Changing the game: Fantasy sports


Emily Blobaum

Columnist Lucas Ramey argues that gambling could teach financial responsibility.

Mitchel Anderson

Plastered on the front of Sports Illustrated’s July 15 issue was Eric W. Rasco’s photo of American Pharoah’s triple-crown winning finish at the 2015 Belmont Stakes.

The moment captured on Rasco’s camera seemed to perfectly embody the sport of horse racing in 2015. Spectators — dressed in attire that hasn’t seemed to have changed in 100 years — were hoisting up their cellphones in hopes of capturing a moment that hadn’t been experienced in the sport for nearly 40 years as American Pharoah glided past the finish line.

Oh, and three advertisement posters were created for DraftKings, not to mention the DraftKings logo on the horse itself.

In another instance, Floyd Mayweather Jr. defeated Manny Pacquiao in May of 2015 in one of the most anticipated boxing matches in the sport’s history. The fight was the most profitable in history — Pacquiao and Mayweather made a combined $300 million from the event.

Slapped on Mayweather’s shorts was a FanDuel logo.

The Boston-based daily fantasy sports (DFS) startup, DraftKings, and its New York-based counterpart, FanDuel, have been ambushing the sports media landscape with advertising and marketing for more than a year. They also scored a major victory in securing the rights to advertise at events such as the Belmont Stakes, boxing matches and in everyday sports media.

People might wonder why companies don’t worry about sports media consumers getting sick of seeing ads from the DFS companies, especially in states such as Iowa, where participation in daily fantasy sports is illegal.

“It’s something to take into account, but it weighs against creating brand awareness,” said Michael Colangelo, assistant director at the University of Southern California’s Sports Business Institute. “The only way to let people know about the service is advertisements, and the best way to do that is to bombard people with ads.”

Bombard, they do.

FanDuel ranks 11th in ad spending among companies in the United States, according to iSpot TV ad metrics. During the last 30 days, a selection of 46 FanDuel spots have aired 6,177 times, which only ranks 53rd in the United States.

DraftKings, on the other hand, has a selection of 26 spots that have aired 2,612 times during the last month, ranking only 259th in airing and 84th in spending.

Here’s another question worth asking: Is all of that money spent on advertising worth the cost?

“Each company has different key performance indicators on what entails [return of investment] on advertising,” Colangelo said. “DraftKings and FanDuel can monitor new customers, as well as how much money is spent in contests as key performance indicators.”

With such heavy ad placement on ESPN, Fox and NBC, the companies are certain of their demographic. Fantasy sports players are 66 percent male, the average age being 37 years old, according to the Fantasy Sports Trade Association. Also, 47 percent of players have an annual household income of more than $75,000, which makes way for the average annual amount spent by players to be a relatively large $465. Perhaps most staggering is the total participation — 56.8 million people play fantasy sports in the United States and Canada.

Although advertisements have appeared to be worth the cost to the two companies, the upcoming legal battle with the state of New York, which banned the companies from operating in the state, may change that.

The NFL is the only major sports league in the country that isn’t partnered with a DFS company. Many professional teams have also partnered with a DFS company, and so have NBC, Fox and ESPN. To put it simply, these partnerships cost the DFS companies money.

“The intense campaign is typical because DFS companies are facing an ‘existential treat,'” said Dan Malliet, lecturer in management who teaches several marketing classes.  “It appears to me that they see big profits in the future of the business and will fight this threat aggressively and likely with a lot of well financed investor backing.”

Colangelo, who is also the managing editor of a website called The Fields of Green, — wrote in an article that FanDuel and DraftKings are eventually going to have to choose between paying their legal expense or paying their sponsorship deals.

 “They technically can’t spend less money on contracts that have already been signed, but they can pull back advertisements, which they are already doing,” Colangelo said.

The situation is sticky. If the companies don’t fight back against the state of New York, they will lose a major portion of their business there. If the media, leagues and teams partnered with the companies demand their money, they may lose all future revenue from the DFS companies because of their inability to fight the state of New York. Colangelo notes that the only solution for media, league and team partners is to “wait out the legal battle and hope to make up the revenue.” 

The future of daily fantasy sports — at least for FanDuel and DraftKings — is uncertain at the moment, and for the most part depends on investors. DFS companies have raised $1.063 billion to date from investors, according to Legal Sports Report.

To date, DraftKings has raised about $626 million, exceeding FanDuel’s total of $362.5 million. The two companies have spent a combined $205.9 million on advertising from January to October of this year, according to CNN Money.

Some of the major investors include former NBA commissioner David Stern (AlphaDraft), the MLB, the NHL, The Madison Square Garden Company and Kraft group — all DraftKings investors. FanDuel has brought in investments totaling about $286 million from NBC Sports, Google Capital, NBC, Comcast Ventures and Time Warner.

With news sprouting every day about the legal battles between state governments and DFS companies, the future of daily fantasy sports is bound to change during the coming months.