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Volume 160, No. 177

Are fantasy sports SPORTS MARKETING PLAYBOOK operators betting DOUGLAS N. M ASTERS on the right game? AND SETH A. R OSE Douglas N. Masters is a partner in Loeb & Loeb LLP’s Chicago office, where he litigates and counsels clients primarily in the areas of intellectual property, ith the start of society that seeks instant gratifi - advertising and unfair competition. He is deputy chairman of the firm’s advanced the NFL season, cation? How do we take a media and technology department and co-chair of the firm’s intellectual property football fans are product that people love and protection group. He can be reached at [email protected]. Seth A. Rose is a partner in the firm’s Chicago office, where he counsels clients on programs and measuring make it faster? How do we make initiatives in the fields of advertising, marketing, promotions, media, sponsorships, player perform - every day draft day? entertainment, branded and integrated marketing and social media. He can be aWnce and building virtual rosters Enter reached at [email protected]. for seasonlong fantasy sports contests. According to FSTA leagues. President Paul Charchian, dailies These commissioner-style have “exploded in the last couple play on a daily basis is an innova - the opponent’s bet — minus the games, in which players create of years.” tion that has really taken off. The relevant “contest management fantasy “teams” with a roster of The two biggest daily fantasy success of the dailies may be fee.” Much like commissioner- real-life athletes that “play” over sites are FanDuel, which controls because, as DraftKings CEO style fantasy sports, FanNation the course of the sport’s regular 65 percent of the market, and Jason Robins has explained, the has secured major sponsorships, season, are offered on big DraftKings, which recently daily fantasy operators are not including partnerships with platforms such as ESPN.com, purchased rival DraftStreet in an trying to displace the existing BlackRock, Canon and New Yahoo.com and effort to narrow the difference in market for fantasy sports Balance. CBSSports.com. market share separating it from leagues. Rather, they are trying USA Today also recently While none of these companies the entertainment leader. to give people who were already announced that it will rebrand its have detailed fantasy revenue or With daily fantasy contests, passionate about fantasy sports longtime KFFL as USA Today user totals, there is no doubt profits are easily made — the a different way to participate and Fantasy Sports and team up with these operations make money — host usually takes about 10 to invite new, younger fans to the 20-year-old RealTime Fantasy and lots of it — from these percent off the top of every game. Sports to create a daily fantasy fantasy sports leagues. NFL contest as an entry fee. The The biggest sports websites in sports gaming site, FantasyScore. fantasy contests offer million- dailies generate additional traditional fantasy haven’t yet All of the platforms — both dollar payouts on annual tourna - revenue by selling display ads, entered the paid daily market. the new and the well-established ments and partner with large native advertising and sponsor - But two publishing powerhouses — offer a variety of playing brands such as Toyota, Snickers ships for free games. have thrown their hats into the options, including head-to-head and Volkswagen. Weekly payouts average ring. contests with a single other According to the Fantasy upwards of $6 million, and users Sports Illustrated recently player or multiplayer contests, as Sports Trade Association, can win millions with an initial introduced a mobile application, well as the ability to invite Americans spent $11 billion investment of under $5. In fact, FanNation, that “allow[s] users friends to play. Other options playing fantasy football in 2013 according to FanDuel’s website, a to take part in … daily play, include contests open to as few alone. normal week on the site has where participants select a new as two users and as many as 50 And the numbers continue to payouts reaching more than $10 team each time they play and users, as well as team and league grow. More than 33.5 million million. then square off against a friend play, contests and people play fantasy sports in the With all this money floating or random competitor.” private leagues. U.S. with that number projected around, even big companies such To develop the app, the The legality of fantasy sports to reach 41 million players by the as want a piece of the popular sports magazine contests that require an entry end of this year. action. In 2013, Comcast Vnture, partnered with Topline Game fee and pay out cash prizes So who is playing online its venture capital affiliate, Labs, which is led by David varies by state. On the federal fantasy sports? Interestingly, invested $11 million in FanDuel, Geller, the former head of level, the Unlawful Internet most players are in their mid- which is expected to generate Yahoo’s fantasy sports depart - Gaming Enforcement Act 40s, and when tech-savvy 20- more than $40 million in revenue ment. FanNation currently offers includes exemptions for season- year-olds were asked why they this year. both NFL and MLB, and intends long fantasy sports games that weren’t joining in, the most FanDuel Chief Executive Nigel to offer NHL and NBA contests adhere to certain defined common response was that Eccles explains this market in the coming seasons. criteria. Pay-to-play fantasy league or commissioner-style explosion by noting fantasy To play for prizes, FanNation sports contests are not legal in games “took too long.” sports is a “very competitive users put up an “entry fee,” or a Arizona, , Louisiana, For fantasy sports organizers, market” with many people trying money bet, to win a contest. If Montana and Washington and the task then became: How do to innovate. they win, Sports Illustrated pays are questionable in other states. we cater to a large segment of Offering the opportunity to their money back — and tacks on The operators of daily fantasy

Copyright © 2014 Law Bulletin Publishing Company. All rights reserved. Reprinted with permission from Law Bulletin Publishing Company. sports websites chafe at compar - FanNation also provide that A recent case chal - revenues of $4 billion overall isons to online such as users in certain states may play lenged the legality of short-term (according to FanDuel’s website). , which is illegal, paid contests — and that all and “daily” fantasy sports And the investors in and asserting that their sites offer users warrant that they are legal contests. The suit, Langone v. operators of daily play platforms games of skill rather than illegal residents or that they are physi - Kaiser & FanDuel , was dismissed are betting — heavily — that games of chance. Their terms of cally located in and using the on procedural grounds, so the these new sites keep the interest use reflect their awareness that services from those states. underlying legal issue of whether of current players and attract a these new forms of fantasy sports Market leader FanDuel includes short-term or “daily” fantasy whole new generation of new play have not yet been declared a section on its site discussing sports games involve enough ones. universally legal, however. the legality of fantasy sports play skill — as opposed to chance — It’s likely that these new Sport Illustrated’s FanNation in which it states it does not offer remains unresolved. games and sites will see more offers users the ability to enter paid-entry games to residents of And it’s likely to remain unre - legal challenges as they grow and contests by paying an entry fee Arizona, Iowa, Louisiana, solved — in Illinois and across evolve, however. Challenges that and playing for cash prizes (pay Montana and Washington. Under the country — at least for some will need to be resolved before contest play) or without an entry FanDuel’s terms of use, residents time. The fantasy sports these investors and operators fee and without prizes (free of those states are not eligible to industry is both popular and can declare a “win” and collect contest play). The terms of use of play. lucrative, with an estimated on their bet.

Copyright © 2014 Law Bulletin Publishing Company. All rights reserved. Reprinted with permission from Law Bulletin Publishing Company.