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DraftKings On Cusp Of Exclusivity In New Hampshire

Granite State has 15 licenses to give out, and got 13 proposals, but is prepping to sign DraftKings as exclusive online, retail vendor

Jill R. Dorson by Jill R. Dorson
November 22, 2019
in Regulation
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Though sports betting stakeholders regularly tout the idea that having an open, competitive marketplace is the best way to maximize revenue — both for themselves and the states they are operating in — it appears that New Hampshire will have just the opposite.

Sports Handle obtained the contract between DraftKings and the New Hampshire Lottery, which will ultimately make DraftKings the exclusive operator for both mobile and physical sportsbooks in the state. The state’s Governor and Council is set to meet Monday to consider the contract.

Per the contract:

The Parties agree that the pricing set forth in this contract is based on Contractor being an exclusive agent of the Lottery to operate mobile and retail sports betting in the state.

In the event of a material default by the Contractor which is not cured within one hundred and twenty (120) days, in addition to other remedies provided under this Agreement, Lottery may contract with other contractors to perform sports betting during the term of this Agreement, however, in the event that Lottery retains other vendors, said other vendors must receive an equal GGR share as Contractor receives in Exhibit B and Contractor will have the right to modify the pricing in Exhibit B to the non-exclusive rates set forth in their RFP response.

Intralot to run Lottery channel

In a letter to the Governor and Council, New Hampshire Lottery Chief Charlie McIntyre wrote that after reviewing the 13 technical proposals that it received for sports betting and further examining cost proposals from a handful of them, that it considered the “combination of awards that would provide the highest revenue percentage to the state as required by law. Based on these criteria, an award of one contract for the mobile and retail channels was tendered to DraftKings.”

The Lottery also offered an “award,” or opportunity to negotiate a contract, to Intralot to run the Lottery channel.

New Hampshire legalized sports betting in July and since then, has been racing toward the launch pad. Governor Chris Sununu has been a supporter from the start and in October called into WEEI, Boston’s premier sports radio station, and promised sports betting in the Granite State by the Super Bowl.

The NFL playoffs start in January. I’m assuming the @Patriots are going to the Super Bowl because I’m a diehard fan, and I really want to be betting on @TomBrady before the season’s done. NH is moving forward with sports betting! https://t.co/30jrxPghY3

— Chris Sununu (@GovChrisSununu) October 30, 2019

It is either predictable or kind of ironic that New Hampshire is awarding only one contract each for mobile and retail sports betting and that those contracts are to a Massachusetts company. The Granite State has long had a little brother-big brother rivalry with its southern neighbor, and throughout the process of legalizing, and now working toward launching sports betting, the word “Massachusetts” has come up often. Lawmakers wanted to beat the Bay State to live sports betting, and the Lottery is hoping to capture as much of the Massachusetts market as possible.

That said, New Hampshirites — and all New Englanders — embrace Massachusetts’ pro sports teams as if they are their own. The Patriots are, after all, called the “New England” Patriots for a reason.

Barely a month after legalizing, the New Hampshire Lottery opened the RFP process. The enabling law allows for up to 10 physical sportsbooks and five mobile platforms. The Lottery took one of the mobile platforms, which Intralot will operate. That left 14 potential licenses for the 13 proposals that came in. The RFP process was staged, with operators invited first to submit a technical proposal. Thirteen did just that, and then a handful was invited back for oral presentations and to provide a cost proposal. Those that weren’t invited past the technical-proposal stage received one-paragraph form letters, according to multiple industry sources.

‘It’s been a rush job’

Stakeholders have noted the speed with which New Hampshire has been moving.

“It’s been a rush job,” said one industry source. “And by them rushing it, they are basically short-changing the entire RFP process. It wasn’t a fair process.”

In its proposal, DraftKings is promising 51 percent of mobile gross gaming revenue and 50 percent of retail GGR to the state, far above the 20 percent proposed by ROAR Digital or 12 percent by Kambi, the second- and third-place finishers in the mobile division.

DraftKings’ 51 percent is based on it being the exclusive mobile operator, as laid out in the contract. If there is a “material breach” of the contract, and the state contracts with additional operators, DraftKings will then share only 21 percent of GGR with the state.

In either case, those percentages may not be exactly what they appear to be and will be reduced by promotional spends. The contract says that “promotional payments” shall not exceed 15 percent of mobile GGR, and will not be considered part of the overall GGR. “Promotional payments” are defined as “bonuses, DK dollars, DK crowns, odds boosts, free play and free bets.”

On the retail side, the contract says that “retail promotional payments” shall not exceed 10 percent of the retail GGR, and shall not be considered as part of the overall GGR. The contract also requires the Lottery to provide up to $250,000 per year to DraftKings for advertising and promotion.

Additional points

According to the terms of the contract, DraftKings will operate a minimum of four, and up to 10 physical sports betting locations, and has set a July 1, 2020 launch date for at least one of those locations. The contract would run through 2026 with two two-year renewal options.

Other key points in the contract:

  • DraftKings will co-brand its product with the New Hampshire Lottery, which was a key issue for the Lottery when it opened the RFP process.
  • Retail locations must be open for a minimum of 10 hours per day, seven days a week, but not earlier than 10 a.m. or later than 1 a.m.
  • DraftKings will own lottery player information (Section 8.1., A): The Parties agree that data collected as a result of Contractor’s operation under this Agreement, including but not limited to, the identification and personal information of players, bet transaction data and financial information (the “Platform Data”) is the sole property of Contractor. What this means is that should DraftKings and the Lottery terminate their contract, DraftKings would have the right to the personal information of a database of players that was, in part, developed by the Lottery, and could use this information to solicit the players’ business elsewhere.

While the state could formally enter the agreement with DraftKings as early as Monday at the Governor and Council meeting, it has yet promulgate rules or disclose its licensing process. The Lottery has not published the 13 proposals received, and by state law, cannot do so until after the Governor and Council meeting.

“With this approach, NH will quickly become an irrelevant footnote in the sports wagering industry,” wrote industry observer/watchdog known as Captain Jack Andrews on Friday. “People won’t flock to New Hampshire to bet once their neighboring states offer much more innovative options.”

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Jill R. Dorson

Jill R. Dorson

Jill has covered everything from steeplechase to the NFL and then some during a more than 30-year career in sports journalism. The highlight of her career was covering Oakland Raiders during the Charles Woodson/Jon Gruden era, including the infamous “Snow Bowl” and the Raiders’ 2003 trip to Super Bowl XXXVII. Her specialty these days is covering sports betting legislation across the country. You can reach Jill at jill@bettercollective.com

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