Is it Ethical for Pro Sports and Sport Media to Endorse Fantasy Sports Leagues?

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Team Members:

Brittany Gregor, Kenny Gregor, Dustin Anderson, Steve Reichenbacher

Group Name:

The Flin Flon Sea Donkeys

Technology:

Online fantasy sporting league websites that use real-life, real-time statistics of Professional Athletes.

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Initial Statement:

Fantasy sporting leagues utilize real-time statistics generating detailed analyses of pro athletes in order to market this information to sports fans. Participants pay a fee and select a variety of players in a sport. Based on player statistics accumulated during a season participants selecting the 'best' athletes are awarded prizes.

Current technology used to administer fantasy sporting leagues combined with its growing popularity has had an effect on the fan, pro leagues, sports media, and internet gambling legality. Conflict over the rights to statistics has created friction between pro leagues, fantasy leagues and sport media. In addition, controversy over the effect on fans regarding addiction and internet gambling legality remains.

With legality in question and links to addiction present the onus is on pro sport and sport media to either embrace fantasy leagues and capitalize on its increasing profitability or to distance themselves and let fantasy leagues continue independently as they have in the past. Society has dictated that a mix between sports and gambling is undesirable, yet with the role of fantasy sports still undetermined we ask if the ethical boundary has been crossed by sports and sport media in their promotion of fantasy leagues to the public. The following documentation will look into the growing industry of fantasy leagues with respect to its social and marketable outcomes. This page will discuss what fantasy sport leagues are and cover their history to date. Next the incentives motivating the business side of fantasy leagues will be covered, followed by a section on addictive qualities present in active fantasy league participants. Last the legal issues surrounding fantasy leagues will be discussed before concluding if it is ethical for pro sports and sport media to endorse fantasy sports leagues?

What Are Fantasy Sporting Leagues?

Fantasy sports provide sports fans with the opportunity to play the role of the “coach” or “owner” of their favourite pro athletes in many different sports. This idea began over 50 years ago originally beginning with paper and pencil leagues that were put together by a few friends. Today, however, with the use of the internet, people from all around the world are able to compete against one another in the same leagues. The game allows people to build and manage a team of professional athletes that competes with other fantasy owners in their specific league. The teams earn points that are based on the real life statistics generated by the individual players or teams that are selected by the fantasy sports owner. These points are accumulated over the professional sports season according to the roster that is selected by the fantasy sports owner.[[1]] In some leagues the owners have a fake salary cap with which they are able to spend on the players which are priced according to their statistics. Owners in some leagues are also able to trade their players for others to help improve their team and earn more points. Many leagues are free to enter, but some are pay-to-play which give out prize money to the owner whose team accumulates the most points over the duration of the season. All in all, fantasy sports leagues are growing into a very large and successful internet business because of the ease of organizing and playing in on-line leagues which help many sports fans feel like they are a part of the game. [[2]]

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History of Fantasy Sporting Leagues

Since shortly after World War II, the concept of picking players and having a contest based on the players yearly stats has been around. It was never a widespread hobby or business until in 1960 when a Harvard University sociologist named William Gamson started the “Baseball Seminar” where colleagues would form baseball rosters that earn points based on the player’s final standings in batting average, RBI, ERA, and various other statistics. This caught on with many professors at various schools across the USA. However, while the original idea was mainly focused on Baseball, it was a Football league that really turned it into a hobby. The Greater Oakland Professional Pigskin Prognosticators League began in the early 60’s with eight teams made by Raiders fans and media. This was the initial jumpstart that helped make fantasy sports what it is today. [[4]].

