October 8, 2013 – The following article is written by Travis Measley and appears in the Business Issue of Avid Golfer Magazine.
The Risk Takers
SCA Promotions is in the business of taking risks, and so far, business is good
It’s April 23, 1989, and it’s the bottom of the ninth inning at the Ballpark in Arlington. Texas Rangers pitching legend Nolan Ryan, in his mid-40s, is three outs away from becoming the oldest pitcher in the history of the game to not allow a single hit in nine innings. The atmosphere in the stadium is electric, and nobody is talking to Ryan. Certainly nobody is saying those words – those words that you don’t say, no matter what the circumstances, no matter what is on the line, no matter who may or may not be listening – “no-hitter.”
A few miles away at his office in the Metroplex, famed bridge player Bob Hamman gets a phone call from his son Chris. Bob picks up the phone, and his son Chris says, “Uh, Pop, Toronto has all zeroes on the box score going into the ninth inning.” And Nolan Ryan is on the mound.
Hamman quickly rushed to the television, turning the game on just in time to watch Ryan fan the first batter in the ninth inning. One down, two to go. The entire city is watching – probably the entire county – and rooting for Ryan to get those last two outs. But not Hamman. He’s is in the risk-taking business, and his company, SCA Promotions, is in the business that specializes in “promotional risk coverage and technology solutions for sweepstakes and games.” When the Dallas Mavericks allow a fan to shoot a half-court shot for a million dollars, SCA Promotions pays the winnings if the shot goes in.
At the time, SCA Promotions was still a fledgling company, and Hamman had taken on a contract that would have paid out a large sum if Ryan threw a no-hitter. But the guy was over 40 – no one had ever thrown a no-hitter over the age of 40, especially in the hot Texas sun, and especially after years of pitching indoors for the Houston Astros.
But Nolan Ryan isn’t just “anybody.”
Then, into the batter’s box steps Nelson Liriano, a career .250-hitter in his second year in the major leagues out of the Dominican Republic. Liriano stares Ryan down and calmly rips a triple into right field, spoiling Ryan’s no-hitter and saving Hamman and SCA Promotions a huge chunk of money.
Looking back on that day now, Hamman can’t help but crack a wry smile. “Nelson Liriano – that guy, he is my hero.” He even keeps one of Liriano’s baseball cards on his desk, for good luck.
Luck, as it would have it, is a concept Hamman and SCA Promotions deal with on a daily basis. Founded in 1986, SCA Promotions is one of the premiere promotional risk-taking agencies in the country. They partner with advertising agencies, large brands and other clients to implement high-return promotions, sweepstakes, games and contests. Over the past two-plus decades, SCA Promotions has been involved in everything from 60-foot-putting contests and home-run derbies to envelope drawings and pumpkin-growing contests (which they lost out on, by the way, when someone grew a pumpkin over 1,000 pounds. “We underestimated the pumpkin growers pretty bad on that one,” Hamman said with a laugh. “We were eating pumpkin everything for months!”).
Hamman moved to the Dallas area in 1969 to play on a professional bridge team, and began working as an insurance wholesaler to pay the bills. In the early 1980s, a friend, who had been a former customer, approached Hamman with the idea of entering into the hole-in-one business. After the two parted ways a couple years later, SCA Promotions was born.
“To put it simply, we deal with risk.” Hamman said. “A company approaches us with a package or concept – maybe it’s a hole-in-one deal, maybe it’s an athlete incentive package, maybe it’s a ‘sign-up-to-win’ contest – we evaluate the concept, put a price on it, and sell it to groups of insurance underwriters, while keeping some of the risk ourselves.”
Since he was a child, Hamman has had a mind for competition and evaluating risk and strategy. As a boy he had an affinity for chess – playing well enough to achieve the status of a provisional master in the chess community. While in college at the University of California at Los Angeles, he spent more time playing and studying the game of bridge than he did attending class; by 1957 he had played in his first national bridge tournament and in 1963 he and his partner won the right to represent the United States in the World Bridge Olympiad in New York City.
Now, in his 70s, Hamman is still as passionate about bridge as he’s ever been, although his days in the intense international competition spotlight are mostly over. He still plays the game for fun, however, making trips around the Metroplex or out to the West Coast to keep his mind sharp.
The game of golf provides multiple business avenues for SCA Promotions. In the company’s early days, they exclusively handled hole-in-one tournaments; now, they do everything from 60-foot putts for $500,000 to conditional retail product rebates and PGA Tour player incentives. They’ve worked with companies such as Callaway Golf and have a client list that has included the likes of Phil Mickelson, Ernie Els, Adam Scott and Jason Dufner.
In 2012, SCA had a contract with international corporation SAP, of whom Ernie Els is a spokesperson, that would pay Els $1 million if he won the British Open. Els, of course, came from eight shots back to beat a struggling Adam Scott to win the Open, the Claret Jug and a hefty bonus paycheck.
As “unlucky” as that may seem, Hamman and his son, Chris, SCA’s executive vice president, know that “losing” is just as important as “winning” in the risk business.
“We are in a business where we need a modicum of exposure,” Chris said. “We have to make good enough decisions and evaluations so as not to ‘lose’ all the time, but if we don’t ever pay out, we will quickly run out of business.”
