Interesting Break even/Win Big Bet?

[HPstache]

OK, so I'm a 49ers fan who are playing the Dallas Cowboys this weekend and something in the news caught my attention.  There's some crazy mattress chain store owner in Texas that places BIG money on Texas-based teams before big games as what seems to be a free publicity stunt... he just placed $2M on the Cowboys to win, watch & listen carefully:

https://twitter.com/MarkBermanFox26/status/1616276451535327238

At first I thought "what an idiot", but then I continued to listen to him talk, he says something like "buy a $3,000 mattress and if the Cowboys win, you mattress is free free free!".  Ah, OK, I think to myself, he is hedging his bet!  But here's where it gets interesting... I believe he is betting on the spread (reads his $2,000,000 ticket to win ~$3,000,000, and Cowboys are 3.5 point underdogs).  Well that's interesting.  So with the following assumptions:

Buys Mattresses for $1,000ea
Sells Mattresses for $3,000ea
Because of Publicity sells 1,000 Mattresses

I believe the following is true for the 3 possible scenarios:

Scenario #1: Cowboys win the game outright
Place Bet: -2,000,000
Buys Inventory: -1,000,000
Sells Mattresses: +3,000,000
Receives Winnings: +3,000,000
Pays back Customers: -3,000,000
Profit: 0

Scenario #2: Cowboys Lose by 4 or more
Place Bet: -2,000,000
Buys Inventory: -1,000,000
Sells Mattresses: +3,000,000
Receives Winnings: 0
Pays back Customers: 0
Profit: 0

Scenario #3: Cowboys lose by 3 or less
Place Bet: -2,000,000
Buys Inventory: -1,000,000
Sells Mattresses: +3,000,000
Receives Winnings: +3,000,000
Pays back Customers: 0
Profit: +3,000,000

So he will either break even or win Huge due to the free publicity... what am I missing?  Could be risky not knowing how many mattresses you may or may not sell?  Potentially having a whole bunch of people buy mattresses, you break even and then they don't buy again for another 5 years?  What are some other pitfalls?

[Financial.Velociraptor]

That's "Mattress" Mack in Houston.  He bet something like 17 million on the Astros to win WS to hedge his promotion.  I believe it was the biggest winning sports prop bet ever.

He keeps doing these promotions win or lose so it must be working.

[Boll weevil]

1. There’s probably a long term component to it: you may not need a mattress now, but let’s say you end up needing a mattress 6 months or 2 years down the road? He’ll probably be the first one that comes to mind.

2.  Does he end up on the news? Free publicity.

3. There might be a tax angle to it. If he loses, can he write it off? If the losses are big enough, can’t they be applied to other years?

[YttriumNitrate]

A $3,000 mattress?!? Yikes. My guess is he's not really cannibalizing future sales and instead incentivizing people to spend way more on a mattress than they otherwise would. Seems like a shrewd businessman.

[Villanelle]

I have a very hard time believing he sells an additional 1000 mattresses based on this promotion. 

[HPstache]

I have a very hard time believing he sells an additional 1000 mattresses based on this promotion.

He owns a chain of mattress stores all throughout Texas from what I understand.   His bet must be based on what he thinks he can sell as well as possibly the spread on the game.  There is more math I need to do... there might be a simple correlation.

[lost_in_the_endless_aisle]

I have a very hard time believing he sells an additional 1000 mattresses based on this promotion.

He owns a chain of mattress stores all throughout Texas from what I understand.   His bet must be based on what he thinks he can sell as well as possibly the spread on the game.  There is more math I need to do... there might be a simple correlation.

1 minute of google: Mack is tied to Gallery Furniture, which according to a potentially dubious website has $72M/year in revenue. $2M is not a completely ridiculous marketing expense (actually far less than $2M since the expected value of the bet shouldn't be massively less than $2M).

[Villanelle]

But doesn't it need to be 1000 *more* mattresses than he'd have sold without the promotion?  If he'd have sold 800 and sells 1200 due to the promotion, only 400 of those sales would go toward offsetting the money spent on the bet.

[By the River]

I saw an article that he/his store broke even on the Astros bet after accounting for the amount bet, refunds and administration costs.  However, as people have mentioned, the advertising effect is huge.  You all know Mattress Mack's name, now name a local furniture store in California or Florida (assuming you don't live in one of those states).

[eyesonthehorizon]

But doesn't it need to be 1000 *more* mattresses than he'd have sold without the promotion?  If he'd have sold 800 and sells 1200 due to the promotion, only 400 of those sales would go toward offsetting the money spent on the bet.

Not necessarily, if it also incentivizes people to spend more than they otherwise would have who were already going to buy mattresses, upgrading from queen to king or the mid-range model to the second-costliest. Football is the state religion here & excitement on that level often cuts past critical thinking.

[Dicey]

So...the Cowboys lost by 7. What does the math look like now?

[By the River]

So...the Cowboys lost by 7. What does the math look like now?

He lost his bet and doesn't refund purchases but still gets the word of mouth like this topic.  I thought about this more, if I was in the market for furniture/mattress and thought the Astros had a 15-25% chance of winning the World Series, would it make sense to drive 6 hours to Houston, buy furniture and pull a uhaul trailer full home?  What if I thought it was a 50% chance? Would I drive from further away?   Theoretical thoughts right now as I'm not in the market

[Dicey]

So...the Cowboys lost by 7. What does the math look like now?

He lost his bet and doesn't refund purchases but still gets the word of mouth like this topic.  I thought about this more, if I was in the market for furniture/mattress and thought the Astros had a 15-25% chance of winning the World Series, would it make sense to drive 6 hours to Houston, buy furniture and pull a uhaul trailer full home?  What if I thought it was a 50% chance? Would I drive from further away?   Theoretical thoughts right now as I'm not in the market

Look at all the space the mattress dude has rented in your head.

[HPstache]

So...the Cowboys lost by 7. What does the math look like now?

Yeah, as mentioned above he sold a bunch of mattresses, lost a bet but doesn't need to pay them back.  One interesting thing that I need to research is why his bet was only to pay 2.7M on 2.0M... it should have been more like 4.0M on a 2.0M bet , I am beginning to think that he might be buying the spread down (to say, -5, -8, etc) which would increase his chance of the game landing in that sweet spot where he does not have to pay customers back but also wins his bet.... very interesting.

[Psychstache]

I do love some Mattress Mack, but think y'all are reading too much into this. Man is a degenerate compulsive gambler so he's laying down the bets no matter what. Might as well get some extra value from a PR campaign out of it.

[frugalnacho]

Far more likely explanation is that he just loves to gamble so he's going to do it anyway.  I suspect $2M is a tiny fraction of the total money gambled on NFL games each week. 

[BicycleB]

If he's a gambler, then he's found a way to get tax shelter for his bets.

PS. I bet (ha ha) that he pays less than $1000 per mattress, which also makes the math better for him.