Pro Leagues Embrace A Big-Payout Evolution In Fantasy Sports
"On FanDuel I've won over $62,000 — try FanDuel today."
"This is DraftKings. Welcome to the big time. You can play when you want with the team you want. Just pick your contest, pick your team, and pick up your winnings."
These types of ads have been inescapable on NFL broadcasts so far this season. They are encouraging fans to play a type of fantasy sports game — and bet real money on their performance.
DraftKings and FanDuel each say they've raised hundreds of millions of dollars from investors and paid out millions in prize money to winners. That success has become apparent in the sheer saturation of ads on sports broadcasts, podcasts, websites and more.
The business has become so big that some professional sports leagues are getting a piece of the action.
The websites want to change the way that fantasy sports traditionally have been played. About 50 million people in North America play fantasy sports games each year, but until recently they've been low-level competitions among friends, neighbors and co-workers, often for little more than bragging rights.
Typically the games start with the pool of players in a professional league — the NFL or Major League Baseball, for instance — who are then drafted onto fantasy teams by a dozen or so fans playing against one another.
If your team's pro players — who typically play for many different teams in real life — do well in their games, then based on their stats, you do well in your fantasy game.
These sorts of games were played for decades using pens, paper and newspaper box scores, but the Internet made them much easier to organize and run, so most major sports sites got involved.
What companies like FanDuel and DraftKings have done is broken down what usually have been season-long competitions into many single-day contests — while pulling a lot more money into the games.
DraftKings, for instance, runs a contest every week with a $20 entry fee and a grand prize of $2 million.
"It's just one of those things that, once you do it, and you're already into fantasy sports, you will get hooked immediately," says John Reidy, a sports fan from Denver. "Because you get to pick something new every week — and I know that's what the commercials say, but it's really true."
For Monday Night Football, when the Minnesota Vikings played the San Francisco 49ers, Reidy had money on the line. But he wouldn't win or lose based on which team won, or by how the teams performed against the point spread.
Instead, it was about how players Reidy had drafted — including longtime Vikings running back Adrian Peterson, "which I'm not thrilled about, don't really like him as a person, but he's a great fantasy asset," he says — would perform versus the teams others in the competition had drafted.
Reidy was up a few points going into Monday's game, but the next-best team had 49ers running back Carlos Hyde, and could catch up if Hyde had a better game than Peterson.
Reidy: "Annnnnnd I lost."
Former league MVP Peterson ran for just 31 yards, while Hyde, making his first NFL start, got 168 yards and scored two touchdowns.
"Very frustrating," Reidy says. "But the beauty of it is that I can try again next week."
That's the way these companies market themselves — instant cash, instant gratification, and a clean slate as soon as the day's or week's games are over.
It's been near-instant gratification for the companies involved too, says John Ourand with Sports Business Daily: DraftKings and FanDuel didn't even exist five years ago but so far this year have spent $500 million on TV ads.
Much of that money came from big-name investors.
"If you take a look at the list of investors in let's just say FanDuel, you have the NBA, Google Capital, you have Time-Warner, Turner Sports, NBC Sports, Comcast," Ourand says. "DraftKings, if you take a look at the sponsorship deals that they've signed with individual teams, it's Cowboys, Broncos, Patriots. And their investors are another who's who — MLB, the NHL ... Major League Soccer. ... You have big, blue-chip media companies and sports leagues that are investing in these two companies because they see a lot of potential in daily fantasy."
The windfalls from professional sports leagues and teams may seem unusual, given their long-standing opposition to legalized gambling. But the leagues know that fantasy players are more engaged than the average fan — and more willing to watch a game they otherwise might not care about, which means higher TV ratings.
And while players on FanDuel, DraftKings and other sites put up money for a chance to win a lot more, it's not considered betting — thanks to an exemption in a 2006 law regulating online gambling.
Nigel Eccles, CEO and co-founder of FanDuel, says it's a game of skill not chance.
