4/3/2012 10:00 PM ET|
The real money of fantasy sports
It's a pastime rooted more in make-believe than in reality, but fantasy sports leagues are major players when it comes to the revenue they generate -- an estimated $800 million a year in North America.
That money is real and growing. If fantasy leagues were a corporation, they could soon push into the Forbes 500.
There are 34 million fantasy sports players in the U.S. and Canada, and the numbers are growing by 2 million a year. And that's drawing advertisers to this seemingly recession-proof market.
The typical player has time to spare and money to spend: He's a 40-ish white-collar married man with a household income of $92,000 a year, according to the Fantasy Sports Trade Association, an industry group. On average, that fan spends three to eight hours a week playing.
Factor in the typical player's consumptive behavior: Compared with other sports fans and the average consumer, he is more likely to attend sports events, dine out, drink beer, travel, buy apparel, subscribe to sports networks and purchase the latest high-tech gadgetry, according to a 2009 study by market research company Ipsos.
A growing number of women play, too -- about 20% of the fantasy total, or around 5.2 million.
Fantasy websites generate revenue from advertising and subscriptions, with ad revenue typically exceeding the amount paid by players, sometimes by a lot. The sites tend not to discuss how they make their money, but industry analysts say ad revenue is based on a rate of anywhere from $2 to $10 per 1,000 page views.
All told, the economic impact of fantasy sports has been estimated at more than $2 billion a year, including advertising, player fees and players' related spending. That puts fantasy sports in a league with names like Burger King, Bose, Hostess, Foster Farms and Mary Kay.
|Fantasy league participation by sport|
|NFL football||23.8 million|
|NCAA football||4.8 million|
*Ages 12 and up. Millions play in more than one sport.
Source: Fantasy Sports Trade Association
How to play in a league
Here's how fantasy leagues work: Participants form pretend teams of athletes from across entire sports, and their teams compete against other teams in the same fantasy league. An "owner" of a fantasy baseball team, for example, might have the New York Yankees' Derek Jeter as his shortstop and the Los Angeles Angels' Albert Pujols as his first baseman.
Athletes' actual statistics determine the outcomes. During the season, fantasy sports websites keep track of player stats and, from those, determine league standings. Fantasy competitors make trades, drop slumping players, pick up promising newcomers and deal with injuries -- almost like real-life general managers.
Most fantasy participants play for bragging rights and a little money. As vices go, it's a pretty harmless pastime. But don't underestimate the intensity and passion, which has been known to create friction.
Players have checked in on their teams during dates, holidays, wedding receptions, pauses during childbirth, honeymoons, funerals and, of course, on the job. For instance, Easter and the beginning of Passover won't stop a fantasy baseball group called the TransAmerica League (its 10 members are spread across the U.S.) from gathering in a major-league city for Opening Day weekend, as it does each year.
"Committed players spend nine to 12 hours a week, and not just watching sports on TV," said Paul Charchian, the president of the Fantasy Sports Trade Association and owner of a fantasy league escrow company, LeagueSafe. "This is managing their roster, proposing trades" and being active in their leagues.
Winning is a great motivator, but for the vast majority, winning money is not.
"Serious gamblers don't play fantasy," Charchian said. "The average entry fee is about $70. Five dollars a week (over the season) is half a hand of blackjack. The motivation is primarily social."
Not only that, fantasy leagues have become part of culture. A TV sit-com on FX, "The League," is based on characters in a fantasy football league. The show is in its third season.
In the movie "Knocked Up," Paul Rudd's character, Pete, hides his fantasy-league obsession from his wife -- a part of Rudd's role that resembled his life at home, according to The Hollywood Reporter.
Passion for these sports has always been there. It's the Internet that has brought the millions together. In pre-Internet days, when a high of 3 million people played fantasy sports, you had to pour over newspaper box scores for hours just to compile a day's worth of stats. That limited the number of leagues, because relatively few fans had the time and inclination to do all that work.
Now, stats are produced instantly, allowing players to easily compete with friends or against a nation of players.
Books, magazines and websites feast on this interest. Cable sports channels devote entire programs to fantasy viewers. ESPN had a 90-minute fantasy baseball preview in March, with a panel of experts projecting player performance and pitching draft strategies. Sirius radio launched a 24/7 fantasy sports channel in 2010.
Fantasy football dominates. More than 75% of those in fantasy sports are in football leagues.
Get insured when you play
Insurance providers are in the game, too. The biggest participation sites, such as Yahoo's, are free, but a few leagues have buy-ins of as much as $10,000. For those leagues and for the smaller players, too, a few insurers offer players a chance to cut potential losses.
