Thoughts On ESPN's Outside The Lines Show On WCOFF

Team Legacy · Post by **Team Legacy** » Sun Dec 18, 2011 4:05 am

Originally posted by Glenneration X:
quote:Originally posted by wiljiro2:
So I re-ask the question - Why would Government Regulation be such a bad thing? It would be rather easy to stay above board -
Everyone hates government regulation because whenever the government gets involved in anything, the bureacracy, politics, and ineptitude of government muddles everything.

However in theory, there should be nothing wrong with it for the players. We are required to file for anything we win as it is now and there are no fool-proof current protections in place for the players outside of our own due diligence and as mentioned earlier, the good will of the contest providers. [/QUOTE]Government regulation would result in either taxes, up front bonds and or additional licenses to operate, which would cause great expense to the operators. In turn, our payouts suffer. The question is are we willing to pay the price for that type of oversight or can we police it ourselves? I think we're in great shape!

Greg Ambrosius · Post by **Greg Ambrosius** » Sun Dec 18, 2011 4:05 am

If you want to see bad business decisions, just look at how they went from profitable to unprofitable without even knowing anything about their operating expenses. Forget about how much they paid at the live events for referees, food & beverage, salaries, promotions, etc. Let's just look at the prize money for baseball and football and see where they went wrong.

In 2006 WCOFF had I believe 840 teams at like $1,500 each (these aren't exact numbers). They paid out $200,000 as a grand prize and were sold out for the fourth straight year.

The first year that Dustin and Jesse took over the WCOFF, they wanted to go big and thus increased the grand prize to $300,000 and increased second overall and many other overall prizes. Prizes were based on 1,200 teams and guaranteed overall prizes increased by more than $150,000. The event eventually grew to over 900 Main Event teams, but even though they were still only 3/4's full they never were smart enough to lower these guarantees and thus lost money those last four WCOFF seasons despite revenue rising each year.

In baseball, they of course had to top NFBC payouts so they came out with a $200,000 grand prize and a stupid $50,000 second place overall prize. They were basing prizes on 300 Main Event teams and of course finished with 126 teams in 2010 and 126 teams in 2011. You're looking at less than $200,000 in revenue and payouts of almost $400,000 BEFORE ANY EXPENSES are factored in.

So they did two years of baseball with heavy discounts and they provided way too many discounted teams for football to keep the cash flow going and you can see where the losses began to add up from. It's hard not to imagine baseball being a $500,000 loss over two years and likely more. You can do similar math over football for four years and see where the losses began just from the signup/prizes structure. Then look deep into expenses and you have your answer to where the money went.

wiljiro2 · Post by **wiljiro2** » Sun Dec 18, 2011 4:07 am

Originally posted by Scott Atkins:
quote:Originally posted by Glenneration X:
quote:Originally posted by wiljiro2:
So I re-ask the question - Why would Government Regulation be such a bad thing? It would be rather easy to stay above board -
Everyone hates government regulation because whenever the government gets involved in anything, the bureacracy, politics, and ineptitude of government muddles everything.

However in theory, there should be nothing wrong with it for the players. We are required to file for anything we win as it is now and there are no fool-proof current protections in place for the players outside of our own due diligence and as mentioned earlier, the good will of the contest providers. [/QUOTE]Government regulation would result in either taxes, up front bonds and or additional licenses to operate, which would cause great expense to the operators. In turn, our payouts suffer. The question is are we willing to pay the price for that type of oversight or can we police it ourselves? I think we're in great shape! [/QUOTE]I agree - I think we would be easy to regulate - I was all for the idea touched on in the OTL piece - a players owned Regulating Board that kept tabs on leagues that pay, their escrow accounts, and general business practices - These boards serve as a great way to "police" as well -

Greg Ambrosius · Post by **Greg Ambrosius** » Sun Dec 18, 2011 4:10 am

Originally posted by Glenneration X:
quote:Originally posted by wiljiro2:
So I re-ask the question - Why would Government Regulation be such a bad thing? It would be rather easy to stay above board -
Everyone hates government regulation because whenever the government gets involved in anything, the bureacracy, politics, and ineptitude of government muddles everything.

However in theory, there should be nothing wrong with it for the players. We are required to file for anything we win as it is now and there are no fool-proof current protections in place for the players outside of our own due diligence and as mentioned earlier, the good will of the contest providers. [/QUOTE]Agreed Glenn. Everything we are doing to run our business at the NFFC and NFBC is already scrutinized by our owners, who are part of a publicly traded company. So we wouldn't see anything wrong with government regulation if the goal was to make sure every business ran legally and had secured funds for prizes. In fact, it might clear up some problems that we now see with states viewing fantasy sports differently than other states. The scare, however, is that the government will over-reach in areas they don't even understand and make things worse. You can certainly expect more rules and regulations if they were to get involved. But the original premise isn't off base at all.

Glenneration X · Post by **Glenneration X** » Sun Dec 18, 2011 4:13 am

Originally posted by Greg Ambrosius:
In baseball, they of course had to top NFBC payouts so they came out with a a stupid $50,000 second place overall prize. Greg for obvious reasons, this is the one part of your last statement I strongly disagree with.

Of course, I would disagree even more vehemently if a dime of it was actually paid out.

Greg Ambrosius · Post by **Greg Ambrosius** » Sun Dec 18, 2011 4:18 am

Originally posted by Glenneration X:
quote:Originally posted by Greg Ambrosius:
In baseball, they of course had to top NFBC payouts so they came out with a a stupid $50,000 second place overall prize. Greg for obvious reasons, this is the one part of your last statement I strongly disagree with.

