful strategy. It may not be effective, long-term, due to the ability of the tribal casinos to match that innovation. All the low-cost strategy may likely do is commoditize the gaming product, lowering the profits of the overall industry, and leaving the Reno and Lake Tahoe gaming properties in the same competitive disadvantage. Those markets may actually fail sooner, then the tribal casinos would restore their house advantage to prior levels, not having to worry about Northern Nevada competition, then de facto non-existent.

Another approach is to push their advantage in being able to offer sports betting. Unfortunately, sports betting isn't the largest revenue producer in a casino, and isn't likely to become that ever. In addition, the law notwithstanding, dedicated California sports bettors can place their wagers with online bookmakers or their local bookmaker, without having to drive to Nevada.

The most radical inspiration for Reno and Lake Tahoe actually lies to the south. Las Vegas is known as "Sin City." The slogan, "What happens in Vegas stays in Vegas," is very well known. Leveraging Las Vegas and Porter's theory, Reno and Lake Tahoe may differentiate by offering something that can't be copied by competing California tribal casinos. Sports betting is good, but not sufficient. The radical idea is to bring the legal brothels, now restricted to areas outside the major Nevada cities inside the hotel-casino properties. This approach is the most radical because it completely moves these casino properties fully into the adult entertainment realm, otherwise known as the three B's: Bets, Booze and Babes.

If patrons had more on their minds than gambling and drinking, the properties could offer something more in their facilities without the patron having to leave the property and travel. All elements of this entertainment offering would be available under one roof. With regard to these kind of services being offered in a hotel environment, they are not uncommon in Asian hotel properties. In those properties, the definition of "massage" may be a bit broader than is customary elsewhere. Not all properties would desire to offer this element and instead try to differentiate by being family-oriented. If that is occurring now, it doesn't appear to be very effective in countering the California-based competition.

Brothels integrated with the hotel-casino, catering to both men and women, would be definitely a unique but controversial differentiator. It is likely that these services are indirectly available now, but due to this indirect nature, the true advantage isn't being captured. The offering must be convenient and immediately available for those patrons wishing to buy. This does not exist today. Of course, proper layout and location of these "salons" would be required, but with a multi-story hotel-casino property, this can easily be accommodated, similar to the club floors for frequent stay program members that most hotel chains employ.

There will be a need to be a change to Nevada law as well as potential zoning changes and regulatory modifications to allow this offering, so this last ditch effort, if seriously considered, would be an indicator of the severity of the competitive situation.

Maryland Seeking to Legalize Fantasy Sports Contests

2009-02-27T20:57:00.001-08:00

In a positive for the fantasy sports industry, a Maryland legislator introduced a bill to specifically exempt fantasy sports contests from state gambling prohibitions. FOXNews.com reports that Democrat John Olszewski presented a bill this week to a state House committee.

The federal Unlawful Internet Gambling Enforcement Act (UIGEA) has a specific carve-out exempting fantasy sports contests, as long as they operate within certain stated parameters. Maryland is seeking to insert that same language into state law.

Current Maryland law is unclear with regard to the separation of games of skill from gambling, which is why fantasy sports companies generally shy away from allowing Maryland residents to compete for prizes, or shy away from allowing them to participate at all.

There are nine states where state law is not very clear or undifferentiated between a skill game and a gambling game. These states are: Louisiana, North Dakota, Montana, Iowa, Arizona, Vermont, Maryland, Arkansas and Florida. Fantasy sports companies, in general, place restrictions on players that reside in those states. Maryland is attempting with the legislation to make a clear distinction, which will allow residents to fully participate in prize-based fantasy sports contests.

Montana in 2007 passed a law legalizing pari-mutuel wagering on fantasy sports, but that was an expansion of their gambling law, and not impacting the conduct of contests. Fantasy sports contests in Montana are controlled by gambling statutes as well, with the bulk of the contests affiliated with in-person contests, not utilizing online formats.

The proposed Maryland legislation is further confirmation of the continuing popularity of fantasy sports. The Fantasy Sports Trade Association currently estimates 27 million Americans play fantasy sports, an $800 million industry.