The insurance works like this, said Henry Olszewski of Fantasy Sports Insurance. Say an owner in a $200 buy-in league selects Dustin Pedroia, the star second baseman of the Boston Red Sox. If Pedroia gets hurt and misses 60 games, the owner gets his entry fee back.
The underwriter? Lloyds of London.
Some players are uninsurable because of their injury histories. That group includes superstar quarterback Peyton Manning of the Denver Broncos and baseball stars Carl Crawford of the Red Sox and Ryan Howard of the Philadelphia Phillies.
Policies don't cover players who get suspended, either. "No," Olszewski said, "we don't insure against stupidity."
Now, on to arbitration. Website lawyers can decide disputes that arise in fantasy leagues. Decisions go for $15 a shot, or, if a league is particularly troubled, $100 can cover its season. Such sites include FantasyDispute.com, SportsJudge.com and Fantasy Judgment.
Fantasy sports haven't been without legal challenges. Major League Baseball contended it had ownership of statistics and images, and it wanted not just a piece but all of the action. It lost.
Congress in 2006 passed a bill that stopped online sports betting in America, but fantasy sports were not included.
Just in case, the Fantasy Sports Trade Association has a lobbyist to keep an eye on such things. Several states don't allow online fantasy play, and a few others have ambiguous wording. The fantasy sports association's lobbyist was in Maryland in mid-March to help push legislation to legalize fantasy sports through the House of Delegates' Ways and Means Committee.
In most cases, people can set up their own leagues and play for free. Some fee-based sites offer more services, such as sports news, draft strategies and scouting reports on players. But some free ones offer much of that, too.
Draft day is typically the most exciting day of the season, when league owners gather in person or online to pick their players.
Capitalizing on that draft excitement is FanDuel, one of several websites that offer players a chance to pick teams and play for daily prizes. Its "seasons" each last a day or a week. You can pick a team in the morning, pay a fee and, if your team wins, get paid that night. According to FanDuel CEO Nigel Eccles, the site has grown from 1,000 players and $1.5 million in payouts in 2010 to 100,000 players and more than $10 million in payouts. It takes a commission on the payouts.
"Players decide each day whether to play or not. Our challenge is to make it exciting enough to play every day," Eccles said. Baseball and basketball are the daily drivers, he said. Football is big, too, but games happen only once a week.
According to FanDuel's website, its games aren't offered in Arizona, Iowa, Louisiana, Maryland, Montana or Vermont, where fantasy sports are barred or the legal language against gaming is too vague to risk offering play there.
One of the newer fantasy sites is Fleaflicker, a baseball site that's growing in popularity and touts testimonials from The Wall Street Journal and CBS Radio on its homepage. One of its selling points is that players or "commissioners" can easily and quickly customize their leagues. Players on Fleaflicker, as on most other fantasy sites, can link to Facebook and Twitter and post their sports "pages" out into the world.
Not all fantasy league sites make it, even ones with interesting angles. In 2009, RapidDraft boasted that its $250,000 first-place money would make players think about fantasy football more than sex -- like that was a good thing.
As popular as fantasy football is, it evidently isn't that popular. RapidDraft is out of business.
For those not interested in big-time sports, there are leagues for you, too: Celebrity game sites have sprung up, including Fantasy Box Office, and several tied to "American Idol."
A common criticism of fantasy leagues is that they distort what it means to be a fan -- that participants care more about their fantasy teams than the ones they grew up following. But analysts say most fantasy devotees find that their interest spikes, having a rooting interest in practically every pitch and every play of every game. You can bet players want to know what's happening right away, too.
Enter smartphones and social-networking sites that are connecting players with advertisers, wireless carriers and software companies. 4Info, a mobile advertising company, sends users free texts of sports updates with tiny ads at the bottom. Fifteen percent of its half-billion texts reportedly will be directed to users seeking sports results.
Outsiders often wonder: Why do players get so wrapped up in their fantasy leagues? The answer is that they're fun and competitive; players cite camaraderie, trash talk, love of sports and a host of other reasons.
For Walter Harrison, the president of Hartford University in Connecticut and a member of the same fantasy baseball league since 1986, it's "that it allows me to become completely involved with a 'reality' that is different than what I experience every day."
"Fantasy baseball provides me with the illusion that decisions I make can have real consequences," Harrison joked. "Of course, at some level I know that isn't true. Samuel Taylor Coleridge, the Romantic poet, called it 'a willing suspension of disbelief.' For him, poetry; for me, fantasy baseball."
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Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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