Oregon Is The Only State Losing Money On Sports Betting. But Why?
Few expected Oregon sports betting to wow the world with its lone online sportsbook.
The Scoreboard app, produced by Oregon Lottery and powered by SBTech, enjoys a mobile monopoly in the state. It launched in fall 2019 following months of delays. Plus, it prohibits wagering on college sports — not just in-state college sports but all college sports.
Yet the lottery maintained a rosy outlook, one that included a revenue projection of $6.3 million from sports betting in its first year.
That optimism has since taken quite a hit. According to a memo from lottery director Barry Pack to the Oregon Lottery Commissioners, after “examining contracts and reviewing expenses” since Scoreboard launched “and establishing revenue run-rates and based on actual results,” the lottery expects to suffer a loss of $5.3 milli on for the first nine months of the 2020 fiscal year.
Oregon Lottery analyzes sources of setbacks
During the lottery’s Board of Commissioners meeting near the end of February, Pack cited several reasons as to why Scoreboard has vastly underperformed.
For one, Pack noted that “a new sales channel and a new product” needs ample time to reach profitability. “So, there is no big surprise here that we aren’t at profitability at four months. We did a three-year forecast (in summer 2019) because we weren’t sure exactly where in that first three years we’d hit profitability.”
That forecast estimated a $6.3 million net profit in the first year of Scoreboard’s existence, a total that would increase to $13.9 million and $23.4 million over the next two years.
However, costs apparently became insurmountable for the Oregon Lottery: some $16 million in direct and indirect expenses. A bulk of that, Pack explained, could be attributed to startup costs that “were higher than we anticipated.” Add in legal fees, “fairly significant” testing costs and higher-than-anticipated geolocation fees. Not to mention increased labor costs because of issues relating to the app’s launch.
Because of these costs, in essence, Scoreboard has operated out of a hole from the start.
The Scoreboard hold percentage
This is all without mentioning Scoreboard’s less-than-ideal take on bets placed. That margin, as Pack described, has drastically fallen short of expectations.
“We built that original forecast on an 8% margin and actuals for the first four months are more around 7%,” Pack said. “And that 1% actually makes a fairly significant difference in terms of profitability.”
Of the $66.2 million wagered via Scoreboard through January, the lottery netted $4.5 million in revenue, reflecting a less than 7% hold. Further, the state has lost $2.3 million during that time.
Pack closed by emphasizing his dissatisfaction with the deficit and how he and his team are committed to keeping costs down and “finding creative ways to boost the margin” to help reverse the app’s fate.
Oregon sports betting has issues to address
Certainly, the Oregon Lottery faces myriad obstacles in its attempt to turn things around with the Scoreboard app.
Chief among them, however, are two issues that seem insurmountable but would assuredly get Scoreboard on the right track.
Monopoly sportsbook does not pay off
Of the 15 states with legalized sports betting, 10 offer mobile wagering in some form. Of those 14 states, only four are monopolized, aka, lottery-run: Oregon, New Hampshire, Rhode Island (all three of which have authorized online betting) and Delaware.
And of those 14 states, only one would end its first fiscal year in the red: Oregon.
While complete control of the market allows for Scoreboard to capture 100% of all legal online wagers made in Oregon, the positives essentially stop there.
Without competition, Scoreboard does not truly need to worry itself with friendly prices or even frequent bonuses or promotions. Arguably the lottery is not pressured to fix any technical issues users face — at least not as quickly. On a larger scale, fewer operators equates to fewer platforms that can potentially lure bettors away from offshore sites, or attract new bettors.
The goal of state-sanctioned wagering, lawmakers across the country have agreed, is to take business away from and ultimately shut down illegal sports betting. In a monopoly, Oregon cannot do enough to acquire customers and accomplish that feat.
For the record, the state could have other online sportsbooks active via partnerships with tribal casinos. It’s likely, though, those apps would only be accessible while on site.
It could also just open up a more open model of competition, something the lottery is tasked with in starting up Tennessee sportsbooks online.
Adding college sports betting would help
In the call with the Board of Commissioners, Pack noted how Scoreboard could gain more traction.
“The availability of collegiate wagering,” he said, “is still up in the air … which would bring that margin up fairly substantially because of the interest in college sports and the fact that we could turn it on with really no costs.”
Oregon launched Scoreboard with the stipulation of only accepting wagers on professional sports. Some states, such as New Jersey, have prohibited betting on college events staged within respective state lines or on colleges located within the borders. Oregon outlawed college betting altogether.
That means taking away college football (up there with the NFL for most popular sport to wager on) and betting on March Madness, among others. That’s quite a lot of money left on the table.
An Oregon Lottery spokesman has indicated that lottery officials are working toward integrating collegiate betting.
“The ability to offer collegiate wagering would speed our progress towards profitability — increasing revenue with very little additional expense,” the spokesman told Willamette Week. “But there doesn’t seem to be much appetite for that in the legislature.”
Some legislators in the state have backed House bill 4057, which would ban gambling on college sports for good.
Indeed, much is to be desired with Oregon’s lone online sportsbook. And much work remains to fulfill the lottery’s desire to make Scoreboard profitable.