The biggest development in fantasy sports, however, came with the development of the Rotisserie League Baseball in 1980. The name came from the New York City restaurant La Rotisserie which was where some friends used to meet and play including the man who was credited with inventing it, Daniel Okrent. [[5]] The innovation of this game was that “owners” in the Rotisserie league would draft teams from a list of MLB (Major League Baseball) players and follow their stats for the duration of the season and compile points. This began to catch on with many sporting fans, but especially with members of sports media and by 1988, USA Today estimated that 500, 000 people were playing it. [[6]]

This new craze continued to grow throughout the 80’s and 90’s as many new companies and magazine publications began to form concerning the subject. From 1991 to 1994 there was a growth of people playing from 1 million to 3 million; however, as the internet boomed in the 90’s, so did the hobby of Fantasy Sports. The internet made it quicker and easier to compile
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statistics from games which opened the door to many new participants. The two original fantasy sports sites which paved the way to what we get now were commissioner.com and RotoNews.com. Commissioner.com launched in 1997 and was sold to Sportsline in 1998 for $31 million in cash and stock proving that fantasy sports had made the leap from a hobby to a business. By 2003, commissioner.com helped make Sportsline generate $11 million in revenue and now it is the engine that drives one of the largest fantasy sports websites CBSsports.com (after Sportsline was sold to CBS). [[7]]. Many sporting websites began to get involved with fantasy sports including all of the major sporting league sites and many sports magazine sites such as Sportingnews.com. Although many leagues on these websites are free, most are pay-to-play and include cash prizes for the “owners” whose teams compile the most points over the season. Cash prizes generally range from as little as $50 to $250,000 grand prizes for the winners of high stakes $5000 entry fee leagues. [[8]] Today a recent 2006 survey from the Fantasy Sports Trade Association, notes that 16 million Americans between the ages of 18 and 55 play in leagues ranging from football, to NASCAR, to even golf! [[9]]

The Market: A Growing Industry

To understand why support for fantasy leagues exist and where it comes from one must understand the perspective of some of its most avid defenders: the sports industries who stand to profit from it. Fantasy sport providers, advertising firms and major sports media broadcasters have enjoyed the revenue generated by fantasy league play and are optimistic about its future. Internet based fantasy leagues are in a market experiencing significant growth, and as fantasy league user demographics become more clearly defined the business world is realizing this market’s potential.

In fall of 2000 Fantasy sports’ subscription fees and advertising revenues were estimated at $600 million annually, while surpassing financial based websites in minutes per month users spent logged in (Berentson, 2000). By 2004 revenue had increased to $1.65 billion, reflecting a demographic shift from a niche market to a broad pattern of participation (Bernhard and Eade, 2005). In 2006 subscription fees alone were estimated at $1.5 billion annually while Industry growth was to continue at a rate of 7% to 10% annually (Klaassen, 2006). User demographics point toward a highly sought market - estimating “that more than half of fantasy players are between the ages of 25 and 44, 37% hold a bachelor's degree or higher, and 33% have household income of $75,000 or more”(Kang, 2005). The large majority of these players are Caucasian males with a disposable income. Once just a small group of fanatics, this demographic has widened to the point that the average sport fan is familiar with web based fantasy sports. In America approximately 15 million people are actively involved equaling 5% of the population.

Fantasy league market growth and user demographics prompted an increase in investment from sports media, advertisers and the pro athletes. The average web user’s preference for free services online over subscription based services is large, yet comparatively fantasy sports users don’t seem to mind the expense. By 2004 the average rotisserie user spent $154 a year on subscriptions, watched an extra 2 hours of television a week over non-fantasy players (Tedeschi, 2004), and spent roughly 3.8 hours a week managing their teams (Klaassen, 2006). Advertisers see disposable income combined with extra time for fantasy sports from this demographic as a perfect mix with potential for high returns. While advertising revenue increases for fantasy sport providers, broadcasting has altered their presentation of sportscasts to draw the advertisers focusing on this demographic back to television. During broadcasts a general reference to fantasy play has increased and the presentation of statistics fantasy players find more valuable are shown more often. In addition television commercials featuring pro athletes playing for fantasy teams are getting air time during major sports’ respective pre-seasons. This prompts users to subscribe to fantasy play for the upcoming season. The reaction of sports media, advertising, and pro leagues indicate that fantasy sports are being recognized as a strong revenue generator.

