Daily fantasy sports turned into a giant business overnight. What happens if it goes away just as quickly?
DraftKings and FanDuel Look Wobbly, and So Does $220 Million in TV Ads
Daily fantasy sports have helped prop up the TV business this fall. What happens if they go away?
DraftKings, via YouTube
Peter Kafka covered media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.
Short answer: A lot of ad spending goes away with it.
As we’ve pointed out before, and as everyone with a television set or Internet-connected device knows, FanDuel and DraftKings, the daily fantasy giants, blanketed the U.S. market in ads at the beginning of the NFL season this fall. Among other superlatives, that made daily fantasy the fastest growing advertiser in TV sports, and by some estimates the biggest.
That spending has slowed, but that’s in relative terms: It’s still very hard to watch football without seeing an ad from one of those guys. Ad tracker iSpot estimates the two companies have collectively spent more than $220 million since August, when the NFL pre-season started ramping up.
Industry executives say that daily fantasy ad spending will drop significantly once football is over this winter, because while there are daily fantasy offerings for other sports, daily fantasy is really about football, football, football.
And over time, it’s likely that spending would contract, since it’s unlikely that both DraftKings and FanDuel will be around for the long term: The logical conclusion is some sort of Sirius/XM merger between the two competitors.
But for the medium term, both companies have been telling everyone that they’re going to spend, spend, spend. DraftKings, for instance, is supposed to be on the hook for half a billion dollars in ad spending with ESPN and Fox Sports over the next few years.
That is: Internet-based advertisers are helping to prop up the TV business, as traditional TV advertisers start shifting their money to the Internet.
But that only works if the Internet-based advertisers are still in business. Daily fantasy is now effectively banned in New York and Nevada, and other government regulators are trying to figure out what to do with it.
It’s unlikely that daily fantasy truly evaporates, as so many giant businesses (including Comcast, which is an investor in Vox Media, which owns this site) are now invested in it. More likely, the companies find some solution that combines self-regulation with large doses of tax payouts to revenue-hungry state and federal collectors.
But if it did go away, media companies would really miss it. Hard to imagine a scenario where Mariah Carey and Kate Upton plug that hole.
https://www.youtube.com/watch?v=5AaacAMljG8
This article originally appeared on Recode.net.