When something as unpredictable as Els’ eight-shot comeback occurs, it’s easy to put the blame on bad luck, Chris said, but in actuality, odds and probability say that, from time to time, things like that happen.
“If we predict an event or contest will be won one out of 100 times, we expect and almost want that to occur. We don’t want to lose much more than that, but we don’t want to never lose either.”
The analysts at SCA Promotions are quite accurate – and they have to be, considering some of the high-level contracts they’ve taken on. They’ve survived Tiger Woods putting for $500,000, hole-in-one chances at The Masters, and countless close calls on the 18th greens at tournaments across the country.
With the increasingly deep fields at PGA Tour events, Bob Hamman calculates any one golfer’s chance of winning at about 10 percent. A decade ago, however, that number was completely skewed by Tiger’s dominance.
“Back then, when [Woods] was winning at such a frightening pace, you could get most of the other golfers at a much cheaper rate than right now,” he said. “In fact, a lot of people weren’t even willing to take bets against Tiger when he was rolling – he was just about unbeatable.”
The odds of you, the amateur golfer, making a hole-in-one on any given hole are roughly 13,000 to 1. It doesn’t matter where the pin is or if water surrounds the green – the odds stay about the same, and SCA uses the knowledge (derived from almost 20 years of being in the hole-in-one business) to set up a basic formula for assessing the risk and evaluating a project.
“Our formula is fairly standard for those type events,” said Todd Overton, a senior account executive at SCA Promotions, “We adjust for distance and number of players, and the formula spits out a value.”
For a professional tournament, things get a bit more complicated. On any given day at a professional golf tournament, SCA sees the odds of a hole-in-one occurring at about 2,400 to 1. But that’s during a tournament. If the pros are trying to hole the shot (and aren’t worried about making par), those odds drop to about 1,000 to 1. At the end of the day, however, it can still come down to luck.
“Golf is a game of luck and inches,” Bob Hamman said. “If a ball lands on a green three or four inches to either side of a specific spot, the outcome can be completely different. It’s the only individual sport where almost anyone can win. In any given tour event, at least half the field has a chance to win any given week. But, for example, in a sport like tennis, you’d really only expect the top 10 or so players to have a chance to win.”
Luck, however, doesn’t always play a dominant role in their calculations, and, as SCA has discovered over the past few years, luck can sometimes be eliminated from the equation all together. Case in point: cyclist Lance Armstrong. In 2002 and 2003, SCA Promotions paid Armstrong more than $4 million in contractually obligated bonuses for winning the Tour De France. In 2004, when he won again, SCA refused to pay out as accusations of performance enhancing drugs swirled about Armstrong in his team. The case went to arbitration, and Armstrong vehemently denied ever doping. He was awarded $7.5 million in the case.
In February of this year, SCA Promotions filed suit against Armstrong, demanding he pay back at least $12 million of the bonus money he was awarded as part of his winnings. In the suit, Armstrong is accused of committing fraud by lying under oath about his use of performance-enhancing drugs during testimony surrounding the 2004 case. Armstrong was recently stripped of all his Tour De France wins and received a life-long ban from the sport of cycling.
Performance-enhancing drugs are becoming a common black eye in many sports, and companies like SCA are forced to adapt and adjust their policies to account for these risks.
“PEDs are one of many ways competitors cheat in sports,” Chris said. “These days, our contracts are more increasingly designed to limit or eliminate that impropriety and to shield ourselves from manufactured results.”
The rise in PEDs has also had an impact on the business as a whole, he said, as companies are now having to consider the use of PEDs when they decide how much risk to take on and even consider if they are unwilling to take part in certain sport contracts all together. While unfortunate stories such as Armstrong’s may dominate the headlines, there are countless other great stories in which SCA has gladly paid out large sums of cash to deserving winners. At the 2004 MLB All-Star Game in Houston, SCA paid out $1 million to a local man who was picked at random out of the stands to throw five baseballs through a ring at home plate before the game in 30 seconds or less. With the crowd cheering him on, the man sent the fifth ball through the ring as time expired on the clock.
Two years later, and the Home Run Derby, down to the last ball of the contest, Philadelphia Phillies first baseman Ryan Howard hit a towering home run off a small sign in left field, netting him $250,000.
SCA is more often right than wrong, however – in the past 26 years, SCA has paid out more than $170 million to contest winners and athletes, but has, in that same time, collected fees on about $10 billion in theoretical risk, a testament to the skilled evaluators employed by Bob Hamman.
In a way, you might say that the SCA staff members are some of the biggest sports geeks on the planet. They have hundreds, if not thousands, of spreadsheets with sports data, statistics, formulas and numbers. If Overton or Chris or Bob can’t find an answer or need information on an athlete or sport, they have “gurus” in house who know everything there is to know about a specific sport. They pour over leaderboards and box scores, not looking for the score of their favorite team’s game, but checking to see if they got through the day without any payouts.
“[Working for SCA] has changed the way I watch sports,” Overton said. “If it’s a big event, I’m watching the scores and leaderboard with a much different frame of mind.”
The environment at SCA Promotions is uniquely its own – it’s a company populated with gaming experts, mathematical geniuses, odds makers, statisticians and self-proclaimed sports junkies. But, underneath it all, as Overton puts it, it’s an environment full of friends and camaraderie. When you walk into SCA, leave your allegiances at the door, because you never quite know who you might be rooting for.
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