Fantasy Sports Website Makes Top List

2009-02-18T17:55:00.000-08:00

As another indication of the popularity of fantasy sports in the US, a fantasy sports website garnered a mention in an iGaming publication. The Jan/Feb 2009 issue of iGaming Business published data from Hitwise showing the top ten gambling sites in the US as of Nov 2008.

Top Ten Gambling Sites in the US, Nov 08

Florida Lottery www.flalottery.com
NY Lottery www.nylottery.com
FreeSlots www.freeslots.com
Pennsylvania Lottery www.palottery.state.pa.us
Texas Lottery Commission www.txlottery.org
Ohio Lottery www.ohiolottery.com
RealTime Fantasy Sports www.rtsports.com
Powerball www.powerball.com
California Lottery www.calottery.com
Illinois Lottery www.illinoislottery.com

Now according to the UIGEA, fantasy sports is not gambling, but to the iGaming businesses that are legally shut out of the US market, they have a certain bias. That aside, to have a fantasy sports site with sufficient hits to be compared to major lottery websites, that is interesting.

Now this list is for US-based sites. Typical online gaming sites, which are not based in the US, aren't eligible for inclusion in this list. What are eligible, but didn't make the cut, are the pari-mutuel horse racing betting sites. Those US-based online gambling sites are eligible for inclusion in this list, but didn't make the top ten.

What will be interesting to see if during the May timeframe, when horse racing's Triple Crown is running, if any of those sites make the list.

References:

Anonymous (2009, Jan/Feb), Hitwise Industry Report, iGaming Business, 129.

Are Anti-Smoking Bans Online Gambling's Friend?

2009-02-07T18:30:00.000-08:00

Land-based casinos are facing another indirect threat from online casinos, and that threat comes from nearby, not from some offshore locale. Anti-smoking laws that impact casinos impact more than just air quality.

For those that like to gamble and smoke, a smoking ban is more than an inconvenience. These patrons often just go home and smoke, and with online gambling, they can gamble and smoke right from their living room.

Anti-smoking laws are not just being implemented in the United States. France implemented a smoking ban last year and evidence is already in that their land-based casinos are feeling the impact.

"There are multiple factors that have directly and indirectly caused the French casinos to face losses in revenue during 2008. First, the smoking ban that became effective on Jan 1, 2008, has radically changed the habits of players. Players were used to smoking and drinking while playing. Instead of quitting smoking, players have preferred to neglect the casino properties. They now play at home on the Internet, where they can smoke while gambling." 1

US casinos have also seen revenues decline after imposition of smoking bans. Tom Swoik of the Illinois Casino Gaming Associate reports that in the first year after the statewide smoking ban that became effective January 1st of last year, Illinois casinos had a nearly 21% reduction in revenue. Although the economy can explain part of the decline, the smoking ban is implicated as the major cause, due to the comparison with casino revenue in Indiana, which has a similar economy, but with no smoking ban. Swoik added that the two states that have been hurt the most are Illinois and Colorado, as both had smoking bans that were implemented.

"'When you compare the Chicagoland market with the Northern Indiana market,' Swoik said, 'the Chicagoland market in Illinois is down 21.8 percent, and Indiana’s down 4.7 percent. They have the same economy and the same weather that we have. In the St. Louis market, Illinois is down 20.3 percent, Missouri’s down 9.9 percent.'" 2

If you have a land-based casino, the lessons already learned are clear. You need to work to ensure no smoking ban is enacted that impacts your property. Moving proactively to create smoke-free gaming and dining areas might be advisable. If your location is in a warm weather location, creating outdoor venues for gaming and dining may actually increase business while staving off anti-smoking laws.

If you are an online casino, exploration of exploiting these laws in your marketing efforts should be undertaken. If your customer demographic has a substantial amount of smokers, highlight the convenience of gaming and smoking without the hassle of "designated smoking areas." As part of the frequent player program, cigarettes, cigars and other smoking paraphernalia could be included as redeemable items or as incentive gifts for new players.

The most bold approach would be for online casinos to actively support anti-smoking efforts that included casino properties for the express purpose of driving customers to the online sites.

