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

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

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

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

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.