Sports

Game is fantasy but money is real

Fantasy sports companies DraftKings Inc. (the app is shown) and FanDuel Inc. (website) raised a total of $575 million in July from investors.
Fantasy sports companies DraftKings Inc. (the app is shown) and FanDuel Inc. (website) raised a total of $575 million in July from investors. Bloomberg

It is virtually impossible these days to watch a football or baseball game, turn on sports-talk radio, or download anything on a mobile device without being blitzed by ads for FanDuel and DraftKings.

The burgeoning daily fantasy sports companies have gone viral, grown at a dizzying pace, and are valued at $1 billion apiece. They have trampled the traditional season-long fantasy football formula and lured millions of fans into tantalizing get-rich-quick daily contests.

The first week of this NFL season, the two companies netted a combined $60 million in entry fees — of which they keep roughly 10 percent, according to Eilers Research, which studies the industry. And the numbers are expected to mushroom as the season goes on and fans are bombarded with more enticing ads.

DraftKings and FanDuel spent $26.1 million combined on TV commercials in Week 1 of the NFL season, according to ad tracker iSpot.tv. Since Aug. 1, Boston-based DraftKings spent upwards of $80 million to air 22,000 ads. During the same period, New York-based FanDuel spent $20 million on 7,500 ads.

Their ubiquitous commercials have surpassed sports advertising for beer companies and car manufacturers. In fact, in September, DraftKings aired 25,000 ads, more than any other brand in any industry.

You know the ads. A hip millennial in a T-shirt or hoodie sits on his living room sofa, pulls out his laptop and smart phone, clicks a few times, and voila! Money rains from the ceiling. A giant cardboard check shows up in his hands.

“Get winnings right away!” they promise. “Get Cash!” A young man named Erik Hafner is featured on one testimonial, saying: “I started with a $25 deposit, and I made over $62,000.”

As sports junkies fantasize about being general managers of teams, they plunk down entry fees ranging from $1 to $250 to draft make-believe rosters and pit their “teams” against those of other pretend GMs. Meanwhile, major investors with lots to gain have been pouring money into the daily fantasy sports industry.

FanDuel in July got $275 million of investments from companies that include Google, Time Warner, NBC Sports, and Turner.

DraftKings — whose CEO and cofounder, 34-year-old Jason Robins, graduated from Miami Killian High in 1999 — raised $300 million from Fox Sports, Major League Baseball, the National Hockey League, Major League Soccer and Madison Square Garden.

The number of participants is staggering, and the leagues and networks have taken note. It’s in their best interest to fund and promote FanDuel, DraftKings and other fantasy leagues because the pretend teams generate interest in the players of the real teams, which spikes TV ratings and merchandise sales. Fans who normally wouldn’t follow teams other than their home teams now have a vested interest in the performance of players all over the country.

This has spawned a new industry of insider tips and phone apps, such as one offered by Miami-based SportsManias, with which fans can sign up for customized alerts to find out every time a player from their fantasy rosters are in the red zone, or every time a news story breaks about that particular player.

Yes, fantasy sports fans really do care that much.

According to the Fantasy Sports Trade Association, 56.8 million people in the United States and Canada are playing fantasy sports this year, up from 41 million last year and more than twice as many as in 2009. The average player spends $465 a year.

DraftKings had 200,000 registered users in 2014, and this year it is up to 2 million. FanDuel has more than 1 million users and promises payouts of $75 million weekly.

“Fantasy sports keeps me interested in the NFL,” said Thomas Fitzpatrick, 24, an investment firm property manager who lives in South Miami. “I used to be just interested in the Dolphins, but now, on a Thursday night, if the Cincinnati Bengals are playing Pittsburgh, a game I wouldn’t normally care about, I tune in because I have a Bengals player on my fantasy team, so I have to see how he does.”

That is precisely why sports teams and leagues, which officially frown on gambling, are betting on the growing trend of daily fantasy sports and forming alliances with those companies. Major League Baseball is a minority owner of Draft Kings, and the NBA owns a stake in FanDuel.