Citations:

[1] Verbiest, T. & Pelletier P. (2009, Winter), Rien Ne Va Plus In The French Casino, Casino Lawyer, 26.

[2] Ortbals, A. (2009, February), Cities, state, schools socked by smoking ban impact on casino revenues, Illinois Business Journal, Retrieved February 7, 2009, from: http://www.ibjonline.com/

References:

Black, P. (2009, January 31), onlinecasinosphere.com, Retrieved February 7, 2009, from:
http://www.onlinecasinosphere.com/news/reports/world-casinos/future-of-online-gambling-5396.php

Ortbals, A. (2009, February), Cities, state, schools socked by smoking ban impact on casino revenues, Illinois Business Journal, Retrieved February 7, 2009, from: http://www.ibjonline.com/

Pakko, M. (2008, January), Clearing the Haze? New Evidence on the Economic Impact of Smoking Bans, The Regional Economist, Federal Reserve Bank of St. Louis, Retrieved February 7, 2009, from: http://stlouisfed.org/publications/re/2008/a/pages/smoking-ban.html

Verbiest, T. & Pelletier P. (2009, Winter), Rien Ne Va Plus In The French Casino, Casino Lawyer, 26-27.

Hawaii Lawmakers Consider Gambling

2009-01-26T20:31:00.000-08:00

Legalized gambling often is seen by states as an easy way to get additional revenue without raising taxes. To an extent, they are correct. Many states opt for lotteries as opposed to casino gambling, or if they allow casino gambling, they allow tribal gaming.

Hawaii is one of only two states with no gambling (the other state is Utah). With an estimated budget deficit of a billion dollars, some of the Hawaii legislature is considering legalizing gambling to make up the shortfall.

A story from KHON discusses this effort. What gambling would do in Hawaii is not just provide some additional revenue due to gaming. It would have a positive economic impact on the tourism market. Hawaii is awesome, but is suffering from lower tourism levels, due to the economy.

Imagine Las Vegas with lush gardens, water, sand, mild temperatures - and gaming? Very nice. I think that the time is right to make this move. With gambling growing globally, Hawaii can keep up with those that wish to gamble, but combine that with the outstanding locale to create a "winning" combination.

Typically, gambling operations tend to be the most busy from late afternoon to a bit after midnight. There is not as much gambling in the morning hours. This would work out great for Hawaii hotel resort/casinos. During the day, the patrons would be on the beach and doing the typical resort/tourism activities. At dusk, when the beaches clear, the casinos fill.

It is unknown if Hawaii will ultimately legalize gambling for thier hotel resorts, but they should.

Kentucky Court Stops Governor's Move To Seize Online Gambling Domain Names

2009-01-21T20:04:00.000-08:00

An AP story today reports that a three-judge panel of the Kentucky Court of Appeals rejected the move by the state to seize the internet domain names from 141 online gambling and related websites. This move by Kentucky was done to stop these sites from being accessible by Kentucky residents. You would think all they had to do was just ask the sites to block Kentucky-based IP addresses. Nope. Seems like some folks aren't that bright in Kentucky, particularly the Governor.

Governor Beshear's apparent intent was to keep out gambling competition from hurting the state's horse racing industry, but the way he went about it was very unusual. Quoting from an article in the December issue of CAP Magazine, attorney Martin Owens describes that the person expected to enforce state laws, the Attorney General, was not the person who filed suit. It was done by a state agency named the Justice and Public Safety Cabinet, whose charter covers prisons, public defenders and coroners. The agency does not have charter that covers telecommunications or gambling. It gets more unusual. The agency actually hired an outside, private law firm to file the suit. Now there's a wise use of taxpayer dollars in this economic environment.

The AP quotes Judge Michelle Keller, who wrote the majority opinion, "It stretches credulity to conclude that a series of numbers, or Internet address, can be said to constitute a 'machine or any mechanical or other device ... designed and manufactured primarily for use in connection with gambling,'" So, in other words, an IP address is not a gambling device.

