SBTech Contract For Oregon Sports Betting Finally Revealed


Oregon sports betting

The Oregon sports betting partnership between SBTech and the Oregon Lottery isn’t quite the bargain it was advertised to be.

Finally released Tuesday after a months-long court battle, the contract reveals that SBTech receives a much larger share of OR sports betting revenue than initially disclosed. Expenses so far have erased every cent of profit for the lottery — and then some.

Since launching the Scoreboard app in October 2019, the state has lost nearly $2 million despite net revenue of almost $6 million. Direct payments to SBTech and other vendors over that period amount to at least $2.9 million.

SBTech has exclusive deal for Oregon sports betting

The two parties are primarily responsible for Scoreboard, which launched in October as the product of an exclusive partnership formed earlier in the year.

The terms of the agreement only became public record following a petition from Legal Sports Report and The Oregonian, an order from the state Department of Justice, and a Superior Court ruling from Judge David Leith.

SBTech fought to keep the details of the public contract hidden as “trade secrets” but Leith disagreed with that interpretation of state law. The operator recently dropped its right to appeal, allowing the lottery to release the unredacted contract.

OR sports betting revenue share

Prior to the release of the contract, the only public insight into the financial terms came from a since-removed memo on the Oregon Lottery website.

In that communication, an agency official asked the board to approve an agreement in which SBTech would receive 9-11% of the net revenue derived from sports betting for three years, and 12% thereafter.

Net revenue is defined as:

Gross Gaming Revenues less (a) seventeen and one- half percent (17.5%) of GGR for costs related to payment processing, chargebacks, KYC, and geolocation or other costs to be agreed by the Parties; and (b) an amount not to exceed twelve percent (12%) of GGR for (i) actual Bonus Costs (to be calculated and capped separately for retail and mobile channels), and (ii) any federal excise taxes (if due and payable) ((a) and (b), collectively, “Deductions”)

The executed contract defines these payments as Access Fees, and it lays out a tiered structure that matches the expected rates.

Oregon Lottery SBTech Access Fees

Those figures, however, represent just a fraction of the total revenue SBTech collects from Oregon sports betting. The actual numbers are considerably larger than advertised.

SBTech making the most of Oregon sports betting

The section related to Managed Service Fees contains the bulk of the additional costs.

It stipulates that SBTech receives an additional 16% of net revenue, with a minimum monthly payment of $300,000 for the first six months and $350,000 thereafter.

After 36 months, that “Minimum Managed Service Fee” ticks up to 17%. There is a mechanism for Oregon to recover some of those minimum payments once the market matures.

The lottery is also responsible for pass-through expenses not otherwise itemized in the contract. SBTech does provide a basic data feed from Sportradar as part of its obligations.

Pass-through items, per the contract, include “payment gateways, affiliate systems, data providers, scoreboards, visualization, statistics and any additional products.” The lottery reimburses SBTech for such costs.

Only one winner in Oregon

While we don’t have visibility into the actual costs, we can make a few inferences from the monthly revenue reports.

For February, for instance, the lottery paid just more than $1 million to cover its direct and indirect sports betting expenses. At least $630,000 of that went to vendors, representing more than 43% of gross revenue for the month.

At full maturity for both the contract and the market, the state’s share of Oregon sports betting revenue appears severely constrained by required cuts to SBTech and others.

What a month at maturity could look like

Assuming $5 million of GGR in a hypothetical month at four years of market maturity, the lottery can deduct:

  • 16% for fixed costs
  • Up to 12% in bonusing

That would leave $3.6 million as net revenue with 12% deducted. SBTech then would receive:

  • $432,000 in access fees
  • $612,000 in managed service fees

SBTech would take in more than $1 million in fees on $5 million, or about 20% of GGR or 29% of net revenue. Vendors would also receive up to $800,000 in deducted fixed costs (16%) as compensation for “payment processing, chargebacks, KYC, and geolocation or other costs” as set out in the contract.

That amount could make the vendors’ share as much as 51% of net revenue.

Will Oregon sports betting improve?

Even without the contract, it’s easy to pinpoint reasons for the underperformance of Oregon sports betting.

Giving one operator a monopoly is, for starters, never the broadest path to success in any state. Without competition, it’s hard to foster the sort of innovation needed to build a young sports betting market from scratch. By many accounts, the Scoreboard app is one of the least user-friendly sportsbooks you’ll find in the country.

What’s more: the structure of SBTech’s agreement with the lottery disincentivizes both parties from offering the types of promotions that drive growth in competitive markets. The contract caps such bonuses at 12%, though it removes them from the net revenue calculation.

Regulations also put Oregon sports betting at a disadvantage right out of the gate. College athletics are off the board, most notably, and the choice to treat sports betting like a lottery game creates additional hurdles for prospective bettors. Both likely will need to change before the market can thrive.

Of course, any discussion of the future comes with a great deal of uncertainly at the moment. The governing bodies of nearly every international sport have indefinitely suspended play in an effort to combat the coronavirus pandemic.

Lotteries struggling to succeed in sports betting

State lotteries are, with few exceptions, well-equipped to administer draw games and scratch-off tickets. Sports betting, however, is fundamentally not a lottery game. And as a group, lotteries are not doing a great job administering the new vertical.

Of the 16 states with legal sports betting, six of them use their lottery as the regulator. In some cases, such as in Oregon, the agency also assumes the role of the operator in partnership with a third-party supplier.

So far, none of these partnerships have produced an ideal framework for sports betting.

Proof is in the details

Rhode Island and Delaware managed to get their industries off the ground without incident, but those small-market monopolies generate negligible sports betting revenue.

New Hampshire signed a similar sole-source contract with DraftKings Sportsbook, but its market is still too new to make any judgments. DraftKings operates on nearly a 50-50 split with the state in exchange for exclusive territory, not dissimilar to Oregon’s setup.

The yet-to-launch sports product in Washington, D.C. provides perhaps the best argument against lottery operation. Its path through the legislative and regulatory process has been littered with debates, delays, and perceived conflicts of interest. This includes the resignation of the man who spearheaded the effort, Councilmember Jack Evans, over unrelated ethics violations.

More than a year after DC sports betting became legal, it has still yet to launch. And expectations for the forthcoming Intralot product are in the basement.

Montana sports betting a mess

The Greek company is also the sports betting partner to Montana, another market in which the lottery granted an ill-advised monopoly to an unproven vendor.

And of course, Oregon is the only state in the union managing to lose money from sports betting.

West Virginia serves as perhaps the lone favorable case study in lottery-administered sports betting in the US — and even it endured a bad case of hiccups during infancy.



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