The New England Patriots have a DraftKings Fantasy Sports Zone at Gillette Stadium. The Dallas Cowboys and Kansas City Chiefs also have similar areas, and the DraftKings logo is visible behind home plate at many MLS ballparks. FanDuel billboards are showing up at stadiums from coast to coast.

“I think FanDuel and DraftKings are so popular because they provide instant gratification for us degenerates in our 20s and 30s,” joked Andre Paz, 35, a Miami Palmetto High grad who is working on his Ph.D. in Psychology at Florida Atlantic University.

Paz plays in three traditional fantasy football leagues, and also plays FanDuel regularly. He figures he spends a few hours a week doing research to make educated picks for his rosters.

“With regular fantasy football, you have to wait all season for delayed gratification, but with these new sites, it’s like buying Lotto tickets and there’s the chance of big payouts,” Paz said.

Fitzpatrick is also hooked. He plays in three traditional fantasy leagues — one with family members, one with college friends from Purdue, and one with Miami friends. But he also dabbles in FanDuel and DraftKings.

“It’s like when you go to Vegas and set aside a little amount of money for entertainment and casinos,” Fitzpatrick said. “I allow myself $20 here and there for fantasy sports. Instead of going to the movies, I do fantasy sports. I’m not that good at it, and I realize the odds are not in my favor, but I get enjoyment from it. And it’s addicting.”

The love affair with fantasy sports started when Fitzpatrick was at Whigham Elementary in Cutler Bay. He and friends made a list of all the players in the NFL, and then had a draft. “It wasn’t for money, just for fun. Now it’s for money, but I view it as play money, pocket change.”

Fitzpatrick said he spent $50 on daily fantasy games last year, and lost all of it.

Paz says he has made money in fantasy leagues every year but one since he started playing 15 years ago. On average, he wins $600 per season. But he lost $100 in daily fantasy football bets last season. This season, after studying spreadsheets over the summer, he is breaking even.

Despite their popularity, FanDuel and DraftKings find themselves embroiled in a scandal, as New York Attorney General Eric Schneiderman announced last week that he had launched an investigation to look into possible advantages daily fantasy company employees might have gained by using data unavailable to the public to win prizes in a competitor’s contests.

The trouble began when DraftKings employee Ethan Haskell published data revealing which players were included on most rosters. The next day, Haskell finished second in a FanDuel million-dollar contest and won $350,000. Knowing the percentages of entrants who chose particular players could give you an edge that would lead to a bigger payout.

U.S. Representative Frank Pallone Jr., of New Jersey, surprised by the volume of FanDuel and DraftKings commercials at the opening of the NFL season, has called for a congressional hearing to “review the legal status of fantasy sports.’’

And Massachusetts Attorney General Maura Healey also has asked for a review of the legality of the industry.

There is a fine line between legal and illegal online gaming. Online poker and waging on games is illegal. But monetized fantasy sports are legal in all but five states — Montana, Washington, Louisiana, Iowa and Arizona.

Fantasy league companies and supporters say their business is exempt from the federal Unlawful Internet Gaming Enforcement Act (UIGEA) because theirs are considered games of skill rather than games of chance.

Fantasy sports entrants are said to use knowledge of the skills and tendencies of the players on which they are placing wagers.

The law, which Congress passed in July 2006, prohibits gambling businesses from accepting wagers over the Internet. But there was a provision in the UIGEA for fantasy sports after heavy lobbying from pro leagues.

The law permits “participation in any fantasy or simulation sports game … in which no fantasy or simulation team is based on the current membership of an actual team that is a member of an amateur or professional sports organization.’’ It also required that the outcome of the contests reflect “the relative knowledge and skill of the participants.”

Even so, there is chance involved.

“I think it’s gambling,” Fitzpatrick said. “Even if you do research, you’re taking a chance. It’d say it’s 50 percent skill, 50 percent chance. Who’s to say if you take a guy who has 10 sacks that he won’t break an ankle on the first play of the game?”

Said Paz: “It’s not pure gambling because you’re aware of matchups and injuries; but it’s basically a form of gambling. It’s like poker, and these guys just figured out the loopholes to make it legal. I wish I had thought of it.”

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