Mr. Owens in his article cites Kentucky Revised Statutes Section 528.010 which defines gambling devices. Gambling devices are defined as those things which, "...when operated may deliver, as the result of the application of an element of chance, any money or property, or by the operation of which a person may become entitled to receive (them)." 1

It is extremely plain that a website address or domain name doesn't even come close to the definition of a gambling device. Mr. Owens also makes very clear the nonsense being attempted by the Governor. He equates the logic of this suit to trying to arrest the house address numbers of a building where gambling occurred.

I think Kentucky better stick to raising horses and making bourbon rather than trying to set unusual legal precedent. But they won't. The Governor's office has already stated its intent to appeal the ruling.

References

1. Owens M. (2008, December/2009, January), All Eyes On Kentucky, CAP Magazine, 51-52.

Fantasy Sports Prognosticators Not So Accurate

2009-01-14T20:47:00.000-08:00

The 2008 NFL regular season is now over, which also means that for the most part the fantasy football season is over. In a previous post, I mentioned that it would be nice to have some measure of accuracy of player projections.

Now this is not by any means determinative, but I took a few fantasy football magazines I had for this year, and compared their QB projected rankings to how they actually turned out. 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.

To be fair to the magazines, since I used as my sample what I had on hand, I omitted the actual names of the magazines and list them as A, B and C. The table below shows the fantasy QB rankings at the end of this year's regular season, along with the projected rankings from the 3 fantasy football magazines. Also, I averaged the ranking error for the 3 magazines under the "Variance" column.

Where the QB was not included (ranked too low) in a particular magazine's rankings, I insert an "N/A" and assume a ranking of 50. Magazine A had a longer list of QB rankings compared to magazines B and C.

Here's the results (table is at the end of the post):

Correct within 5 or less spots - 10 (31%)
Correct within 10 or less spots - 13 (40%)
Incorrect by 11 or more spots - 19 (59%)
Average ranking error - 15 spots

What is striking is how inaccurate the various fantasy magazines are with their rankings. It is interesting that these magazines, supposedly independent, are very similar with regard to their rankings. They by and large all predict the same performance. So what is the real difference between these various magazines?

On a whim, I wanted to see if the final QB stats ranking for the 2007 season was used, as is, for the 2008 QB stats ranking, how that would measure. For those QBs that ended up ranking too low for measurement in the final 2008 regular season stats, I assumed a ranking of 65. No changes were made to the 2008 projected rankings based on off-season changes. I took the final 2007 regular season rankings verbatim. In other words, Cleo Lemon was projected 25th, Josh McCown was projected 31st, etc. The results are:

Correct within 5 or less spots - 10 (31%)
Correct within 10 or less spots - 15 (46%)
Incorrect by 11 or more spots - 17 (53%)
Average ranking error - 17 spots

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 any worse. I didn't do the work, but from a cursory glance, taking the 2007 rankings and simply swapping QBs that took over from the previous year's starter, you likely would have been more accurate than the fantasy football magazines (at least the ones evaluated).

I did not look at the other positions, so it is possible QBs have a greater variation but that would have to be verified and I'll leave that to others to research. As of now, here's some evidence that fantasy football magazine projections (crafted by "experts") are not statistically more accurate than just saying what happened last year would happen this year.

#	QB Name	Mag A	Mag B	Mag C	Variance
1	Drew Brees	5	4	4	3
2	Aaron Rodgers	16	19	19	16
3	Jay Cutler	8	8	8	5
4	Philip Rivers	18	13	13	11
5	Kurt Warner	37	36	36	31
6	Peyton Manning	2	2	2	4
7	Matt Cassel	64	N/A	N/A	48
8	Donovan McNabb	7	6	6	2
9	Tyler Thigpen	N/A	N/A	N/A	41
10	David Garrard	9	15	15	3
11	Chad Pennington	27	30	30	18
12	Tony Romo	4	3	3	9
13	Eli Manning	13	12	12	1
14	Brett Favre	N/A	N/A	45	34
15	Matt Ryan	N/A	34	34	24
16	Jason Campbell	17	25	24	6
17	Kyle Orton	31	38	39	19
18	Joe Flacco	33	37	38	18
19	Ben Roethlisberger	6	7	7	12
20	Jake Delhomme	21	14	14	4
21	Matt Schaub	12	17	17	6
22	Jeff Garcia	22	23	23	1
23	Trent Edwards	24	28	28	4
24	Kerry Collins	50	N/A	N/A	26
25	Shaun Hill	38	40	40	14
26	JaMarcus Russell	26	22	22	3
27	Marc Bulger	15	11	10	15
28	Ryan Fitzpatrick	66	N/A	N/A	27
29	Gus Frerotte	45	N/A	N/A	19
30	Seneca Wallace	53	N/A	N/A	21
31	Derek Anderson	11	10	11	20
32	Dan Orlovsky	N/A	N/A	N/A	18