Of course, I would disagree even more vehemently if a dime of it was actually paid out. [/QUOTE]I feel for ya man. I made that reference because NOBODY plays for 2nd place overall, so there was no need on their part to make that the BIGGEST 2nd place prize in the industry. Look at FFPC. When they went to $200,000, they kept 2nd place overall at $15,000. Heck, in NFBC we have a $100,000 grand prize and $20,000 2nd place prize. The key is putting out that big carrot. But NOOOOOOO, they had to go $200,000 for first and $50,000 for second and take even bigger losses. Just a big, big guarantee prize that definitely set them back six-figures for both years of WCOFB. And the actual cash that came in during 2011's WCOFB was virtually nil as the vast majority of players rolled over prize money for those entries. That, along with the NFL lockout stalling 2011 entry fees from coming in, made the "run on the bank" too loud to ignore.

Glenneration X · Post by **Glenneration X** » Sun Dec 18, 2011 4:21 am

Originally posted by Greg Ambrosius:
quote:Originally posted by Glenneration X:
quote:Originally posted by Greg Ambrosius:
In baseball, they of course had to top NFBC payouts so they came out with a a stupid $50,000 second place overall prize. Greg for obvious reasons, this is the one part of your last statement I strongly disagree with.

Of course, I would disagree even more vehemently if a dime of it was actually paid out. [/QUOTE]I feel for ya man. I made that reference because NOBODY plays for 2nd place overall, so there was no need on their part to make that the BIGGEST 2nd place prize in the industry. Look at FFPC. When they went to $200,000, they kept 2nd place overall at $15,000. Heck, in NFBC we have a $100,000 grand prize and $20,000 2nd place prize. The key is putting out that big carrot. But NOOOOOOO, they had to go $200,000 for first and $50,000 for second and take even bigger losses. Just a big, big guarantee prize that definitely set them back six-figures for both years of WCOFB. And the actual cash that came in during 2011's WCOFB was virtually nil as the vast majority of players rolled over prize money for those entries. That, along with the NFL lockout stalling 2011 entry fees from coming in, made the "run on the bank" too loud to ignore. [/QUOTE]I guess we should be happy that the lockout and "run on the bank" put an end to their Ponzi scheme or even more innocent players may have been hurt. Just an unfortunate situation for so many as it is.

Greg Ambrosius · Post by **Greg Ambrosius** » Sun Dec 18, 2011 4:31 am

Agreed Glenn. I truly believe this was never set up as a Ponzi scheme, but the plan presented to investors showed growth at impossible levels and thus the business plan was set in place accordingly. To spend almost $3 million on an existing business, you obviously need to make enough profit to get that money back and more, right?

Under the WCOFF plan of 2006 with profits from that season, it would have taken about 15 years to get return on investment. Well, nobody wanted that so the plan was to double the number of WCOFF participants in 2-3 years and eventually get 10,000 players in that event. Now you're looking at an event that REALLY returns on investment, right?

But that plan just wasn't possible, unless you went outside of the fantasy space. That's where promoting to the poker industry and recruiting poker players and former athletes and paying for television air time, etc., began. The plan was to turn this profitable event into an EVEN MORE PROFITABLE EVENT like World Series of Poker with TV, national exposure, etc., and make that kind of money. Now you have something that returns on that investment in 3-5 years and makes all of the investors the envy of the industry.

But it didn't happen. And I'm not sure it could have happened. Again, I don't believe this was ever set up as a Ponzi scheme, it was just a very, very, very bad business plan in a tough economy and the players knew where the emphasis was going as early as 2008. It was no longer on the fantasy players but on outside interests that could make the investors more money than their core customer base was currently bringing.

Greg Ambrosius · Post by **Greg Ambrosius** » Sun Dec 18, 2011 4:44 am

The one sad thing about the WCOFF is that the "run on the bank" didn't come sooner to prevent the prize figure from getting as big as it did. And why didn't it come sooner? Because allowing rollover prizes made the cash flow manageable longer for Dustin, Jesse and WCOFF.

I know some players don't want to hear this, but allowing WCOFF to keep your prize money for the next season may have helped them carry this scheme on longer than it should have. They told players they had "deep pockets" and investors with "deep pockets", but the bottom line is that the losses were allowed to be absorbed because hundreds of thousands of dollars in winnings each year were just passed on the balance sheets to the next season. Players felt they were getting an advantage by rolling over their prizes and maybe not having to report that, but in the end it just helped WCOFF survive longer.

Would it surprise anyone if that number was well over half a million dollars from 2010 to 2011? And would anyone disagree that the vast majority of 2011 WCOFB signups came from rollover prize money from 2010 winnings rather than cash payments? The cash flow was being moved on the books, but when cash stopped coming in and people began requesting their money it was finally time to dip into the investors' pockets again and someone said NO MORE. That happened in March as we all know. And as Dustin has stated, he needed someone to step in and fight for them, but outside of Lakeside (who obviously didn't look too deep into the numbers) nobody was going to do that if they saw how deep the losses were.

The whole thing is unfortunate, but rollovers did play a part in this when the total reached $500,000+.

DoubleG · Post by **DoubleG** » Sun Dec 18, 2011 4:55 am

Originally posted by Greg Ambrosius:
Because allowing rollover prizes made the cash flow manageable longer for Dustin, Jesse and WCOFF.
ding.ding.