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Daily fantasy goes big

NHL signs DraftKings; NBA in talks with pair

DraftKings and FanDuel, the two heavyweights in the quickly developing category of daily fantasy sports, are moving from fundraising and small team deals to premier, league-level sponsorships.

Boston-based DraftKings has signed a two-year North American partnership with the NHL to become that league’s official daily fantasy game. Financial terms of the deal, which is expected to be announced this week, were not disclosed.

The NBA, meanwhile, has been in talks with both DraftKings and FanDuel about a similar partnership for the daily fantasy sports category. While no deal had been completed as of press time, industry sources characterized a deal as being close and FanDuel as more likely to strike an NBA pact than its key rival.

The dealings don’t stop there.

MLB Advanced Media, which has been working exclusively with DraftKings on a smaller scale while in the second year of a three-year deal, is completing a broader, leaguewide approach for baseball’s presence in the space.

Group keeps up push
on legal front


The Unlawful Internet Gambling Enforcement Act, passed in 2006 by the federal government to regulate online gambling, created a carve-out for fantasy sports. In most states, fantasy sports is clearly defined as a game of skill, but in five states — Arizona, Iowa, Louisiana, Montana and Washington — laws surrounding playing fantasy sports for money are less clear, and the major daily game operators offer only free games to residents of those states as opposed to ones with cash prizes.

The Fantasy Sports Trade Association is continuing to push for universal legality.

“The floodgates have basically opened up around daily fantasy. So far, it’s proving to be almost entirely additive to traditional fantasy,” said Peter Schoenke, president of fantasy content operator RotoWire and head of the association’s legal committee. “So we’ve stepped up our lobbying in those states where it’s not legal and are working those areas.”

The largest prize out there for daily fantasy operators is a league-level NFL deal, a pact that would dwarf all others given the size of the NFL and how fantasy football drives the entire fantasy sports industry. A September memo sent by the NFL to its teams that laid out rules for the category could spark additional deals, and several clubs have already reached individual agreements.

This flurry of sponsorship activity follows a run of venture capital funding in the category this summer. In August, Draft-Kings closed on a $41 million Series C round of funding led by major New York investment bank The Raine Group. Just days later, FanDuel closed its own $70 million Series D round of funding, a round that similarly included several major financial entities as well as NBC Sports Ventures, the media giant’s venture capital arm.

Those funding rounds followed a $25 million round last year for Los Angeles-based TopLine Game Labs, parent of another daily fantasy operator, DailyMVP.

Almost overnight, what historically had been a small offshoot of the entire fantasy sports industry has exploded into a major force.

“What’s happened with daily fantasy has affected everybody in the business, directly or not,” said Paul Charchian, president of the Fantasy Sports Trade Association, the leading trade group for the fantasy sports industry. “There has been more direct investment in our business in this brief window than in the entire history of fantasy sports up to then.”

A key part of the appeal around daily fantasy sports lies in its format, which provides single-day or single-week leagues — with substantial cash prizes — as opposed to traditional leagues that last an entire sports season.

Flush with cash, these fantasy sports operators are aggressively looking to teams, events and now leagues to aid with their customer acquisition. They are doing so on top of a relentless blitz of advertising on digital and radio platforms that mirrors ticketing giant StubHub’s rise to prominence in what was its own relatively new business category, secondary ticketing, over the past decade.

In addition to its new deal with the NHL, DraftKings has signed pacts with the New England Patriots, Breeders’ Cup and World Series of Poker, among others. New York-based FanDuel similarly has partnered with several NBA teams, including the Orlando Magic, Brooklyn Nets and Chicago Bulls, building off a move by the NBA in August to open up the daily fantasy sports category to its teams.

DailyMVP has aligned with Patriots quarterback Tom Brady and Los Angeles Lakers guard Steve Nash, with the players starring in DailyMVP commercials.

“[The daily fantasy operators] are working to broaden their base of players, and an association with a team or league adds credibility at a time when it’s all about brand building,” said Chris Russo, former chief executive of Big Lead Sports and now a consultant with his own CR Media Ventures.

For the NHL, its deal with DraftKings gives the company prominent brand placement across the league’s digital platforms, including NHL.com, the NHL mobile application and the league’s social media properties.

“Fantasy sports are such an important fabric of all sports, especially for the passionate fans,” said Keith Wachtel, NHL executive vice president of global partnerships. “This daily category is obviously a growing one, and from a category standpoint, we wanted to find a partner that would not only embrace the league’s fan base, but also look at the league as a great marketing and branding platform.”

Additional activations in the deal include DraftKings serving as the presenting sponsor of daily video previews on NHL.com for regular-season games, fantasy segments on the NHL Network’s “NHL Live,” and dasherboard signs at NHL tentpole events such as the Winter Classic.

“Our data shows us that hockey has a very fanatical and obsessive fan base,” said Jeremy Elbaum, vice president of business development for DraftKings. “Obviously then, there’s no better place than to be partnered with the league itself.”

Wachtel said the NHL had been looking into partnerships in the daily fantasy category for about a year, noting that the league wanted to feel fully comfortable with how the games worked before signing a deal. The NHL will offer only free games that award fan-experience prizes; the league has no interest in moving into the paid space, Wachtel said.

Yahoo remains the league’s partner for season-long fantasy play.

The league-level deal for DraftKings adds to an NHL portfolio that includes seven exclusive team-level deals: Boston, Chicago, Colorado, Detroit, Los Angeles, St. Louis and the New York Rangers. These partnerships provide for dasherboard ads and additional elements such as DraftKings-sponsored fantasy reports on team websites.

Elbaum said the company is looking into more team relationships now that Draft-Kings has a league deal, as well.

While there has been an exponential rise in daily fantasy, there remain some questions surrounding its legality (see box). And while many of the activations with the teams to date have been digital in nature, some have been offline. The Magic-FanDuel deal includes prominent floor apron signage. All told, that deal is valued at nearly $2 million annually, making FanDuel the Magic’s third-largest partner in terms of spending.

“This is a category that our teams have clearly gotten into,” NBA Deputy Commissioner Mark Tatum said. “There is a lot of interest in the category, and teams are formulating some substantial partnerships. It is a very active category.”

As for the NFL, the September memo the league sent to its teams that laid out rules for deals in the category noted that clubs may accept advertising from daily fantasy companies on club-controlled media and stadium signage but are forbidden from using club marks and logos in such advertising. The Patriots-DraftKings deal, for example, falls under this parameter. Naming rights for stadium areas and media enhancements are forbidden. Teams also may sell hospitality suites to daily fantasy companies, but those cannot be turned around and used for game prizes.

The restrictions are similar to ones the NFL places on teams selling to casinos, raising the question of how different daily fantasy is from traditional gambling, at least in the eyes of the league. In addition, would the NFL permit a daily fantasy sports company to advertise during the Super Bowl after spurning offers for years from the Las Vegas Convention and Visitors Authority? That remains to be seen — but for now, what is clear is that the comfort level for leagues with this space is rapidly increasing.

“In testing, we noticed that the average fan that played daily fantasy games was spending five to 10 minutes more watching games than those that didn’t play,” said Christopher Golier, vice president of mobile marketing and strategy at the NHL. “These sorts of games obviously appeal to the avid fans, but we also see an opportunity to reach more casual fans as well.”

Staff writers Terry Lefton and John Lombardo contributed to this report.

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