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Week 11 of the college football season was bad for big business.
Through Thursday, the Dow was off 281.84 points, the S&P 500 was down 36.69, and the Nasdaq had dropped 86.55 points, or 2.9 percent - the largest percentage drop of the three. Despite falling unemployment claims and rising U.S. exports, investors worry that the impending "fiscal cliff" could severely hurt an economy that has shown signs (the Dow is up 593.76 on the year) of improvement.
What is the fiscal cliff, you ask? We have no idea. But as a rule of thumb, whenever you see a word like fiscal used alongside a geological (and/or geographical, for the picky) term meaning "a significant vertical, or near vertical, rock exposure," we assume it's not good, especially if there's no mention of carabiners, harnesses, and the like. We feel the government would be wise to coin a new, less frightening, term, like the Wiley Coyote Predicament. Wiley Coyote couldn't hurt anyone, right? He's like the Stay Puft Marshmallow Man.
Fortunately, The CollegeFootball Report Free Range Chicken doesn't put all of his eggs (if you will) in one basket. Long ago, he learned the key behind sound investing: diversify! And never bet against double-digit home dogs in primetime.
For instance, heavily backing the favorites in the NFL last weekend proved a lucrative hedge against the drubbing the Chicken's stock portfolio suffered this week. Longtime veterans put the losses suffered by Vegas sportsbooks on Sunday as "the worst single, regular-season" day of action due primarily to players placing parlays on favorites such as Denver, Green Bay, Chicago, Baltimore, etc. (The Chicken also liked second-half action in many games where the favorite trailed - or wasn't covering - by halftime.) We grant that pro football is off topic for the College Football Report, but both share a common business interest: gambling.
Betting, especially sports betting, is big business and point spreads don't move in response to issues like the Wiley Coyote Predicament. The American Gaming Association (AGA) estimates that Nevada sees $3 billion in action annually across 216 individual books, but the total amount wagered, including illegal bookies and Internet sites, amounts to a bit more: somewhere between $380 billion (according to the AGA) to $500 billion.
While betting on the NFL dwarfs action on other sports, college sports are a significant draw as well. The FBI reports, for example, that as much as $2.5 billion in illegal bets are placed during March Madness alone. And yes, office pools are lumped into that figure.
But while you are fleecing your Human Resources Department and other easy marks for a few hundred bucks, the NCAA takes in approximately $770 million in revenue during the tourney - even as the NCAA pretends it abhors betting on college games.
Last month, the NCAA pulled six regional championship tournaments from New Jersey after the state announced it would begin issuing sports betting licenses in January. The license would allow books in N.J. to take bets on college games, running contrary to the NCAA's position prohibiting championship tournaments in states allowing legal "single game betting" - i.e. bets based on money lines or point spreads.
On a side note, we love The Garden State's attitude toward the NCAA's move. The revenue derived from hosting the championships - the Division III wrestling regionals in Ewing; the Division I men's and women's swimming and diving regionals in Piscataway; the Division I women's basketball regionals in Trenton; the Division III men's volleyball championship in Hoboken; and the Division II and III women's lacrosse championships in Montclair - pales in comparison to the lucrative new gambling business.
State senator Raymond Lesniak, asked about asked about the NCAA's power play, stated that the projected revenue from the college tournaments were "a drop in the bucket compared to the revenues we're going to get from sports betting." The NCAA seems to have overestimated how much leverage the women's lacrosse championships would give them. Lesniak again: "If they think that, they don't know New Jersey."
The NCAA can't acknowledge the link between college sports and gambling. For example, airtime during college games is lucrative, at least in part, due to gambling: sports betting drives viewership. Thus the NCAA must pay lip service to protecting the integrity of college sports and "protecting student-athlete well-being" by pulling events from venues in states with legalized gambling. To do otherwise would implicitly recognize the connection.
Consider a college football playoff system. The BCS currently receives more than $125 million annually from the ESPN contract for the national championship game. But the BCS system doesn't create the same atmosphere, much less the same betting options, as March Madness. Imagine the pools, parlays, and prop bets made possible by a college football playoff format that would, in turn, increase the pool of television viewers.
Asked about the new playoff system, Neil Pilson, former president of CBS Sports, called the television rights "the last big American sports event that hasn't happened yet . . . like creating beachfront property" with advertising rate increases from 25 to 40 percent. In total, experts value the playoff system between $600 million to $1.5 billion per year.
But the NCAA can't admit that the winner of the playoff auction will also win all the additional eyeballs that come with it. Instead, the NCAA relocates the Division III men's volleyball championships. We didn't even know there was such a thing, nor do we expect the residents of Hoboken to bat an eye. But the sheer hypocrisy is galling. Borrowing from a statement released by New Jersey governor Chris Christie's office in reaction, "[t]he NCAA wants to penalize New Jersey for legalizing what occurs illegally every day in every state."
Although really, we feel like New Jersey overcooked the whole deal. We would rather see the public relations office release the following statement: "Nanny nanny boo-boo!"
The Free Range Chicken
Kansas (+26) at #22 Texas Tech, 12 p.m.
Comment: The line moved from +25 to +26 for good reason.
#15 Texas A&M at #1 Alabama (-13.5), 3:30 p.m.
Comment: A hook-buying opportunity.
#18 UCLA at Washington State (+16.5), 10:30 p.m.
Comment: Probably a terrible decision, but we've made worse for less. See Kansas, above.
The Sports Seal
The long nightmare is over in the Blue Grass State. The death watch on Kentucky head coach Joker Phillips is over. Sadly, the Wildcats don't play this weekend so the Sports Seal will have to console himself by spending his Saturday afternoon rolling in a pile of herring, his winnings from fading UK in every game this season.
Mike Luce is our man on campus. He welcomes your comments.