Question: How Do You Spell Failure? Answer: Montana Sports Action

2008-12-30T07:28:00.000-08:00

The NFL regular season is over, and so is the first NFL season for Montana Sports Action. The weekly handle is shown in the chart above. It doesn't look very pretty. Problems with this game have been discussed in previous posts. You can read those posts here and here.

For the entire season, Montana Sports Action didn't even generate $100,000 in handle. The estimate, based on prize amounts, is approximately $87,510. If you read the hype regarding the revenue potential of this game, it should have been generating $87 thousand per week in wagers. Not even close. The results are so poor, that it is likely that the total amount held back for horse racing, the lottery and the retailers wasn't even enough to offset the costs of the fantasy sports statistics feed. However the cost of the statistics feed can not be covered by the fees to the retailers, or by the fees given to the Board of Horse Racing, so the network operator (Lottery) has to cover an approximate $20,000 charge with their gross revenue of about $5,250.

There is nothing positive with these results. Even the trend is in the wrong direction. If handle was low, but steadily increasing, you could make the claim that the future looks brighter. Not with Montana Sports Action. The trend is downward, with lower handle as the season progressed.

The total revenue amounts to the various entities after paying prizes are approximately:

Montana Board of Horse Racing (MBOHR) - $14,000
Montana Lottery - $5,250
Retailers - $3,500

Assuming 150 retailers, each one generated on average a whopping $23 in commissions - $1.37 per week.

As stated in a previous post, probably only the statistics supplier made money on this game.

On a related topic discussed in a previous post, if this game is truly a lottery game, and not a pari-mutuel game, as the Lottery seems to be moving their positioning toward, why pay MBOHR any money? If the game is a lottery game, that game would be outside the purview of HB 616; therefore no need to pay MBOHR. Quoting Forrest Gump, "stupid is as stupid does."

Keeping with the topic of stupidity, the Montana Lottery is looking to launch a similar game for the NASCAR racing season. Recent research from the Fantasy Sports Trade Association estimated that there were about 4 times as many fantasy NFL participants as fantasy NASCAR participants. Given the poor results of the NFL game, which by far is the most popular fantasy sport, it is fair to estimate that the NASCAR game will generate about 1/4 the handle. Even Forrest Gump would be scratching his head at that.

Given this assumption, and the assumption that the Montana Lottery or their vendor partner isn't bright enough to make sufficient changes to the core game, a similar handle chart is expected. Some initial interest, realization that the game is poor, and a steady gradual decline in handle. Albert Einstein defined insanity as doing the same thing over and over again and expecting different results.

There are rumors of legislation that will be proposed in the new year to put an end to this insanity. Let's see if the Montana Legislature has more sense than the Montana Lottery and the Montana Board of Horse Racing. Time will tell.

Las Vegas Gaming Revenue Still On Downward Trend

2008-12-20T20:14:00.000-08:00

As described in earlier posts, here and here, Nevada and the gambling industry are not recession-proof. The gaming win has been declining, but in October the decline was huge. Really huge. October gaming win in Las Vegas was down 26% from the previous year. Nevada overall was down 22% from a year earlier. The link to the Reuters article is here.

With the housing crisis and higher gasoline prices, people aren't spending their cash heading to Las Vegas. Gas prices have abated a great deal, but the damage to the economy has been done. With the housing crisis not nearly over, and with the US Government printing tons of money to keep the economy going, this is going to get worse before it gets better.