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The increased attention to fantasy sport revenue could be related to differences between the way and level fantasy players and non-players choose to participate in their favorite sports. The average non-player fan tends to gravitate to their favorite teams, tune in to their games and generally tune out to other ‘less important’ league play. The fantasy player fan is more interested in each game because his fantasy team is comprised of players selected across all teams. This makes more league play relevant, hence increasing the amount of time watching televised sports.

When taking the increase of fantasy league participation in the American population into account the result is altered broadcast content favoring fantasy players and inclusion in target audience advertising. As far as marketing, advertising and the rest of the business world is concerned, fantasy leagues have made a better sports fan. With this new source of revenue on the line the argument for fantasy sport play has some big industry support.

Addiction to Fantasy Sporting Leagues

In today’s society the range of addictive activities one can engage in are widespread. Fantasy Sporting Leagues are no exception. Since cash prizes are available, some people will invest a large number of hours and a substantial amount of money into attempting to increase their chances of success. Falling into such a trap could lead to social and financial problems for you and those that surround you.

Symptoms of addiction are consistent whether it’s gambling, alcohol, or even Fantasy Sporting Leagues. A prominent sign of addiction is obsessive thinking over said source of addiction. For Fantasy Sports, people will constantly be thinking about the teams they have, always wondering what is going on in the sports world, and how other competitors are doing. It can lead to a continuous stream of thinking about something that is really meant to just be a minor little activity, or source of entertainment. This excessive thinking can interrupt important individual goals and responsibilities, such as school, work, family, friends, etc. [[10]]

The tendency of individuals displaying addiction to fantasy sports, along with the obsessive thought process, is the time and energy put into their fantasy sports teams. A "dedicated" individual will stay up until all the games of the day are complete, then analyze all the stats in and effort to make the best decisions to further benefit their teams. As mentioned earlier this behavior clearly interrupts time dedicated to doing more productive things like school work, spending time with family and friends, or even sleeping (so you can be more productive at work the following day). If this habit becomes too frequent fantasy players could find themselves failing out of school, getting fired or losing close companions.[[11]]

Since individuals compete against other individuals they can often engage in forum posting styles of communication. Fantasy Sporting Leagues often generate these types of forums where people generally collaborate, establish community codes of ethics, and express successes or hardships. Since people can easily get addicted to sites like MSN Messenger or Facebook, which includes a large amount of online communication, one could even get hooked on this aspect of Fantasy Sports Leagues. This is evident in fantasy sport players tendency to develop online friendships or rivalries, both of which can include a large amount of "trash talking". [[12]]

Perhaps the biggest factor of addiction is the money spent through participation. It may not seem like there can be much cost to individuals associated with fantasy sports, and this is true of those who engage in free signup fantasy leagues and choose to work with what is deemed a lower quality level of participation. However if an individual is highly competitive and desires placing first in a league or winning prize money they tend to spend their own savings in order to do so, whether it be to purchase advanced memberships, higher trade allowances, or various other result improving incentives. These incentives can be seen as money traps, due to very few prizes given out between thousands of competitors. The likelihood of winning in many fantasy sport leagues is, for the most part, not very good.[13]

According to the article,Gambling in a Fantasy World: An Exploratory Study of Rotisserie Baseball Games written by Bo J Bernhard, Vincent H Eade, a poster was created that stated with an alarming degree of certitude that "80% of the players in my fantasy leagues are obsessed with the stuff."

trades.jpg [[14]]

This above picture helps illustrate some of the costs. The people that usually finish near the top are the ones who spend a lot of money on trades, in order to gain an advantage over their competitors who don’t bother spending money. Notice they also offer issues to their magazine in an effort to generate additional revenue. Players who invest in this are again subjected to more improvement incentives through the resulting exposure to companies that advertise in the magazine.

Ad Companies Hoping to Gain an Advantage

Marketing research companies have shown that the average fantasy football player is predominantly male, married, in a high income bracket and more likely to do research or make purchases online. Using information like this ad companies know what ads to run in order to attempt to capture the target market. All though most of the Fantasy League games are offered for free, companies realize the large amount of revenue that can be obtained through advertising, and free fantasy leagues draw more people in the first place. Although an individual may think they are playing for free they are subconsciously being influenced by the ads they see, and this can affect their buying habits later on. [[15]]

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This picture shows a few examples of advertising usage. First, at the top their are five different sponsors who have all paid Sportsnet to advertise on their website. Second, PartyPoker has got its name put into a fantasy sports league for basketball, in hopes that people will hear their name associated with the fantasy sports and it will hopefully draw in more customers for them.