"When Congress sat down to decide what was legal and illegal, they clearly made a distinction that fantasy sports was legal," he says.
Of course, back in 2006, fantasy sports were mostly just small-time games among friends. Today, they've become a gigantic, still-growing industry — with a lot of money on the line.
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Transcript
STEVE INSKEEP, HOST:
We have a story this morning about something stuck in the head of MORNING EDITION producer Kevin Leahy who's with us. Kevin, what is it?
KEVIN LEAHY, BYLINE: Steve, it's an ad. Actually, it's a whole bunch of ads, and I hear them all the time, and I think probably a lot of people are hearing them now, especially now that football season has begun.
(SOUNDBITE OF ADS)
UNIDENTIFIED MAN #1: On FanDuel, I've won over $62,000.
UNIDENTIFIED MAN #2: Try FanDuel today, and we'll match...
UNIDENTIFIED MAN #3: This is DraftKings. Welcome to the big time.
UNIDENTIFIED MAN #4: You can play when you want with a team you want.
LEAHY: Pick your contest, pick your team, and pick up your winnings.
INSKEEP: (Laughter) You've got them memorized.
LEAHY: Yeah, I've heard them so many times. They're in my head.
INSKEEP: These are ads for fantasy football. What's going on here?
LEAHY: These are ads for daily fantasy websites. This is a new form of fantasy football. They're encouraging you to play an imaginary game and bet real money on the performance of different players. And I want to tell you about this because this has become a big business, and pro sports leagues themselves have become invested in it.
INSKEEP: When you say big business, how much money we talking about here?
LEAHY: So we're talking about two companies that have become big players. Each says it's raised hundreds of millions of dollars in venture capital funding. They're giving away millions of dollars in prize money, and they're spending hundreds of millions of dollars on advertising.
INSKEEP: Kevin, can I mention fantasy sports have been around for a long time? My brother plays them. This doesn't sound that new.
LEAHY: Yeah, fantasy sports, in general, has been around. Even before the Internet, people used to grit it out on paper. And traditionally, they would do this among a group of friends or coworkers. And you draft your own team, you pretend that your team includes Andrew Luck or Marshawn Lynch, and then based on how those players do, you accumulate points, and you go head to head with your friend each week.
INSKEEP: Oh, I might have players from seven or eight or 10 different NFL teams and pretend they're all on my team. OK.
LEAHY: Yes, and you might put a little money on the outcome.
INSKEEP: But if this is something people can do among themselves, how are big companies getting in on the action?
LEAHY: These websites want to change the way that you play fantasy football. They want you to play a contest not throughout a whole year but over a course of a day or a week or a few hours at a time. And the prize pools are huge. Every weekend, one of these companies, DraftKings, holds a millionaire maker tournament. It's $20 to enter. The company takes a little bit of that entry fee, and you can win a $2 million grand prize. So this is drawing in a lot of people who have played this traditional season-long version of this game. I wanted to talk to one of them, and I reached John Reidy from Denver, Colo.
JOHN REIDY: It's just one of those things that if you're already into fantasy sports, you will get hooked immediately because you get to pick something new every week. And I know that's what the commercials say, but it's really true.
LEAHY: He had money on the line this past Monday when the Minnesota Vikings played the San Francisco 49ers. But it was not money on the outcome of the game or the point spread. Instead, it's based on how one individual player performs versus how another individual player performs. So we asked John to do some play-by-play of his fantasy game, and I thought we needed a little NFL Films music to kick this off.
(SOUNDBITE OF MUSIC)
REIDY: So here's one thing I'm sweating out in the late game. I have Adrian Peterson, which I'm not thrilled about, don't really like him as a person, but he's a great fantasy asset. The person that is closest to me in this small tournament has Carlos Hyde. There's 7-point difference. If Carlos Hyde has a better game than Adrian Peterson, then I will probably lose.
