There are an estimated 30 million people in North America playing fantasy sports and that market is predominately owned by three key players -- Yahoo, ESPN and CBS Sports. All of these companies have solid products and a large user base, making it difficult for new companies to break into the mainstream. Even with new innovative fantasy products and platforms, it has been nearly impossible for emerging operators to reach the masses. Several companies have spent millions of marketing dollars trying to drive users to their sites and just can't break in.
As you look at the leaders in this space, they share several characteristics. First, all three are consistently ranked at the top comScore's sports category each month. Secondly, they were early entrants and thirdly, they all have several, robust marketing channels across major media outlets to promote their offerings (it helps when ESPN and CBS are both broadcasters of exclusive NFL games). Throw into the mix how tough it is convince a league of 10 guys to jump ship from one of the leaders and give up years of history on their records, badges and accomplishments, and you can see the challenge.
But, there are changes on the horizon. Since the ubiquity of social networks, opportunities are now surfacing for new companies and developers to leverage social media tools to break into the fantasy sports market.
Facebook has nearly 30 million users playing social games monthly. That is currently the size of the entire fantasy sports market. The fantasy games that are starting to gain traction on social networks maintain the key features and functionality that players are accustomed too from the leading operator sites but are built to be faster, lighter, more social and extremely viral. New fantasy platforms are also starting to mirror monetization models similar to other successful social games on Facebook such as Zynga and Playdom. Facebook gamers are familiar with this virtual currency model which should correlate to a stronger conversion and retention rate for these new applications.
As one of the largest sports applications on Facebook, Watercooler is an exciting company to watch this year as it enters the market with a suite of fantasy football applications. With more than 40 million fans connected on Watercooler's properties, and the core of its users being sports enthusiast, it can effectively reach the masses and extend a fantasy sports experience that should resonate with its current fan base through a channel that didn't exist five or ten years ago.
Citizen Sports is another developer that has gained traction in this realm. The application was widely adopted on Facebook because it allowed players to easily compete against their friends, and offered customizable tools that provided all the key features such as live scoring and drafting. Outside of a pure social network, even a massive media operator like Fox Sports has partnered with Open Sports for this 2009 NFL season to create a more interactive and social platform to operate fantasy sports.
The future of fantasy sports is exciting; the market is growing year over year. New platforms and games are starting to evolve with new monetization models, and even channels like interactive TV and mobile will create significant growth opportunities for this burgeoning market. This will be an interesting year to watch. If I was a betting man, I would guess that many of the older, more traditional fantasy sites and games are going to learn a lot from some of these newer market entrants. What do you think?