Not only do companies that advertise on the internet benefit from Fantasy Sporting Leagues but companies that advertise on television or radio benefit as well. People who become hooked on wanting to know how their fantasy players are doing in their given games will therefore tune into games they normally might not. This gives ad companies extra opportunities attempting to influence market buying habits. [[17]]

Legal Issues Regarding Fantasy Sporting Leagues

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The major legal problems that surround fantasy sport leagues are centered on issues regarding online gambling as well as copyright laws. The United States have attempted to control the increase in recent online gambling through various laws and acts, such as the Wire Act of 1961, in which placing bets over the phone was prohibited (Hammer, 2001). Since technology has enhanced, so have the means of gambling online. According to Smith (1992) American governments desired to legalize sport betting websites in an attempt to control and monitor the flow of illegal monies.

The Internet Gambling Prohibition Act of 1997 was introduced which presented fines and imprisonment to companies continuing to elevate the status of illegal online gambling. There was an exception made within this Act, which any gambling that was related to games of skill, and not chance, were still legal; including fantasy sports and horse racing (Hammer, 2001). In 1999, this Act was amended to include various new technologies; however the exemption for Fantasy Sports and horse racing remained. These acts were not successful, as various online gambling companies found ways in which to tie their business into these exemptions (Hammer, 2001). In order for the American government to successfully develop an act that would prohibit online gambling, these exceptions would have to be abolished, or online gambling would have to be allowed in regulation. The major issue with this regulation that the US is facing today, is that most of these gambling sites are run out of Latin American countries, and are therefore unsupervised by the US government (Hammer, 2001). There is little information about the regulation of online gambling and fantasy sports in Canada, however it is assumed in most articles that it is very similar to the system in the US.

Along with the online gambling legal issues that are tied to fantasy sports, there are also various copyright and property right issues that have come up in recent past. This major issue is whether or not professional players’ names, statistics and information are the property of their sporting organizations and players associations, or if they are bits of information that are available to the general public (Bolitio, 2004). The question is if using these players’ statistics and information on fantasy sport websites violates federal copyright laws? The Copyright Law of 1976 states that if information is not “published” in a literal sense, it can not be protected; and therefore belongs to the general public [[18]].

In the past, this problem was controlled through issuing statistic usage licenses to Fantasy Sport companies, however only the large companies such as CBS and ESPN were able to consistently afford these licenses, leaving smaller companies out of luck. The MLB (major league baseball) recently raised their licensure fee by $1 975 000, and the NFL (national football league) limits the amount of licenses it can issue (Bolitio, 2004). If these licenses continue to be issued, there will only be a very few fantasy sport leagues available, however if any company is able to access the statistics and information, the professional sporting leagues will lose a ton of revenue every year (Bolitio, 2004).

Motorola SportsTrax Device
There was a groundbreaking lawsuit that surrounded this issue, between the NBA (national basketball league) and Motorola. In this case, Motorola was selling subscriptions for a new pager-like device named SportsTrax that was able to display real time information regarding scores and statistics for NBA games in progress (Bolito, 2004). These updates were made possible through a team of Motorola workers analyzing the games from live games, TV or even radio. The NBA decided to sue Motorola on the pretense that the SportsTrax technology was violating federal copyright laws, by relaying the information and statistics that belonged to the players, and the sports broadcast companies. Motorola won the lawsuit, due to the technicality that statistics and scores of public sports games are public information, and can not be protected by copyright law. This was a breakthrough for fantasy sport leagues; in that it was becoming known that it was in fact legal to relay these scores and statistics to the public.