(SOUNDBITE OF FOOTBALL GAME)
UNIDENTIFIED MAN #5: Carlos Hyde, little penetration, boom, another spin move. We've seen power. We've seen acceleration by Carlos Hyde. Welcome to the NFL with Carlos Hyde.
REIDY: And I lost, burned by Carlos Hyde, right at the end there. Very frustrating, but the beauty of it is that I can try again next week.
LEAHY: And you heard him say next week. That's really the key here. That's the way these companies market themselves, instant cash, instant gratification.
INSKEEP: And if you lose, you try again.
LEAHY: Yeah.
INSKEEP: There must also be some cash and gratification for the companies involved.
LEAHY: Yes, I talked to John Ourand. He's media reporter with Sports Business Daily. And he told me DraftKings and FanDuel, the two biggest companies in this market, have spent $500 million on ads on the TV networks this year.
JOHN OURAND: That's half a billion dollars from two companies that didn't even exist five years ago. That's unbelievable.
LEAHY: So I was wondering how they had all this money for marketing. And here's the thing. Now they're raising venture capital from a lot of names that you might know.
OURAND: If you take a look at the list of investors - and let's just say FanDuel - you have the NBA, Google Capital. You have Time Warner, Turner Sports, NBC Sports, Comcast. DraftKings, if you take a look at the sponsorship deals that they've signed with individual teams, you have the Cowboys or the Patriots, the Broncos. And their investors are another's who's who. You have MLB, the NHL, MLS, Major League Soccer. You have big, blue-chip media companies and sports leagues investing in these two companies because they see a lot of potential in daily fantasy.
INSKEEP: Woah, woah, woah, so sports leagues and teams, which have long opposed legalizing gambling on sports in any form, are investing in these companies through which people bet. Is this gambling?
LEAHY: You are putting up real cash, and you're winning or losing that cash based on how your players perform against another set of players spread throughout several teams. Legally, it's not considered gambling. I called Nigel Eccles. He's the CEO and co-founder of FanDuel, and he said it's a game of skill, not a game of chance. Part of the reason he was able to invent this whole industry is because an exemption in a 2006 law regulating online gambling.
NIGEL ECCLES: When Congress sat down to consider what was legal and what was illegal, they clearly made a distinction that fantasy sports was legal.
LEAHY: That's true, but here's the thing. When that law was passed in 2006, daily fantasy sports did not exist yet. And now they're big business, but the law is the same.
INSKEEP: Well, does the CEO feel at all creepy about taking investments from sports leagues so that people can put money on the line in this way?
LEAHY: I asked him about this.
ECCLES: No. Really from the start, we felt that it was important that we got to the point where we could have a dialogue with the league. I always felt good that once you understood that this was a really fantasy sports for the next generation that they would get on board with it. And so at a lot of ways, I really thought that it was just a matter of time.
INSKEEP: OK, that's what he says, but could fantasy sports betting motivate someone to try to corrupt a real game because they've put a lot of money on the line?
LEAHY: And this is what the leagues refer to as the integrity of the game. This would be much harder to pull off in fantasy sports. There's just so many more moving pieces. You've got several players over several different games. You might not know what your opponent's lineup is going to look like. So the league's clearly aren't very worried about the possibility someone might fix a game due to fantasy.
INSKEEP: Well, with that said, what makes the leagues willing to run that risk, however small it might be, or even to run the risk of an appearance of some conflict here?
LEAHY: Well, I think the leagues know that fantasy players, and especially daily fantasy players, are more engaged than your average fan, and they're also going to watch games that they might not otherwise care about. I don't really have a team that I'm a diehard fan of, but if I have a little money riding on a game, I might be tuning in when I would otherwise be doing something else.
INSKEEP: Well, Kevin Leahy, good luck this Sunday.
LEAHY: Thank you.
INSKEEP: That's MORNING EDITION producer Kevin Leahy. Transcript provided by NPR, Copyright NPR.
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