The excessive bailouts will, when the economy stablilizes, spur a large spike in inflation. Too much money after too few goods. We're quite possibly going to do a replay of the late 1970s -- not a good time for the economy, working class and retirees. Everything will get more expensive, but those groups won't be able to adjust their incomes sufficiently to compensate. They are going to get squeezed.

And it is exactly those groups that Las Vegas needs to get back on track. I don't envision that happening anytime soon. Perhaps for a short rebound, but when inflation kicks in, that rebound will vanish. For those economy watchers, keep alert to signs of inflation when the bailout money impacts the economy and the high-water mark of the mortgage crisis occurs, and begins to diminish.

Delaware Looking To Parlay With Sports Betting

2008-12-16T17:07:00.000-08:00

When the Delaware Legislature convenes next month, figuring out something to help their racinos counter increased gambling offerings from Pennsylvania and Maryland will be on their list of "to do" items.

How do you counter gambling? MORE GAMBLING! As Sarah Palin might say, "you didn't see that one coming, you betcha!"

Delaware is one of four states that is grandfathered under the Professional and Amateur Sports Protection Act to legally offer sports gambling. If bigger states offer more slot machines to keep their gambling citizens within state borders, how does a small state like Delaware compete? Offering something Pennsylvania and Maryland can't is probably a good idea. The Forbes.com link to the Associated Press article has more detail on the subject.

The outgoing governor is against the idea, but who cares? She's leaving so who gives a hoot about what she thinks? The incoming governor is facing a revenue shortfall to the tune of about 500 million dollars, and the increased gaming competition from nearby states isn't going to help. He could opt for the Beatles' "Taxman" approach, but that won't be too popular. But adding more gambling? A win-win! (except for the people that lose money gambling) The choice is, do you let those gamblers lose money in someone else's state, or do you want them to lose money in Delaware? If you're Delaware, that's a no brainer.

If Delaware adds sports gambling products that are popular and profitable, Delaware could totally counter what her neighboring states are doing. To those that are scratching their heads, yes, you can offer a sports betting product that loses money. Check out my recent posts regarding Montana Sports Action.

Montana Sports Action: Pie In The Sky From The Big Sky

2008-11-25T05:56:00.001-08:00

Montana Sports Action (MSA), the fantasy sports wagering game instituted by the Montana Lottery, has been in operation for three months. There is enough data to perform some analysis.

MSA allegedly is an attempt to implement a fantasy sports wagering game in accordance with Montana HB 616, which authorized pari-mutuel wagers on fantasy sports. A previous post discussed the potential regulatory issues with MSA.

This new wagering game was predicted to deliver big revenue. During the legislative process in 2007, the Governor's Office of Budget and Program Planning estimated annual wagers of approximately $12 million ($11,985,600 according to the documents). More recently, an article by Online Casino Advisory.com quoted the Montana Lottery Director as expecting "the game to produce between three and five million dollars annually." That may not be the case as published results from the MSA website show.

At the top of the post is a chart showing the amount of wagers per week so far this NFL season for MSA. You are reading it correctly. After 12 weeks, the game that was supposed to generate millions in wagers has barely topped $65 thousand dollars total, with the highest weekly handle a paltry $6,800. You would think that the Montana Lottery and its vendor could figure out how to make a popular GAMBLING game. Obviously not. Don't think that new sports like NASCAR and golf will help these folks either. Fantasy football is the largest of the fantasy sports by a good margin. These other sports are very likely to make LESS than this. Montana Sports Action needs to be renamed More Suckers Anyone.

So, how is this "plethora" of cash broken out? By law, any game that is operated under the authority of HB 616 needs the following revenue split:

74% - Winning Bettors
16% - Montana Board of Horse Racing
6% - Network Operator (Montana Lottery)
4% - Retail Outlets

So, after 12 weeks, $48,753 has gone to the winning bettors, $10,541 to the Montana Board of Horse Racing, $3,953 to the Montana Lottery and $2,635 to the retail outlets. Who is making money? Let's start with the retailers and work our way up.