There was a similar case between MLB (major league baseball) and CBC, in which the MLB association claimed that fantasy leagues should be illegal as they violate intellectual property laws, as well as the “right of publicity” (Foxsports). The argument on CBC’s behalf, which run CDM Fantasy Sports, is that their company is just using information that can be found by the general public in newspapers, or on sports highlights. A judge involved in this ruling said “It would be strange law that a person would not have a First Amendment right to use information that is available to everyone” ("Fantasy Sports Win Right to Player Names, Statistics).

In summary, the legality of fantasy sport leagues have been questioned throughout the past decades, with various lawsuits, and arguments between companies and players associations stemming from these questions. However, as seen by the results of these lawsuits, and other rulings, Fantasy sport leagues are in fact legal when considering the online gambling, copyright, and property laws in place today.

Conclusion

Currently there seems to be no serious ethical violations by sport and sport media in their endorsement of fantasy leagues. The average fantasy league player has avoided the pitfalls of gambling by exercising ‘responsible gaming’ and by doing so has reinforced the decision by governments and laws that state that fantasy leagues are not a form of gambling. Fantasy league providers are in a profitable growing industry with little specialized regulation. Yet as the fantasy league industry continues to grow we must consider the direction it is headed. With powerful corporate involvement in the mix will prize money continue to grow at the rate it has over the last decade, and how will this affect the industry? If marketing for fantasy leagues focus heavily on prize money as its selling point how will this change society’s perception of what fantasy sports are and how they should be treated or controlled? The success of fantasy leagues today is dependent on technology and the internet. Its future may yet prove to be an important case study regarding the profitable ventures of sport and media in under-regulated internet industries.

References

  • Banks, Brian. “He Shoots, He Scores.” Canadian Business 75:8 (April 29, 2002), 77 – 79.
  • Berentson, Ben. “Steinbrenner Wannabes.” Forbes (September 11, 2000), P38.
  • Bernhard, Bo J. and Eade, Vincent H. “Gambling in a Fantasy World: An Exploratory Study of Rotisserie Baseball Games.” UNLV Gaming Research & Review 9:1 (2005), 29 – 43.
  • Bolitio, Z. (2004). When Fantasy meets the courtroom: An examination of the intellectual property issues surrounding the burgeoning fantasy sports industry. Ohio State Law Journal: 67 pp: 911-960.
  • Delany, Kevin J. and Kesmodel, David. “Fantasy Sites Fumble the Ball for Fans on the Web.” Wall Street Journal (December 23, 2005), B1.
  • Fatsis, Stefan. “Entertainment + Technology (A Special Report): Web Sights --- Getting in the Game: Sports in Cyberspace is Seen as a Sure Thing; And Nobody Wants to be Left Behind.” Wall Street Journal (March 28, 1996), R6.
  • Grady, John. “Fantasy Stats Case Tests Limits of Intellectual Property Protection in the Digital Age.” Sports Marketing Quarterly 16:4 (December 2007), 230 – 233.
  • Hammer R.D., (2001). Does Internet Gambling Strengthen the US Economy? Don’t Bet on It. Federal Communications Law Journal 54
  • Kang, Stephanie. “Football (A Special Report); Is it Real…or is it Fantasy football? These Days its Hard to Know the Answer.” Wall Street Journal (August 29, 2005), R9.
  • Klaassen, Abbey. "Thats Real Money - $1.5B - Pouring into Made Up Leagues." Advertising Age 77:32 (August 7, 2006), 4 - 6.
  • Mallozzi, Vincent, M. “In Fantasy Sports, It Helps Being a Rocket Scientist.” New York Times (April 15, 2007), 8 -10.
  • Smith G.J., (1992). Sucker Bet or a sure thing: A critical analysis of sports lotteries. Journal of Gambling Studies 8(4): pp – 331-349.
  • Tedeschi, Bob. “Advertisers Discover the Value of Young Men with Time and Money to Spend on Fantasy Sports on the Web.” New York Times (August 23, 2004), C7.
  • Tedeschi, Bob. “In the World of Internet Sites That Cost Money, Fantasy Sports Games Have Found Eager Players.” New York Times (March 3, 2003), C3.
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