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Is Fantasy Football A Mirage?

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Author: , NMC President

Matthew-Goldreich

If you’re a sports fan, and most likely even if you’re not, you’ve been blitzed by a barrage of ads for DraftKings and FanDuel. These sites allow online users to bet small sums of money against one another by predicting specific data about players and teams. The results are compiled after the games take place. Even though the bets are small, the winnings can be big, since there are so many users laying money down. Almost overnight, these sites have emerged as two of the largest TV advertisers in 4th quarter, blocking other advertisers on every network that carries or talks about sports, and even some that don’t . According to iSpot.tv, DraftKings spent $80 million from August 1 to September 15, while FanDuel spent $20 million. In fact, DraftKings was the number one advertiser on TV for week one of the NFL season while FanDuel was ranked #8. These are amazing numbers for companies only three years old. Is it for real and is it sustainable?

If the ads haven’t gotten your attention, perhaps the wave of media reports have done the trick. A short while back, it was reported that a DraftKings employee may have used “insider” information to win $350,000 on FanDuel, a second place finish. This opened the door to speculation that the deck was stacked for the average player, and complaints and lawsuits quickly followed. New York state Attorney General Eric Schneiderman opened an investigation on October 6 into both sites to ensure it’s not a “rigged casino.” A little over a week later, it was announced that the FBI and DOJ are starting a preliminary investigation into the same allegations. Not surprisingly, these developments have caused consumers to start grumbling about the sites. Some were already peeved about the onslaught of ads that constantly interrupted their games. Even more piled on after the scandal. Only 55% of tweets about DraftKings were positive, compared to 82% beforehand. FanDuel fell to 46%, “stumbling and bumbling” all the way from 75%. This is likely what prompted the FBI and the DOJ to get involved. Once consumers start complaining, they’re usually not far behind. And instead of slowing down, both companies have made a conscious decision to continue their media blitz. There’s such a thing as being too successful. Have they taken on more than they can tackle?

At this point, I don’t think slowing down is an option. They’ve already attracted everyone’s attention, for good or bad, so there’s no use closing the barn door after the horse is already off to the races. However, it does appear that the tide may be turning against them. The Nevada Gaming Commission ruled last Friday that Fantasy Betting is a form of gambling and shut it down in their casinos until the proper licensing is obtained. The average person on the street knows that when you lose money and don’t get a product or service in return, it’s gambling. That’s fine when it’s a small, out of the public-eye company, but pity the fool who constantly interrupts our favorite show while making oodles of money! And statistics show that these sites are signing up users in record numbers. On the first day of this NFL season, 220,000 new DraftKings users signed up, more than 10 times it’s prior biggest day, and those numbers were even higher last weekend. It’s the old expression personified: no publicity is bad publicity. There’s no doubt that these sites are trending right now and are top of mind.

The deep penetration of the two TV campaigns have made inventory, both locally and nationally, tighter than I’ve seen in years. Even though the auto and beer categories are weaker, having shifted more budget to digital, Fantasy Sports have intercepted all of that unsold inventory. And while 4th Q is always a tough time for DRTV advertisers, long considered the “scavengers” of TV, these campaigns have added a lot more pressure. It’s hard to question the media’s excitement over these new spenders, though. They have swooped in to salvage a down year for traditional TV – introducing a new category and entirely new, stupendous budgets. And it’s hard to imagine that they would be pulled off the air, when you see who’s backing them. Between the two, investors include Major League Baseball, the NHL, NBC Sports, Comcast Ventures, NBC Sports, Google Ventures and Time Warner Investments. Clearly, some very powerful players are betting on these “entertainment” sites.

So getting back to my original question, the answer is no, Fantasy Football is not a mirage. It’s a new day in media, where sometimes viewers are urged to log onto a website rather than call a toll free number. That said, I don’t think they can sustain their current spending levels. Everything reaches a saturation point, and eventually they will too. Even now, I don’t know how many truly “new” consumers they are reaching. The beauty of their model, though, is that they can cut spending at any time, and sit back and watch as users continue ringing their register, week after week. What they’re building should allow them to continue to prosper long after the large advertising expenses. For me, the bigger question is, what will the government do? What if they decide, like the Nevada Gaming Commission, that this is a form of gambling? Forget the issue of “insider” gambling, since both companies have already agreed to forbid employees from participating in online fantasy sports. There could be fines and levels of enforcement put in place for that. The looming question now becomes, is it legal? If that’s deemed not the case, someone’s going to get sacked!

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