August 13, 2012

Fantasy Football: The Economics of an American Obsession

Fantasy has a distorted relationship with reality. We all spend time daydreaming. It may be about becoming rich, successful or extraordinary in different ways. But more often than not, your dream of jumping off a building an being able to fly like Superman has no direct relationship with the real world.

Such is not the case in fantasy sports. The managers, sports, games and athletes are all real. When Arian Foster rushes for over 100 yards and 3 touchdowns, you see the immediate benefit for your fantasy team. It is one of the only games where the outcome is dependent on real world events. That’s likely why people are so passionate about it. And while the internet has kept the business booming, the enthusiasm and passion for idea has been around for a long time.

It all started over 40 years ago. Ever wonder where the term “roto” comes from? Well fantasy baseball used to be called rotisserie baseball, named for the restaurant La Rotisserie Francaise in New York City. Lisa Tozzi of the Austin Chronicle explains the origins best:

The legend goes something like this: One night about 20 years ago a group of friends — New York City-based sportswriters, accountants, and lawyers — were having dinner at a favorite restaurant, La Rotisserie Francaise. Die-hard fans all, talk of baseball dominated the conversation. They argued over the virtues of Gossage vs. Quisenberry, dissected the Astros’ pitching staff, and wondered if Steinbrenner would fire Dick Howser. As the friends finished their meal, one of them took out a pen and began mapping a game on a napkin. Each of them would be a rotisserie team “owner.” Each would draft 23 players from Major League Baseball’s rosters. Each owner would have the same salary cap, and players would carry different values to be determined by a number of factors, including their performance in a number of key statistical categories over past seasons. Other things were important too: Was your player a rugged soul or made of glass? Was he was a troublemaker, and prone toward suspension, or a manager’s favorite who plays every day? Anything that cut down your guy’s playing time could hurt you. As baseball season went on, the players’ actual performance would win the owners points. Trades could be made within limits and for a price. The owner with the most points at the end of the season would emerge the champion. But what to call it? “Rotisserie Baseball,” someone suggested, a nod to their white-tableclothed Cooperstown. And the rest, as they say, is history.

 

And that fateful day unknowingly launched an industry that would be worth billions of the dollars in the years to come.

Spending and Growth

A lot has happened in the past 50 or so years. But nothing was bigger for fantasy sports than the internet boom. Technology allowed the industry to reach horizons it had never imagined before. Ray Vichot of Newsgames goes into great detail about the evolution of the game:

The internet boom of the late 90s also provided a new model for fantasy sports, since the barrier to entry was much lower. Fantasy sports sites such as Commisioner.com, RotoNews,com, and RotoWire.com were created and it was at this point, in 1998 a trade group, the Fantasy Sports Trade Association, was formed.

 

And with the organization of more technologically savvy companies; the money involved in the industry grew exponentially. As of last year, the value was in the billions. Richard K. Miller Associates conducted a sports marketing study in 2011. They cited the Fantasy Sports Trade Association for figures in spending:

The Fantasy Sports Trade Association (FSTA, www.fsta.org) estimates that 27 million American adults play fantasy sports. Estimates of spending are as high as $5 billion annually – up to $468 per player – for publication subscriptions, league entrance fees, mail-order draft kits, fantasy software, and other products. League entrance fees are returned to winning players, however, so net spending is considerably less than the $5 billion figure.

 

MSN Money says the fantasy sports industry’s actual value, while less than $5 billion, rivals some of the biggest corporations in the world:

All told, the economic impact of fantasy sports has been estimated at more than $2 billion a year, including advertising, player fees and players’ related spending. That puts fantasy sports in a league with names like Burger King, Bose, Hostess, Foster Farms and Mary Kay.

 

And even the omnipresent recession can’t affect the fantasy industry according a great piece by The Hollywood Reporter late last year about the business of fantasy football:

Even a recession and a recently settled NFL labor dispute hasn’t slowed the growth of fantasy football, a fact that has baffled the Fantasy Sports Trade Association, which worried this year that fantasy sports might be too mature an industry to continue its colossal rise. Now, though, they expect 36 million people in the U.S. and Canada will play fantasy sports in 2011, up 13 percent from a year ago. And 75 percent of those will play football, by far the most popular fantasy sport.

 

Infographic

This terrific graphic by Good and Column Five visualizes nearly every aspect of fantasy sports.

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Athletes and Users

So how do the players that are objectified in these games feel about this past time? Well some of them get involved themselves. The aforementioned Hollywood Reporter piece discusses that very notion:

Even NFL players are fantasy enthusiasts, like Jacksonville Jaguars running back Maurice Jones-Drew, who hosts his own show on the topic called Runnin’ With MJD on SiriusXM, and Tennessee Titans quarterback Matt Hasselbeck, who a couple of years ago famously “benched” himself in his fantasy league so he could start Brett Favre. Wouldn’t you know it, Hasselbeck threw four touchdowns that week and scored more fantasy points than any other quarterback.

