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RSSI'm sticking to my guns on this. Although the current leaders in fantasy sports will likely continue to own the core space, I believe there are significant opportunities for new innovators to be big winners on social networks.
Through all my conversations, there is one point everyone seemed to agree on: The fantasy sports demographic is ideal for marketers. The typical fantasy player is an 18-45-year-old male who spends money; these guys have credit cards and are not afraid to use them. Obtaining the highly desirable and engaged male audience in mass numbers is the end game for fantasy sports operators.
Leveraging an existing platform or social network to acquire new fantasy users is one thing, but monetizing those users is a totally different animal. Today, fantasy sports operators primarily monetize through ad sales / sponsorship, league fees and upgrades to premium content.
In order to take fantasy to the next level and see a serious increase in scale and revenue, the mindset of how fantasy monetizes must change and evolve. Anyone who has been responsible for the bottom line of an ad sales model knows how difficult it can be to rely solely on ad sales and sponsorship. You might have the traffic, but not necessarily success in selling your inventory. In addition, most of the leading operators are now giving away leagues, premium content and live stats for free (a serious money maker in the past), and monetization outside of ad sales in fantasy is starting to decrease.
Fantasy needs to adapt and take a page from the micro-transaction models that many online gaming companies are using. Looking solely at ad sales and sponsorships is a mistake. Fantasy sports operators should be capitalizing on their users' familiarity with the micro-transaction model and take advantage of it by implementing opportunities to spend throughout the games they play.
A great example of this is "Snap Draft," which was developed and is operated by Fanball. Snap Draft is a micro-transaction-based daily, weekly or monthly contest that lets users create and play instant fantasy games for dollar amounts typically ranging from $1 to $5. Players create their teams and match up against opponents, while Fanball takes a fee for facilitating the draft and running the contest.
NBC Sports and Comcast are others who have seen the value and syndicate a co-branded version across their sports sites to increase revenue. I think Fanball's concept is genius; the user interface could be improved, but the model is rock star. By providing daily games, including basketball and football, and opening it up to a broader market, they provide sports fans with more opportunity and less commitment of an entire season.
The monetization funnel is key for fantasy's future. Just getting users to show up at the front door is not good enough in today's world. As a marketer, you need to make sure you are maximizing revenue by leveraging qualified users who are willing to spend money by moving them through your monetization cycle.
Let me leave you with a question. If all the major players are moving to or already offer a free fantasy model, what are your ideas for monetizing the market? Can you get the masses or the casual fantasy player to spend hundreds of dollars each year playing fantasy sports?
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Peter - good point about Yahoo. They decided to fire back at ESPN, whose 2009 ad campaign made it clear that you could save the $10 by going to them and getting Live Scoring for free. Good decision or bad? Not sure. Yahoo built their business through years of very little competition - in the early 2000's they were free, free, free and 99% of others were pay or didn't have a product. The decision signaled to me that they covet the traffic more than the $10.
Great read. Thanks!
I believe that, given the amazing demo and psychographics present in the fantasy industry, the idea of charging at every reasonable point of purchase should be priority #1. Think about what people like me want - in and above the usual premium services.
The issue smaller players will face is the advertising market. ESPN or Yahoo! can offer most premiums for free because they can scale for big advertisers. Publishers will have to get very creative to combat scale issues.
Nice work Scott.
For the hardcore, who often will play for large sums of money (league entry fees), I believe the community element can used to monetize. For example, Bill Simmons of ESPN.com wrote an article where his group of friends went to Vegas and paid for a Fantasy Sports Package (http://www.lasvegasfantasysuperdraft.com/) which included a room to draft and amenities for your friends. Now my fantasy basketball friends are thinking of doing this next year. Yahoo or Sportsline or ESPN can offer similar packages to Vegas, Atlantic city etc and get a share of the revenue. This is just one way to capitalize off the hardcore fantasy player, which is growing by the year.
I see the casual fantasy market exploding every single year, especially in football. It's become like the NCAA March Madness office pool, where someone who doesn't even follow college hoops will join just for the fun and of course for the friendly wagers (and often win, which pisses us sports fans off). Now Fantasy Football is growing by leaps and bounds, with more and more casual users/non hardcore sports fans. How can this group be monetized now that the major players are all offering the free model? This I'm not so sure of, since winning cash prizes are a big selling point, and fantasy sites cannot facilitate gambling. Personally, I thought live scoring was a great subscription model for Yahoo, and I'm not sure why they made it free (probably to draw more casual users).
I agree with Scott that micro transactions in the social gaming world could be a great example for fantasy sports. It's based around community, which as I've mentioned is a big reason why we play fantasy sports.