The Financial Outlook of Fantasy Football
Fantasy Sports is a booming industry. If you’re reading this, you’re one of the almost 60 million people playing fantasy sports. How did fantasy sports, especially fantasy football, explode from a niche topic to mainstream financial powerhouse exceeding $7 billion in annual revenue? What financial impact does fantasy sports have on the economy and your bank account? The Fantasy Sports Trade Association (FSTA) released its latest market research in June at the FSTA Summer Conference showing the details of this $7 billion industry.
Participation in Fantasy Sports
Before digging in too far, we first must look at where we came from. Prior to 1991, fewer than 1 million people were playing fantasy sports. As accessibility to the internet grew in the late-90s, so did fantasy sports. By the time I started playing in 2004 it had grown to 13.5 million people. Another 5 million people joined over the next three years until we saw an explosion of 10 million new players in 2008.
Things were growing steadily through 2007, but the 10 million new users in 2008 correlate very closely to the widespread adoption of smartphones. The iPhone was released on a carrier-limited basis in 2007, while the Blackberry was breaking out of the business-only market and the Android system was being released. After a spike and growth in the internet age, the mobile age created another spike and growth pattern.
The next spike and growth phase of fantasy sports was in 2015. After starting off as a niche product offering in the online poker market, Daily Fantasy Sports (DFS) exploded into the mainstream, growing the participation in fantasy sports by 15.3 million users in 2015 alone. The growth from 41.5 million players in 2014 to 56.8 million in 2015 was the same as the total number of players in 2004.
Who Are All These Players?
Of the expected 59.3 million fantasy players in 2017, the mass majority are in North America. Somewhat surprisingly, almost 10% of fantasy players hail from north of the border in Canada (5.8 million players in 2017). In 2015, 14% of the US population was playing fantasy sports, growing to 21% in 2017. When I started playing in 2004, it was not common to find people outside my league to talk about fantasy football. Now, 1 in 5 people are now playing fantasy sports, 73% of which are playing fantasy football.
Unsurprisingly, fantasy sports participation fits the stereotype it has earned. 2/3rds are college educated males, aged 18-34. While DFS was a major impact in overall fantasy growth in 2015, the demographic contrast in the DFS space is even starker. While the NFL reports that 45% of its fan base is female, registered users on DFS sites are 95% are male, aged 25-35 compared to season-long fantasy sports with 34% female participation.
On a recent show, the Fantasy Footballers told a story about a grandmother who decided to start playing fantasy football after listening to the podcast on a road trip with her grandson. All age demographics are growing, but the fastest growing group is teens, aged 12-17. 34% of the US population aged 12-17 is playing fantasy sports, up from 20% in 2013. This can easily be attributed to access to the internet and mobile devices at an earlier age.
A Booming (Fantasy) Economy
In 2008, the 30 Million fantasy players contributed an estimated $800 million to the economy. Four years later, the fantasy industry was contributing $1.67 billion. the DFS explosion has pushed the impact to an expected $7.22 billion in 2017. Where is all this money going?
League Fees and Draft Parties
70% of players will pay a league entry fee in 2017 and, on average, players over 18 are spending an average of $556 each year on fantasy sports. The current group of fantasy players is still primarily in the 18-34 age range and not afraid to spend that money, with over 50% holding a college degree and an annual household income exceeding $75k.
“57% of season-long players have had a non-draft party league-wide event.”
Another major financial impact is everyone’s favorite day – draft day! 84% of players will participate in at least one draft party. The most popular location is a private residence, but the local and chain bars/restaurants are very popular. Draft day spending obviously includes food and beverages and 79% of leagues will spend money on a draft board or software program. Beyond the actual draft, many leagues are participating in “off-the-field” events, such as league meetings at bars/restaurants, live sporting events, golf outings and group trips, including “destination drafts”.
If you’re going to spend money playing fantasy sports, it would make sense to be well-informed. There is a lot of free content out there, but 65% of season-long players reported spending money on some form of draft prep, be it a magazine, draft guide or online premium package. (If you want to be more informed than 35% of fantasy players, click here to order your Ultimate Draft Kit!) DFS players are even more likely to spend money on premium content, with 76% spending money on paid content. (Take your DFS game to the next level by adding the DFS Pass to your #UDK!)
Investing time and money into playing fantasy sports brings up strong feelings of ownership in your team and players. 73% of fantasy players reported spending money on sports memorabilia related to their favorite team or fantasy sports team. Entirely new businesses are launching strictly focused on fantasy sports: fantasy-focused clothing, mobile apps, and league prize businesses have popped up over the past few years. Matching the memorabilia and pay-to-play aspects of fantasy sports, 73% of players will spend money on a league prize, such as a trophy, championship belt or ring. In addition to league prizes, 68% of leagues will spend money on a punishment or embarrassing prize for the loser in the league. All told, over $1 billion will be spent on “ancillary spending” directly related to fantasy sports.
Through the whole process of researching this article, a few things stuck out to me. The biggest was the three major events that collided to impact industry growth: the Internet in the 90’s, smartphones in the late 2000’s and, most recently, Daily Fantasy Sports. The explosion of growth has taken a niche market into the mainstream, with annual ancillary spending exceeding the value of an NFL franchise.
With that pattern, the question that the FSTA and everyone in the industry wants to answer is: what is the next big game changer to increase participation? Personally, I see a wide-open target audience in the female and younger player demographics. While females represent 45% of the NFL fans, only 34% participate in fantasy sports. Additionally, as sports, especially the NFL, grow globally, the fantasy industry needs to continue to spread the love of the (fantasy) game to these new fans. With growing participation globally, our little niche hobby will continue to thrive, providing us a long future of enjoyment.