There are about 150 of the retailers, who had to pay $75 for a license fee to offer Montana Sports Action. In return, they get 4% of the fantasy sports wagers as a commission. To break even on that investment, the retailers will need to sell $1,875 worth of fantasy sports wagers. Assuming each of the retailers sold an equal amount (unlikely), after 2/3 of the NFL season, each one on average has sold only $440. Remember, fantasy football is the most popular of the fantasy sports. Other sports should generate far LESS revenue.

It gets better (if you have a warped sense of humor). Assuming that the betting terminal consumes 150 watts of power, is on for 12 hours a day, and electricity costs 10 cents per kilowatt hour, the terminal will cost the retailer $5.40 per month in electricity. The average retailer earns a whopping $5.84 in MSA commissions. So, each retailer earns enough to cover the electricity costs plus turn a monthly profit of 44 cents. Wow. But remember, that is only if the retailer is performing at the retailer average. Those that are underperforming likely aren't generating enough in MSA betting to even cover the cost of electricity for the betting terminal.

Retailers? NOT making money on Montana Sports Action.

The Montana Lottery is acting as the network operator for the game. So far, they have pulled in just under $4,000 in MSA revenue. To put on the game, they need marketing labor to push the terminals on the retailers, put up the website, etc. But, let's assume all that costs zero. They still need a statistics feed to run the game. Based on the typical rates for these kind of statistics feeds for fantasy sports games, a ballpark assumption is that the cost for fantasy stats for the NFL season would be around $20,000.

Montana Lottery? NOT making money on Montana Sports Action.
Stats Supplier? MAKING money on Montana Sports Action.

The Montana Board of Horse Racing was hoping for this big revenue to keep the horse racing industry alive in the state. To date, they've pulled in approximately $11,250 in retailer license fees and $10,500 in MSA wager revenue, totaling $21,750. Unless jockey insurance drops dramatically and horsemen like race purses around $100, I don't think they are going to get the money they need.

Montana Board of Horse Racing? NOT making money on Montana Sports Action.

So, of all the entities involved in a GAMBLING game, only the stats supplier seems to have a valid profit on Montana Sports Action.

But what if the Montana Lottery's motivation was not really to push the fantasy sports game but really to push lottery ticket sales? We'll examine that possibility in an upcoming post.

With Implementation of UIGEA Regulations, the Government Upholds the Law of Unintended Consequences

2008-11-20T07:12:00.000-08:00

The Kansas City Star queries on their gambling blog if the government actually made internet gambling more likely with the implementation of the Unlawful Internet Gambling and Enforcement Act (UIGEA).

I think that the trend to liberalizing online gambling laws is well in place and that just implementing some regulations won't do much to speed or slow the process. With the economy the way it is, politicians are going to "get religion" and figure anything that can generate more revenue without raising taxes is a good thing. However, I do think that the poorly drafted nature of the legislation coupled with the sleazy way it was passed did help cement the ultimate path of liberalization rather than prohibition.

The Global Gaming Expo trade show was in Las Vegas this week. I attended and saw a smaller show than last year. I definitely noticed a smaller crowd and noticed more than a few empty booth spaces, where exhibitors were scheduled to show, but didn't. A much more somber show than last year's. The press said attendance was down 7%, but to me it seemed a much larger decrease. Last year, lines were long and it was difficult to move from booth to booth. This year, you could move quite easily and not stand in very long lines for anything, if you had to stand in line at all.

At the show, the head of the American Gaming Association opined that legalization of internet gambling will be a hot topic in the next Congress (which will be controlled by Democrats). With a Democrat in the White House, legalization may come sooner rather than later.

If you remember, in the past year or so, several online gambling companies cut deals with the US Department of Justice and paid fines to cover activities before the passing of UIGEA. These companies had departed the US market with that bill becoming law. You know why? Because they want in when the US legalizes online gambling and don't want to be shut out. Those online gambling operators that still service US customers? I think they made a bad bet.

The table is set for the big brick and mortar US gambling firms to move with a passion if internet gambling is legalized, followed quickly by the publicly traded internet gambling firms overseas. A good thing for gamblers as you will be able to work with legit, above board operators. No need worrying about putting money in or getting your money out.

Sports gambling on the internet? Don't count on that portion being legalized soon, but who knows?