The New York Times

August 23, 2004 Monday Late Edition - Final

SECTION: Section C; Column 1; Business/Financial Desk; E-Commerce Report; Pg. 7

LENGTH: 1102 words

HEADLINE: Advertisers discover the value of young men with time and money to spend on fantasy sports on the Web.

BYLINE: By Bob Tedeschi

ADVERTISERS have uncovered a world of young men with plenty of time on their hands and money to spend -- a highly coveted demographic -- in an unlikely place. The young men are on the Internet, paying money to play fantasy sports games. Who knew?

Fantasy baseball, football, basketball and hockey leagues, like the ones that are offered on Sportsline.com were among the first services to prove that consumers were willing to pay for online content. But now, free or low-cost services from AOL, NFL.com and even Best Buy are attracting advertising dollars and, potentially, driving down the price of content for everyone.

AOL last week introduced its first full-service sports fantasy offering, in which AOL subscribers and nonsubscribers alike could play for free, or organize a league for $60, which is substantially less than what others are charging. Carlos Silva, AOL's senior vice president for news and sports, said he hoped fantasy sports would bring AOL new subscribers and help the company retain current customers.

But even if that does not happen, he said it is very possible that advertising alone will pay the costs the service, with sponsors like Reebok and Jeep appearing prominently in the section.

Its success could also come at the expense of established fantasy leagues like Sportsline.com, which charges $130 for football fantasy players to set up a league.

''It's significant that some of the fantasy guys are willing to pull back on prices, because that was such a clear winner in the world of paid content,'' said Michael Zimbalist, executive director of the Online Publishers Association, a trade group. But, Mr. Zimbalist said he doubted that publishers would eliminate fees for content, in part because paid editorial services ''insulate them a little against fluctuations in the ad market.'' Mr. Silva acknowledged that a discount on AOL's service might not have been possible in years past. Between the peaking popularity of fantasy sports and the upswing in advertising, he said, ''it creates a great opportunity for us.''

Given the demographics of the typical fantasy player, it is no surprise that advertisers are moving in this direction. According to the Internet research firm ComScore Networks, online sports fantasy players are younger and more educated than typical online users, and are 45 percent more likely to have household incomes of more than $100,000.

About 15 million Americans participated in sports fantasy games last year, according to the Fantasy Sports Trade Association, with players spending an average of $154 a year on the games. Online sports fantasy offerings include a range of services, but users typically play against strangers on a given Web site, or in leagues they organize with friends or colleagues. Participants select a roster of real players from a sports league, then earn points based on their players' individual statistics in the actual games. League players are given a Web address to track progress and talk trash.

Football season represents the industry's annual peak, with 93 percent of people participating in some online fantasy league last year, according to the Fantasy Sports Trade Association. Baseball ranks second, at 63 percent, with the other leagues trailing by 30 percentage points or more.

This year, not only will AOL be promoting its service to its roughly 23 million subscribers and the millions of monthly visitors it receives to the AOL.com Web site, but the National Football League is instituting its first full promotional campaign for fantasy players to promote its service.

Over the next four weeks of N.F.L. pre-season games, the league will run a series of television commercials featuring N.F.L. stars like Michael Strahan of the New York Giants playing for fantasy football teams like the Prowling Pandas, and answering to their fantasy league managers.

According to Chris Russo, the N.F.L.'s senior vice president for new media and publishing, fantasy players generated revenue ''in the seven figures'' for NFL.com last year, from paid services and advertising.

Even retailers are joining the trend. Best Buy, the electronics merchant, earlier this month introduced a free fantasy football game on its Web site. According to Andrea Kimmel, Best Buy's associate marketing manager of home theater, the reasons are simple. ''Deep down, a lot of a TV-upgrade decision has to do with the fact that they're watching more football,'' Ms. Kimmel said, ''and they're doing that because they're playing fantasy football.''

Ms. Kimmel said that fantasy sports participants watched on average two more hours of television each week than nonfantasy players. In Best Buy's service, participants will compete against other BestBuy.com visitors for $20,000 in weekly prizes, including plasma TV's. Ms. Kimmel said the company had marketed the service on the Web site, and on Sunday began promoting it in Best Buy's weekly newspaper insert. More than 10,000 users have signed up so far.

The established sports fantasy companies have yet to cut prices to compete with AOL and others. Yahoo, which boasts three times more sports fantasy players than its nearest competitor, also gives some of its fantasy games away.

For Yahoo users who want to organize a fantasy league, the service costs $125 a sport, per season. Yahoo would not disclose statistics on paid users or overall fantasy sports revenue, but according to ComScore, fewer than 10 percent of the company's four million fantasy football participants late last year were in paid leagues.

Still, Yahoo does sell a significant number of add-on features to users of its free service. For instance, ''Stat Tracker,'' which follows a participants' players, costs $10 a season and is ''incredibly popular,'' a Yahoo spokesman, Dan Berger, said.

Neither AOL nor Best Buy is creating the fantasy sports service themselves. In both cases, Minneapolis-based FanBall.com, a privately held fantasy sports company, built the service. The company operates a Web site for consumers, said Rob Phythian, FanBall's president, but has ''been finding a lots of business with third parties in the last two years.''

Mr. Phythian has built games for the internal corporate Web sites of Caterpiller and 3M, among others. Meanwhile, big advertisers are appearing on his site more frequently, with Ford ''owning our site for a day every week this year.''

And for fantasy league winners who want to bring gloating to a new level, there are other advertisers waiting to serve them, Mr. Phythian said. Jostens, a maker of championship rings, will be prominently featured on FanBall this season.