 

But in a world dominated by instant gratification, some athletes are not thrilled about how obsessed people are with the fantasy game. Arian Foster was clearly upset with that when fans were more concerned about their fantasy team than his health when he got injured last year according to his twitter and CNET.

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There you have it. Some people are so involved with the game that they sometimes lose sight of what’s important. But how obsessed are we? Well a recently released Yahoo! Sports survey about fantasy sports users was just analyzed by Business Wire. And the findings are interesting to say the least:

Fantasy football over sex?
While 16% of respondents would give up sex for the entire season to win their fantasy league, more (19%) are willing to give up their mobile phone. The most respondents, 39%, would give up beer to win their league.

Fantasy football and real money
75% of fantasy football players are willing to bet on fantasy football, with 12% open to wagering more than $250 in their league.

Favorite teams vs. fantasy teams
35% of fantasy football players have rooted against their favorite NFL team when they had a fantasy player on the opposing team.

As you can see, fantasy sports ends up trumping sex, beer, phones and loyalty to our favorite teams in some cases. But not every fantasy user is the typical beer guzzling married man trying to escape the clutches of his wife. In fact, some of those wives are getting into the game as well according to the Richard K. Miller Associates sports marketing study:

Female participation in fantasy sports has increased substantially over the past     decade. Title IX paved the way for more women to play sports, and their elevated

interest level is manifesting itself in the stands, in the front office, and in front of the computer – competing in the sports world’s alternate universe, where genders are not assigned separate leagues. As recently as 2000, fantasy leagues were an almost exclusively male domain, with women comprising less than 3% of all players, by most estimates. Today, at roughly 15%, women represent a significant – and growing – portion of the fantasy-sports population.

Analytics

Oddly enough, one of the foremost authorities of sports analytics inadvertently increased the fantasy industry’s popularity according to Ray Vichot of Newsgame:

Baseball’s fascination with statistics helped fuel growth of the fantasy sports movement. The Bill James Baseball Abstract, while focused primarily on statistical analysis of baseball,  became a very popular tool for fantasy players as a way to predict player performance for the upcoming season. The 1982 edition was published by Ballantine Books and its success was at least partially responsible by growing fantasy interest

Bill James is regarded as the founder of SABRmetrics, a refined system of baseball statistics designed by the Society for American Baseball Research. These new statistics, which were designed to be a more accurate rating of a player’s performance than the traditional statistics of RBI, Batting Average, and ERA, were embraced by fantasy players which helped to further fuel growth of the game.

And as a result, analytics has always been a huge part of fantasy sports. Take a woman by the name of Hetal Thaker for instance. She works at IBM as a product manager and is a fantasy football enthusiast. She has utilized IBM’s predictive analytics software to help her in fantasy football (a technique we at Krossover just love). In the first five seasons after using the software, she won three times. She was interviewed by CIO’s Thomas Wailgum two years ago and explains how the analytic tools work:

I’m lucky because we have wonderful tools and apps at SPSS and IBM to use. One lets me get all the information I need and allows me to prepare and clean [the data] to make sure it’s correct. And then I use our statistics product, which is a Windows-based desktop application, and I just pull in the data. The nice thing is that it uses any format—whether it’s text or Excel.

Then I take that historical information and dump it into our modeling tool. It has a text-analytics piece, which allows me to take all of that qualitative information—the news stories, the injury reports, the analysts briefings—and rather than reading each individual piece, it lets me automatically categorize information: Basically put it into buckets of things as simple as negative or positive comments, such as “Are they hurt? On suspension?” So I have all these “positives” and “negatives,” and you can keep it as simple as that as if you want. But the tool allows me to dig into my details if I really want to get there.

 

And she’s not the only one using analytics to get ahead. People in your league might be doing the same thing. There are tons of available tools and services online for those who want to employ the same tactics Thaker did. A company called numberFire does just that.

“We do all the number crunching – all you have to do is win,” numberFire’s website says. “And win you will: if you used our fantasy projections instead of the platform defaults, you’d have a 30% higher chance of winning your league.”

So does all this devotion and extra work make any sense? Maybe not, but it doesn’t have to. The bottom line is it’s just a lot of fun. It’s a blast to draft players and watch them do well for your team. It’s awesome to beat your co-workers, friends and family in a game that comes down to the wire.

It gives us real stakes in the competitions we watch every day. As fans, we idolize these athletes. The truth is most of us will never get the chance to play professionally. Devoting ourselves in more ways than one (without crossing the line) to these games let us live out that vision to be a part of it all. It’s a dream or maybe something a little more…a fantasy.