Fantasy sports started small over 30 years ago in a Manhattan restaurant. A group of middle-aged men who loved baseball, board games, and athlete statistics came up with a simple idea that grew into a cultural phenomenon. According to the Fantasy Sports Trade Association, the number of participants in fantasy leagues rose to a record 33.5 million Americans in 2012, or roughly 10% of the U.S. population. There's even a popular television series, The League, based on a group of friends playing fantasy football together, which starts its fifth season this week. Some fans who once saw "fantasy" as a hobby now earn a living covering it as analysts, like Matthew Berry, former Hollywood screenwriter and author of “Fantasy Life.” Media conglomerates like Barry Diller’s IAC/InterActiveCorp (IACI) are investing big money into fantasy-related businesses.
It's a multi-billion dollar online industry with pro football leading the pack. It's by far the most popular fantasy sport via websites including Yahoo Sports, ESPN, NFL.com, CBS Sports and more. The NFL's regular season kickoff this week will ignite a subculture which included 25.8 million people engaged in fantasy football leagues during the 2012 season.
Paul Charchian, a veteran of the fantasy sports industry (dubbed the ‘Godfather’ by the fantasy football community), launched Fanball.com back in 1993. Charchian, now president of the Fantasy Sports Trade Assocation and LeagueSafe.com, discusses the growing popularity of the hobby in the attached video, and reveals some surprising facts that fall under the radar.
1) Women and Fantasy Sports
While the image of a bunch of nerdy men sneaking off to a hotel conference room to do a fantasy draft (cue the Knocked Up scene of Paul Rudd's character Pete hiding his fantasy sports obsession from his wife in the 2007 comedy flick) is what most people think of, the reality is this cliché is changing fast. Women have come into the fantasy fold in droves, and they are a fast growing demographic.
"Twenty percent of Fantasy sports players are women, and the numbers of women are growing. We gained almost 200,000 woman from just last year to this year that are playing fantasy sports,” Charchian says. Although women are just as competitive as men, Charchian’s research shows women enjoy playing because it facilitates “staying in touch with friends, being a part of the draft day experience, being part of the water cooler talk, and hanging with the guys.”
2) Fantasy Users: Till Death Do Us Part
Some have called it the Fantasy Life for a reason. As popularity grows, so has intensity and desire to play fantasy sports, season after season, and sport after sport.
“Looking at the life cycle of fantasy players, and what we have found is that 80% of today’s fantasy sports players fully intend to be playing a decade from now,” Charchian adds. Most surprisingly, he says “40% of players plan to play, until they die.” Charchian notes that players don’t want to give up fantasy sports because all of their friends are playing. If anything, the desire to keep playing fantasy sports may stem from FOMO, or the fear of missing out. In fact, Charchian’s research shows many leagues stay “intact for years and years, and people don’t want to give [up those relationships].”
3) The Youth Revolution
Another huge growth factor is that fantasy’s fastest expanding demographic is a lot younger than you think.
“Our fastest growing demographic is under 18 [year-old] players; young adults and children are our fastest growing segment." As a percentage of the population, teen participation is outpacing adult play by a wide margin: 13% of all adults (both genders, age 18+) played fantasy sports in the last year, whereas 20% of all teens (age 12-17) played. Charchian believes when you combine the youth factor with the desire of players to participate in fantasy leagues over the course of a lifetime, the fantasy sports industry "feels very healthy for the long run.”
4) Fantasy Sports = Real Money
Don't be fooled by the word fantasy; there's real money behind this industry. As noted earlier, the Fantasy Sports Trade Association reports roughly 10% of the U.S. population was involved in fantasy sports last year. This pushed sales to record highs.
“In 2012, [participants] spent $1.6 billion on products and services in the fantasy sports space, and that does not include entry fees,” Charchian points out. “This is just people buying draft kits, and magazines, and online services, premium content, DirecTV, NFL Red Zone, things like that.” Adding in $1.44 billion in entry fees, Charchian says the total industry value tops over $3 billion annually.
5) Rise of the Daily Game
A typical a fantasy league spans the entire season of sport, which ranges from six months for baseball and basketball to five months for football. The time commitment can be somewhat taxing for the average person that has to juggle work and family commitments. The fantasy industry has responded to these demands, creating daily games and leagues for players who want a quicker way to play.
Charchian says the explosion of daily games is the biggest story in the fantasy sports industry thus far. The way it works is simple: players can go to a site such as Draftstreet.com or Fanduel.com, sign up in the morning and join a league, draft a team for that day, and at the end of the day the league has resolved itself (and payouts are made). Charchian notes the simplicity is appealing. “You have winners and losers that very day, and then you can start fresh the very next day.”
Most importantly, these daily sites have garnered as much investment in the last year “as all of the history of the fantasy sports industry in terms of third party investment” combined. The big media companies have noticed, with Barry Diller’s IAC becoming the latest company to invest in the sport, confirming an investment made in Draftstreet.com. This follows a $7 million investment by Atlas Venture in DraftKings.com, and the $11 million in funding FanDuel raised from Comcast Ventures.
As the “smart money” now finds its way into the fantasy industry, it’s not too hard to imagine a day when retail investors will be able to put money into the fantasy sports boom as well.
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