Fantasy Sports, Tangible Profits
They’re called fantasy sports, but there’s nothing imaginary about the bottom-line appeal that these online games hold for Web sites and online marketers that need to attract consumers.
Fantasy games give dedicated fans the opportunity to draft real-world stars and manage them through an imaginary season of play. Between 14 million and 30 million consumers are playing the games, up from an estimated 1 million in 1989. What’s more, players are quickly moving their fantasies online.
The good news for Web sites and advertisers is that fantasy games are an incredibly “sticky” application. Once fans sign on, they’re likely to stick around. Advertisers, who know that sports fans traditionally are loyal to sponsors, have ample time to deliver their messages to a targeted audience of largely male sports fans.
The ongoing advertising slump is hurting profitability of online games. But Web site operators say that some fantasy games already turn profits and that the overall category won’t remain a loss leader.
“From the beginning, we’ve wanted to make these games great for the fans,” said Jim McGee, vice president of consumer products for ESPN’s Internet operations. “But we’ve also had an eye on turning a profit.”
Web site operators believe that the rapidly evolving fantasy games sector can drive multiple revenue streams. Some sites are charging $29.95 or more for a season-long game. Operators also are signing advertisers to serve as official fantasy league sponsors. Die-hard fans indicate they’ll pay extra for breaking sports news delivered to their PCs or wireless devices. And, as fantasy games evolve, business-to-business revenue is growing.
So far, however, there’s no consensus on which business model will survive. CBS SportsLine.com surprised the industry last year when it dropped registration fees and sought corporate sponsors. In contrast, ESPN.com has stuck with its battle plan and continues to charge $29.95 for premium games for, say, a season of baseball or football.
It’s clear that the arrival of such media heavyweights as ESPN.com, FoxSports.com, CBS SportsLine.com and Yahoo has reshaped a once-sleepy business that used to be the province of mom-and-pop operators.
“I don’t have the media might that these new guys do,” said Charlie Wieger, vice president of marketing for CDM Fantasy, a relatively large fantasy game operator that expects to report about $9 million in 2001 revenue. “I can’t compete with an ESPN. They can drive so much traffic just by running a couple of little lines at the bottom of the TV screen.”
CDM has struck deals with the National Hockey League and USA Today. But many smaller operators say they’re being shut out by steep licensing fees demanded by professional athletes’ players unions.
“Many of them are intimidated by the players associations,” said Carl Foster, vice president of the Fantasy Sports Players Assn., a Boca Raton, Fla.-based trade organization.
Professional sports leagues, which ignored fantasy sports for decades, have entered the fantasy fray. The National Football League’s Web site, NFL.com, drew 600,000 players for its initial game last season, and the National Basketball Assn. reports that the number of players and advertising revenue both grew by more than 50% over the last two seasons.
Major League Baseball will become the last major league to offer its own fantasy games with a suite of games debuting today as part of the league’s opening day.
“We are late to the party,” acknowledged Robert A. Bowman, chief executive of MLB’s recently created advanced media operation. “But we think there’s tremendous room for growth.”
Measured against the Internet’s Three Cs--content, community and commerce--fantasy sports seem to have a bright online future.
Fantasy games demand attention to detail because real-world statistics form the lifeblood of the hobby. So fans who sign up for MLB’s premium games will need to know which athletes are hot during the 162-game season. There’s plenty of content to be delivered.
There’s also no shortage of community.
“Through the computer, I’ve met guys from San Francisco, New Jersey, Detroit,” said 36-year-old Fontana businessman Chuck Papenfus. “I’m going on a business trip to Florida in April, so I’m finally going to meet one of these guys in person.”
When Larry Leskew, 47, isn’t teaching math at a high school in Martinez, Calif., there’s a good chance he’s managing one of his seven fantasy teams. Leskew, who like Papenfus won a big-screen television while playing in an ESPN.com league, points to competition as the most powerful draw.
“We’ve had a couple of guys from Australia, and I’ve competed against a guy in Guam,” Leskew said. “The real appeal is the e-mail, the chatting that goes back and forth. A sense of community develops. It’s fascinating to chat across countries.”
That leaves commerce. Game operators hope to augment revenue by selling other products to players. There’s evidence that hard-core fans will pay extra for on-demand delivery of statistics or video clips of favorite players in action.
