Hey, Friends! What a weekend. Over on the East Coast, I’m still trying to figure out how we can convince the major TV networks to start some of these March Madness games a little earlier, as the second Sweet 16 game on Thursday night won’t tip off until 10:15 pm ET (or later). But I digress. Today’s main event explains why Mattress Mack’s multi-million-dollar sports bets aren’t really a gamble. Plus, we’ll touch on UFC’s lawsuit settlement, the Timberwolves sale, and more. Enjoy!

This Newsletter is Sponsored by… Rhone!

Rhone makes some of the most comfortable clothes I’ve ever worn. I own several button-downs from their Commuter Collection®, which are great, and the Commuter Pants® are an absolute game-changer — whether at work, golfing, or grabbing dinner.

I’ve referred many friends and family members to their stuff, and no one has ever been disappointed. So if you want to join the Rhone family — like me! — go to Rhone.com and get some gear today. Rhone is offering a special 20% off your first purchase when you use my code “POMP20” at checkout. All my favorites are linked above!

Get 20% Off Rhone Apparel Now

The Hurry Up: What I’m Thinking/Hearing/Watching…

1. The UFC has avoided trial by settling a lawsuit with 1,200 former fighters, agreeing to pay $335 million. This is a major win for the UFC because the payments will be made over several years, account for less than 25% of the UFC’s projected 2024 revenue, and should be tax deductible. But perhaps the biggest win for the world’s leading MMA organization is that they didn’t have to make any concessions going into the future, meaning fighters that sign new contracts will be subject to the same low pay as the fighters before them. For context, the UFC typically pays out less than 15% of its total revenue to fighters. That’s significantly less than other major sports leagues like the NFL, NBA, NHL, and MLB, which all have collective bargaining agreements and split revenue 50/50 with players.

2. Alex Rodriguez and Marc Lore have submitted financial documentation to the NBA to complete their acquisition of majority control in the Minnesota Timberwolves. In 2021, they entered an agreement to buy the Timberwolves (+ the WNBA’s Lnyx) for about $1.5 billion. The first transaction gave them 40% of the franchise, with this latest transaction increasing their stake to 80%. Rodriguez and Lore raised money from Dyal Capital Partners to complete the latest round of funding, but the good news is that the team’s valuation has nearly doubled since the first agreement was signed. So, while they don’t own all that 80% by themselves, Rodriguez and Lore are already up more than $1 billion on the deal.

3. Germany’s national team switching from Adidas to Nike is one of the biggest sports sponsorship moves ever. For those who don’t know, Adidas’ revolutionary screw-in boots helped Germany win its first-ever World Cup, and they have been partners for the last 70+ years. Now, Germany’s national team will leave a German brand for an American brand in Nike. The Swoosh is reportedly paying 2x more annually ($100M+), but this is one of those sponsorships that is almost priceless.

BONUS: I went on Ethan Strauss’ podcast last week to discuss some of the most exciting storylines in sports business (Shohei Ohtani, sports betting, NBA media rights, etc.). We had a great time. Listen to the full episode here!

Jim McIngvale is one of the world’s most famous sports gamblers. The 73-year-old Texan known as “Mattress Mack” has taken home roughly $100 million in winnings over the last few years, correctly predicting the Houston Astros to win the World Series in 2022 and Kansas to win the NCAA men’s CBB tournament that same year.

There have been some big losses, of course, like when McIngvale lost $9.5 million betting on the Cincinnati Bengals to beat the Los Angeles Rams in Super Bowl LVI.

Still, Jim McIngvale has become famous because 1) he bets BIG and 2) he leverages his business to create a sports gambling system where he always wins, no matter what.

McIngvale started a small furniture business named Gallery Furniture with his wife in 1981. With just $5,000 to their name, they bought a tent and started selling furniture on the side of the freeway in Houston. But fast forward 40 years, Gallery Furniture now has more than 400 employees across three gigantic stores in the Houston area.

McIngvale is supposedly one of the hardest working people you’ll ever meet, personally selling furniture on the showroom floor 365 days a year. But his business has been supercharged over the last decade because of his marketing strategy.

It started with infomercials on local television networks and has since become a national campaign that uses massive sports wagers to hedge against furniture sales.

Here’s how it works: McIngvale starts by placing a bet — typically worth millions of dollars — on a team to win in a major event like the Super Bowl, World Series, or March Madness. He usually bets on teams from Texas (or close to Texas) and ties the bet to a big mattress sale promotion at his chain of Gallery Furniture stores.

For example, in May 2022, McIngvale placed a $10 million bet on the Houston Astros to win the World Series at 7.5/1 odds. He then launched a massive sales promotion, offering all Gallery Furniture customers who spent $3,000 or more on mattresses *double* their money back if the Astros won.

Every media outlet picked up this story, from local newspapers to ESPN. And it received millions of impressions on social media from all the big sports accounts.

The Houston Astros eventually won the World Series, and McIngvale cashed in his record-breaking $75 million win. But he didn’t actually keep any of the cash. That’s because the promotion led to $74 million in mattress refunds and the remaining money was used to cover expenses, like sales commissions, private jets to place the bets in Iowa and Las Vegas, and 400 World Series Tickets for him and his employees.

Think of it as a hedge. McIngvale breaks even on the mattress customer refunds if the bet hits because: Sales Refunds minus Bet Winnings = Promotion Cost. And if the bet doesn’t hit, then it’s a marketing cost to increase sales and drive profit because: Sales minus Wager Placed = Profit (excluding expenses).

To make the hedge work correctly, McIngvale sometimes shuts down sales promotions early if he has generated enough sales revenue to cover his potential bet winnings. Or he might add more dollars to his betting position if customers buy more mattresses and furniture than the winning bet can cover.

It’s a unique strategy that not everyone can execute. Not only do you need a significant amount of cash upfront, but you also need to be confident that the resulting media exposure will drive enough sales to make the economics work. This is why McIngvale started with small bets before eventually reaching $10 million or more.

So when you see headlines this year that McIngvale placed a $1 million bet on the University of Houston to win the 2024 NCAA men’s March Madness tournament, don’t believe the hype. The $7.5 million potential winnings will simply be used to cover his ongoing $4,000 mattress refund promotion, and McIngvale has lost many more bets than he has won. Then again, even when he loses, he wins. That’s why it’s such an interesting case study.

If you enjoyed this breakdown, please share it with your friends.

Share

I hope everyone has a great day. We’ll talk on Wednesday.

Join my sports business community on Microsoft Teams.

Your feedback helps me improve Huddle Up. How did you like today’s post?

Loved | Great | Good | Meh | Bad

Huddle Up is a 3x weekly newsletter that breaks down the business and money behind sports. If you are not already a subscriber, sign up and join 120,000+ others who receive it directly in their inbox each week.