How The Internet Has Changed Sports Gambling

As an avid fantasy sports player, a lot of my time online is spent on activities related to sports gambling. Whether it is fantasy football, hockey, golf, or baseball, I am always on my computer betting on something. After all, it’s another fun way of making money while sitting on my couch. Whether I am setting lineups, making trades, having drafts, checking injury reports, or doing research, all of my time that is devoted to fantasy sports is spent on my computer. There are several different websites that help me out with all of these tasks. This blog is going to take a look at the origins of fantasy sports, take a look at how it has evolved along with advances in technology and the progressions of digital business, and run through some of the major sports gambling websites in today’s world and analyze how they have taken advantage of emerging technologies for financial gain.

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Fantasy football was founded in August 1963 by fans of the NFL’s Oakland Raiders. They formed the Greater Oakland Professional Pigskin Prognosticators League (GOPPPL). They had their drafts in a bar, and calculated the results by hand basic on statistics in the newspaper the next day. Fantasy baseball was founded in 1980 by a group of journalists in New York City, and was named the Rotisserie Baseball League. Other fantasy sports would be invented as these two games rose in popularity, particularly after the rise of computers.

 

By 1989, over one million people in the U.S. played fantasy football, an incredible number for the pre-computer age. This number rose to 12 million in 2006 and 21 million in 2013. Today, over 41 million people play fantasy football. This is an incredible increase in players, and a number that is likely to only keep growing. Why did the number of people playing fantasy sports increase so much between 2013 and today? A big part of the answer is an innovation known as Daily Fantasy Sports, or DFS. Daily Fantasy Sports is a fantasy initiative across all sports that allows players to draft players for just that day. So if you know that you are going to spend your whole Sunday watching football, you can draft players to root for during that day, with prizes from the competition coming immediately after the day’s games have concluded. This is a big switch from the standard form of fantasy sports, in which you draft your players and they are on your team for an entire season, unless you trade them away for another player. This format allows users to enter different competitions with different players every week. It is also very beneficial across sports. For example, if I am watching The Masters, golf’s biggest tournament of the year, I can gamble on players for that week’s tournament, without being forced to play fantasy golf for the rest of the year, if I don’t have any interest in watching the other tournaments. Contests are generally run as auction drafts, where you have a virtual $50,000 to spend on a certain number of players, with prices for different players being set by the website.

 

The biggest providers of daily fantasy sports competitions are DraftKings, which was founded in 2012, and FanDuel, which was founded in 2009. They are both exclusively online companies. DraftKings in particular has steadily rose in popularity since its inception. The company is only five years old, and they are already giving out more than $1 billion a week in cash prizes just from their fantasy football contests. These websites make their money from taking a cut, usually approximately 10% of the entrance fee, from every contest that they hold. Since the nature of the contests is daily fantasy, this means that with such little commitment per contest, players will often keep coming back and enter many contests throughout the year. This offers many opportunities for these websites to keep collecting that fee from the same people, repeatedly throughout the year. The business model seems to be working well for these websites, with the two websites bringing in a combined $3 billion in entry fees in 2015.

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Providers of standard fantasy leagues, such as CBS, Yahoo!, and ESPN, have been innovating as well, taking advantage of the internet and emerging technologies in order to stay relevant in the fantasy industry. They, for the most part, offer the ability to host a fantasy sports league on their service for free, and make their money through advertising on the site. These companies have innovated in several ways, in order to make visiting a fantasy sports website a necessary aspect of any players daily life. By offering the ability to add and drop free agents throughout the week, as well as providing both text and video recaps and updates on every fantasy player, these websites ensure that players will visit the site far more often than to just set their football lineups on Sunday morning. In addition, initiatives such as The Fantasy Show on ESPN provide even more opportunities for advertising and fantasy-related content.

 

Fantasy sports is big business in the United States today, and it is an industry that is likely only going to continue to grow. Fantasy football alone is currently a $7 billion per year industry. Companies will continue to take advantage of emerging technologies in order to promote different ways to gamble on sports, and different ways to make money. How do you think that fantasy sports will continue to evolve?

 

https://qz.com/1068534/how-the-7-billion-us-fantasy-football-industry-makes-its-money-in-2017/

 

http://www.sandiegouniontribune.com/sports/chargers/sdut-the-history-of-fantasy-football-cure-2014jul28-story.html

 

https://en.wikipedia.org/wiki/Fantasy_baseball

 

https://en.wikipedia.org/wiki/DraftKings

 

8 comments

  1. Interesting and informative post, Paul. I play fantasy on the English Premier League, but I can’t imagine that it even compares to how lucrative the Fantasy Football industry is. A friend of mine works in DraftKings and she told me about how serious people are about it, but $7 billion annually? No wonder providers such as CBS, Yahoo!, and ESPN, have all been getting in on the game and innovating as well. What do your average returns look like on a weekly basis for Fantasy Football?
    DraftKings’ business model looks very profitable – just taking a 10% cut of the entrance fee must mean it is taking in billions home in revenue, without much risk or necessary costs. I will be interested to see how emerging technologies will continue to help fantasy sports evolve, and whether there will be other big players that try to enter the industry in innovative ways.

  2. Great post. It’s actually a surprise that this topic hasn’t come up until now. In previous semesters, it has been a major topic of conversation. Maybe its a sign that the hype cycle has passed?

  3. I’m fascinated that people play daily fantasy sports. The odds are significantly stacked against you unless you’re in the top 1% of entry fees. The rate of return is awful for casual players/gamblers. But maybe that’s not the point. If its something that you like doing, maybe throwing down $20 every now and then to have some fun isn’t so bad. There are worst things in the world. Interesting article that I read in another class:

    https://www.mckinsey.com/industries/media-and-entertainment/our-insights/for-daily-fantasy-sports-operators-the-curse-of-too-much-skill

  4. Interesting post! I first started playing fantasy sports when I got to college and it immediately reminded me of trading stocks – you do a lot of research, you try to be the first to make transactions before the other people in the league can respond, and your goal is to find misvalued players (like Alpha in investments). I know that there has been a huge debate over fantasy sports being a game of skill versus a game of luck. Since you refer to it as gambling, I assuming that you consider it a game of luck?

  5. Really cool post! Sports gambling is a really good example of an industry that has grown from exponentially from the rise of the internet. Its also super interesting that 1 million people were playing fantasy sports even before it was adopted to the internet! It is so impressive to me how popular it is and how much work is put into handling a fantasy league it seems like a full time job to be. My roommate’s brother even got his job at Barstool Sports by winning the most money in a weekend from sports gambling!

  6. It will be interesting to see how companies react as different regulations come out on online gambling (good or bad). I am sure companies have plans that they will immediately implement for regulations that are restrictive or give them great ability to reach out to consumers.

  7. I think this is so interesting. I personally do not have a fantasy football account, but many of my friends do. I think it’s an amazing marketing strategy for the NFL as it doesn’t cost them anything, yet I’m sure their number of viewers rose significantly over the increase in popularity. Now, I find my friends watching games that they don’t even care about the teams, but because one of their fantasy football players is on the team, they “have” to watch. I don’t know exactly how they’ll innovate, but I’m sure they’ll find a way!

  8. Nice Post! I never heard fantasy football before and it looks very interesting! I guess information technology has brought us many new ideas and make many business models possible. This is a brilliant way to market NFL and attract consumers awareness. I bet fantasy football not only attract male audience but also females, enlarging the range of the consumers.

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