Jerry Jones doesn't need to buy a lottery ticket to know that he's already won a big jackpot.
The Dallas Cowboys stand to make as much as $4.2 million from the team's new Texas Lottery scratch-off tickets, according to the state contract. The Houston Texans, which announced a similar deal in June, could make as much as $1.45 million.
The amount the teams make is based in part on how many of the 17 million tickets sell at $5 each. The games, already on sale in convenience stores across the state, could generate as much as $14.45 million for the state's Foundation School Fund.
Brett Daniels, a Cowboys spokesman, declined to talk about the finances of the deal but did say: "It's a great opportunity to bring a unique prize package and a unique aspect of our organization to fans across the state of Texas."
A spokesman for the Texans said the team routinely declines to comment about details of marketing deals.
These scratch-off games were made possible after the NFL decided in May to drop its ban on such sponsorships. The NFL and major sports leagues have typically shied away from associations with any type of gambling.
The recession, however, has put a squeeze on even the nation's most lucrative franchises. In the Cowboys' case, despite having the NFL's most expensive stadium and one of the biggest names in sports, the team has been unable to land a naming-rights deal this year.
Economy-driven
E.J. Narcise, principal of Team Services, part of Plano-based Learfield Sports, said lifting the ban on scratch-off sponsorships was inevitable, especially in the current climate.
"There's no question it's driven by the economy," he said. "Like everybody else, the NFL teams are certainly not bulletproof in economic downturns."
John Alper, a regional vice president with Premier Partnership, said the lottery is not the only example of leagues looking for money in formerly forbidden territory. He said the NFL has started allowing corporate advertising on practice jerseys, and the NBA has eased some restrictions on liquor advertising at arenas.
"You see some categories that traditionally have been taboo that owners, because of the economy, have been willing to open up," Alper said.
Previously, some lottery advertising has been allowed in NFL stadiums, but full-fledged sponsorships were out of bounds. Narcise said that for the state lotteries, this, too, had been a desirable marketing opportunity that was just out of reach.
"If you're the lottery, this has been the most powerful brand in your market, and you didn't have access to it," he said.
At least 14 NFL franchises have signed deals for sponsored lottery tickets this fall.
Two pots of money
The Texas Lottery Commission released copies of contracts for both Texas NFL teams last week.
The revenue for the football teams is split into two pieces: licensing fees and merchandise allocation payments.
The licensing fee is the money the Texas Lottery pays the Cowboys and Texans to use their brands. The Cowboys will receive up to $1.15 million, based on how many of the 12 million tickets are sold. The Texans could make up to $262,500 from their 5 million tickets.
The second pot of money going to the teams comes from the second-chance prizes. Scratch-off players can mail in their losing tickets for an opportunity to win prizes, including gift cards, signed Tony Romo jerseys and VIP weekends featuring private tours and a stadium suite.
The Texas Lottery will pay the Cowboys as much $3.05 million for those prizes. That maximum payment is based on 85 percent of the tickets selling. The Texans will make $1.19 million, which does not depend on that 85 percent "sell-through" rate.
Although the teams – particularly the Cowboys – stand to make a lot of money from these games, the Texas Lottery's cut is similar to other scratch-offs.
Michael Anger, Texas Lottery's operations director, said that 68 percent of every dollar will go back to players in either second-chance prizes or cash – up to $100,000. He said that's the standard return rate for a $5 game.
A new attitude
The financial details of the deals for other state lotteries and their teams have generally not been made public.
Narcise said he suspects the other NFL teams' deals are closer to the Texans' payday than to the Cowboys' agreement. Because of their superstar brand, he said, the Cowboys stand to make as much as the average yearly naming-rights deal in the NFL.
In comparison, the Green Bay Packers, another name with a valuable cachet, will be paid $467,000 in their lottery partnership with the state of Wisconsin, according to a report in The Business Journal in Milwaukee.
David M. Carter, executive director of the Marshall School of Business Sports Business Institute at the University of Southern California, said these deals couldn't have happened without an attitude change from the general public. He said there is a greater acceptance of gambling and also a perception that the lottery shouldn't be lumped into the same category as casinos and sports books.
"Before they move forward with these initiatives, they make sure that if they make $1 from gambling that they don't lose $2 from some other sponsor category," Carter said.
Aug 31, 2009