It’s hard to determine who’s making money from fantasy sports because operators don’t break out numbers. The games have been around for decades--witness the venerable Strat-O-Matic board games--but online strategies are still being refined. “We think the potential is really big,” McGee said. “Two businesses are emerging--game playing and providing information to players. And we’re in the enviable position of doing both.”
Yahoo, which began offering free, advertising-supported games in the late 1990s, is now studying entry fees. As the hobby becomes more popular--and technology makes different product offerings available--Yahoo might create a new level of premium games that would include registration fees, said Tonya Antonucci, director of production for Yahoo’s sports, news and weather pages.
One revenue stream that’s expected to skyrocket is direct marketing. Players turn over a wealth of personal information when they register. Many players are younger males, but Fantasy Sports magazine’s subscribers boast average annual income of $60,000, so some players have plenty of time and money on their hands.
CBS SportsLine.com, which claims to have 3.5 million registered and active players, signed Miller Lite as the official sponsor of its 2000 NFL season. Miller Lite was able to send players regular e-mails with NFL updates. CBS SportsLine.com’s fantasy golf league includes Nortel as a sponsor--and lets players use Nortel wireless devices to play the game.
There’s a real danger that marketers will overload fans with e-mail. Some smaller operators have used the offer of free fantasy games to assemble e-mail marketing lists.
“It’s easy to sign people up for free games, capture all those e-mail addresses and then spam the hell out them,” said Greg Ambrosius, editor of Fantasy Sports, an Iola, Wis.-based magazine with 160,000 subscribers. “For some of them, that’s been the basic business model.”
There’s plenty of room for fantasy leagues to grow. ESPN.com, FoxSports.com and CBS SportsLine.com are using their broadcast arms to promote fantasy games. Major league sports are promoting games on their Web sites and through broadcasts of real-world games.
Fantasy games are still dominated by males, but women are increasingly likely to play, said Nadine Gelberg, executive director of Harris Interactive’s sports and entertainment practice. In addition to joining football, baseball and basketball, women also show a preference for fantasy leagues focusing on golf and soccer.
It’s still early in the online battle for a share of the fantasy league market. Consolidation might be coming. Two companies that operated fantasy leagues--Los Angeles-based Broadband Interactive and Toronto-based Internet Sports Network--already have closed their doors.
Technology might help shape action late in the game. Yahoo and ESPN, for example, already offer games that can be played over Palm hand-helds and other devices.
* ON THE WEB
A review of fantasy baseball sites can be found at https://www.latimes.com/business/columns/ereview
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Who’s Getting the Hits
Major League Baseball has turned control of MLB.com and individual team Web sites over to a free-standing operation called Major League Baseball Advanced Media. The top seven individual team Web sites on MLB.com during the week ended March 25:
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Team Percent of audience traffic Yankees 11% Braves 8 Red Sox 8 Mets 7 Cardinals 6 Cubs 6 Mariners 5
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Crowded Playing Field
Most professional sports leagues and sports-related Web sites offer fantasy games. Some charge for entry; others offer free games. Among the more prominent sites:
MLB.com
NFL.com
NBA.com
NHL.com
Yahoo.com
ESPN.com
FoxSports.com
CBS.SportsLine.com
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The Los Angeles Times recently ran a review of some fantasy sites. It is accessible at www.latimes.com/business/cutting/20010329/t000026811.html
Source: Nielsen/NetRatings
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Virtual Fantasy
Of the many reasons people cite for going to Internet sports sites, fantasy sports is becoming a strong draw.
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Reasons cited for visiting Internet sports sites
Sports news: 84%
Team schedules: 59%
Broadcast information: 35%
Live sports coverage: 30%
Surveys: 22
Trivia: 21
Sports tips: 17
Customized live coverage: 16
Fantasy sports: 13
Sports merchandising: 12
Purchasing tickets: 12
Expert advice: 11
Sweepstakes: 10
Video games: 7
Chat rooms: 7
Visitor promotions: 7
Purchasing products: 7
Purchasing equipment: 4
Gambling: 3
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Note: Numbers do not add up to 100%; responses were allowed in multiple categories.
Source: Harris Interactive Sports Poll