Slide Show >>Ryan Lester trains for his NFL fantasy draft with the intensity of a Division I cyber-athlete. The 30-year-old Minnesotan spends hours online researching players' health histories, analyzing statistics, and reading scouting reports. He blogs theories on which prospective picks will have a good season, tweaking his would-be roster in response to posted opinions. He even practices for draft day in mock online drafts before officially choosing the lineups for his several teams.
Welcome to the high-stakes world of online fantasy sports. The teams are virtual, but the prizes are real. In typical fantasy leagues, winners receive a portion of the entrance fees, which vary depending on the number of players in the league and how much everyone anted up. On major online sites, such as SportingNews.com, Yahoo! Fantasy Sports (YHOO
), and CDM Fantasy Sports, prizes range from a T-shirt and virtual trophy to $25,000. For Lester, it's all about being called the best: "The bragging rights are the best part," he says.
More than 15 million U.S. adults play fantasy sports, according to studies commissioned by the Fantasy Sports Trade Assn. (FSTA
), a group of more than 240 companies, leagues, and publications in the fantasy sports industry. Of that number, about 90% gear up for football season, says Greg Ambrosius, director of the industry's biannual fantasy sports trade conference.
SCORING DRIVES GROWTH. The pro football season kicks off Sept. 7, but fantasy football is well under way, with much of the action online. There, players have been blogging about picks, joining leagues, and selecting teams for weeks, says Peter Schoenke, president and founder of Rotowire, a subscription fantasy site that provides statistics for Yahoo Fantasy Sports. "There is a very small minority not playing online," Schoenke says. "Before the Internet came along, you really had to be a diehard to play some of these games. The Internet came along and it lowered that barrier of entry, because the stats and scoring are done for you."
Fantasy football fans are flooding the Net, lured by blogs, message boards, and a host of other social-networking capabilities that let people research, build teams, and debate topics from who's the best running back to which fantasy player has the best strategy, Ambrosius says. In July alone, Yahoo Fantasy Sports drew 3.1 million users, compared to 952,000 at ESPN's fantasy site and 929,000 who used Sportsline's fantasy site, says comScore Media Metrix.
Last September, 10 million people played fantasy sports on the three top sites, Yahoo Fantasy Sports, Walt Disney's (DIS
) ESPN, and CBS's (CBS
) Sportsline, says TJ Mahony, managing director of Compete, an online research firm that monitors fantasy sports. Online fantasy sites have grown 20% to 25% a year over the past five years, Mahony says. "We have only begun to see the growth of fantasy—this evolution from males in dorm rooms with a pen and paper to people organizing large groups on the Internet."
And big groups mean big money. The fantasy sports industry generates $1 billion to $2 billion a year on publication subscriptions, paid league entrance fees, mail-order draft kits, and fantasy software and other products, says Jeffrey Thomas, FSTA president. It's a safe bet a lot of that revenue is ending up online, the playing field for 92% of those who engage in fantasy sports.
DREAM DEMOGRAPHIC. Those numbers aren't lost on advertisers eager to court an especially attractive demographic—men under the age of 35 (see BusinessWeek.com, 9/4/06, "Secrets of the Male Shopper"). About 86% of the participants in fantasy leagues are male and 63% are under age 40, according to a 2005 study from the Pew Internet & American Life project, which then put the number of American adults playing online at 11 million. Compete says the percentage of men has dropped to about 70% as more women have gotten into the game, increasing participation overall.
The Sporting News, a sports magazine with a large subscription fantasy site, is cashing in on some of the online advertising dollars. Since relaunching its fantasy site in October, 2005, the site has seen more than a million unique users a month. With the traffic has come ad revenue increases of 50% for the past two quarters, says Jason Kint, head of the company's online division. Kint says the site is particularly focused on engaging registered users, who pay $20 to run a team on it. Engagement often determines user satisfaction and advertising dollars, because advertisers pay more when they know a computer user is spending time on a page displaying their message.
Average registered users spend seven hours a week on the site reading and writing blogs, catching up on news and commentary, and running their online teams. "Our primary focus is staying No. 1 in engagement across the category," says Kint, adding that part of the reason the league charges for teams is to ensure that players keep up with their roster and don't disappear in the middle of the season. "We believe at the end of the day advertisers are shifting from mass-reach vehicles to depth-of-engagement vehicles."
WHY THEY PLAY. Lester, who manages a team on Yahoo's site and several on SportingNews.com, was awarded the maximum of five stars on SportingNews.com for his engagement. He regularly writes about teams on his blog, Lester's Legends, and uses message boards to trade and talk trash. Another draw: fast access to information and ease of accurate scoring. "Before, you had to sit down with friends and chart the stats down by hand, the old-fashioned way, and use a calculator and a piece of paper to double-check the scoring," he says. "I would always have at least one of my guys not getting the points he thought he was supposed to get."
Most sites keep score for players, letting them run leagues without having to spend hours calculating points. David Funk, 31, from North Carolina, was in a 25-man league a few years ago. The league came unraveled after the guy running it bailed amidst the stress of scoring. "He was the one keeping track of all the points, and he got overloaded and pretty much quit after that year," he says. Partially as a result, Funk moved online six years ago. He now has teams on Yahoo and Sporting News. With the computer keeping score, leagues can support 75 teams or more, he says.
AOL'S GAME. More sites are awakening to the fantasy. Time Warner's (TWX
) newly free AOL began offering a free fantasy game in 2005 and is trying to expand its relatively small site with blogs and fan pages. Executives hope to exceed the 350,000 users they had last football season. It's a strategy that makes sense given AOL's new focus on advertising (see BusinessWeek.com, 8/3/06, "AOL Casts Its Fate with Ads").
There is already so much competition in the fantasy sports arena that Neal Scarbrough, editor and general manager of AOL Sports, says AOL is trying to find a special niche to better compete. "We have to come up with something that is different than other sites so people can say, 'Yeah there is fantasy, but have you heard about that AOL game?'" he says. "We want that AOL game to be something different and better."
But different doesn't matter for Funk. Like many competitors, he just wants to see his name up there with the winners. "A lot of people, including myself, they like to see their name at the top of the list when they go online," he says. "It's nice to have your name seen there."
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