2024 Business Of Fantasy Sports Series: Education & Politics | How It Started | Mainstream Explosion | CBC v MLBAM | UIGEA | The Rise of DFS | The Fall of DFS | The Repeal of PASPA | Sports Betting Crossover | Fantasy Sports Feeds Sports Betting

 

It was a sunny June day in White Plains, New York, in 1991.  I read the National Sports Daily as I did every day since it began publishing 18 months earlier.  It was the most complete daily sports magazine that I had ever known.  The front page just read: “We had a ball.”  It was the final edition of my favorite daily stats and sports fix. The National Sports Daily would be missed.  

That summer was important in my programming life at PRODIGY.  I had been added to the team that would write a fantasy baseball game called Baseball Manager.  PRODIGY hired a third-party development team to do the bulk of the front-end programming work on the project.  

My part of it was to write the transaction processor.  This was necessary because to access information via computer, you needed a modem connected to a phone line that would dial in and connect to deliver your requests. The highest-speed modems at that time could transfer 56,000 bits per second.  I have 1000 MB or 1,000,000,000 bits per second, which is about 18,000 times faster now.  Baseball Manager had 100s of possible transactions for users.  Each would take very little time to write the code but months to test because of the speed at which we could test each one.

Baseball Manager went live on the PRODIGY Service in February 1992.  For the next three years, I made most of the software updates to make it better.  I LOVED IT!

As we look at the explosion into the mainstream, we must divide this into two periods: pre-Internet and post-Internet.

PRE-INTERNET (1984-1995)

In the era before the Internet, but after Glen Waggoner published The Official Rules of Rotisserie Baseball in 1984, creating the reports necessary to play and decide who wins was an arduous task. The solution was stats services and software for running fantasy sports leagues, especially Rotisserie Baseball leagues.  

Stat Services

Many existed as early as 1985 to handle local leagues. Most of the companies were regional, and the fees were expensive by today’s standards. I remember only a few of the names: Heath, Northshore, USA Stats, and, of course, Allstar Stats.  

In 1989, I partnered with my boss at the time and good friend today, Harold Topper, to be in the PRODIGY Rotisserie League (ProdRot).  It was league number 2 on Allstar Stats, which was created by Rich Pike, a PRODIGY softball buddy of mine, and Mike Oliveto, a high school buddy of Rich’s.  They both played in the league, so I got to know them through fantasy baseball.  In 2001, I left CBS Sports and partnered with Allstar Stats.  They both became great friends and established my career.

Allstar Stats and other services would do all the input of teams, management of transactions through call-ins from commissioners or an IVR system that allowed owners to dial in and, using a touchtone phone, enter their weekly bids and the delivery of weekly reports by mail or fax.  I remember we got our faxes on Monday mornings, and we had a weekly lunch at the dinner to do live bidding for our changes.  Summer vacations be damned!

Newspaper Fantasy Games & Early Online Fantasy Football

Many fantasy players started playing in National contests that were administered through daily and weekly newspapers like USA Today and even with some regional newspapers.  You select players against a salary cap or by selecting one player in similar talent groups of less than ten players.  Then, contestants get reports weekly in the U.S. Mail or by fax.  The key to these games was to create constant interest as all of their money was made from first selecting your team and weekly transactions. Some other games were more straightforward, but these salary-cap games were the most popular.  So let’s look at a couple.

Massachusetts-based Wall Street Games was Founded By Tim Demello in 1988 and later renamed Replica Corporation. Replica created interactive investment and fantasy sports games. Their lineup included games based on MLB, NBA, and NFL using a salary cap, with player salaries based on in-game performances and market demand. Replica purchased and printed the player salaries in USA Today, and participants would make their trades by calling an 800 number and speaking with one of their 60 live ‘brokers’ on the appropriate trading day of the week. Newsletters would arrive in the mail every other week with rankings and interviews with weekly winners. My good friend and fellow digital sports pioneer Ed Bunnell led product marketing and management at Replica before joining me at Sportsline USA (more on that in a bit).

CBC Distribution & Marketing (CDM) started in the St. Louis area in 1992.  CBC stands for Carol & Bryan Matthews, who founded it with the last C, the Godfather of Fantasy Sports, Charlie Weigert.  After the strike season in 1994, CDM Sports was able to survive and thrive.  They landed some of the best national magazine deals and local newspaper deals to jettison them to the front of the class.  Their long relationship with The Sporting News solidified them in the fantasy sports space.

Grandstand Sports launched the first fantasy football online leagues through Q-Link in 1985 but got more powerful with strong distribution from AOL in the early 90s.  It was a solid platform, but always kept out of the mainstream sports areas by AOL or they could have led this category.  

In the early 90s, the telecom companies were upset that AOL, CompuServe & PRODIGY were owning users and making a lot of money charging users per hour while using their phone lines to make FREE local calls.  You see, PRODIGY & AOL placed computers country-wide so that most people needed only a local call to get news, weather, sports, make stock trades, buy groceries, shop online and more.  

This 1994 article in the LA Times explained the moves AT&T was starting to make.  Online services companies created an $800m market for online services.  In 1993, AT&T, with David Fincher (yes, director of Gone Girl) created an ad series of what was coming with their new devices.  To open more content and options for their newfangled wireless devices, AT&T created a coalition with MCI and Sprint (two popular wireless operators) that would donate $100m to the National Science Foundation (NSF) to press it to commercial use while continuing to support government and academia.  

Here is a brief history of the early Internet from the NSF for those looking for more.

POST INTERNET 

So, in April 1995, the Internet was freed, and the NSFNET backbone was shut down, allowing anyone to create nodes on the distributed network. WOW. In May 1995, I left my cushy IBM job at PRODIGY to join SportsLine USA. There were 12 people there, seven more than when I interviewed there in February.

Many companies immediately began to run fantasy sports sites.  Sandbox.com was built to serve over 1.6m fantasy football players and just missed an IPO when the Internet bubble popped in 2000.  For those who do not know what that means, there was a groundswell of Internet investing because of the advertising that was being funneled to digital channels.  Many major brands paused their spending and killed a lot of companies that banked everything on advertising revenues.  

Small World was getting a ton of traction with its fantasy products.  They were purchased by The Sporting News as the bubble began to pop.  The Sporting News online fantasy division thrived for a number of years.

STARWAVE & ESPN.COM

It pains me to put this section before discussing SportsLine USA, but Starwave was leading the way in digital technology and using it to start many entities that hit the Internet first.  Founded by Paul Allen (Microsoft founder), Patrick Naughton (JAVA creator), and Mike Slade, it was a great technology company.  They launched and powered ESPN on PRODIGY in 1992.  They were first with a full-featured Internet sports website with many games, contests and other things that could be considered fantasy sports in early 1995.  Their official launch of fantasy football in 1996 broke strong ground.  Their steady push later with the invention of three-play, and most importantly understanding integrating talent directly into ESPN broadcasts was brilliant.  All other media companies only used bottom thirds and separate sections that were only written words, rankings, and tools for the most part.  ESPN set the bar.

SPORTSLINE USA

When SportsLine USA started in 1995, it was exciting to me that they were attacking the market of sports bettors. We broke down the sports fan market into six fan types: casual, team, fantasy, gambler, historian, and collector. We started with the gambler, who was estimated to be 6% of adult Americans at the time.

In 1995, we delivered a series of contests targeted at the sports bettor.  The contests were great, but the adage “if you build it, they will come” did not apply.  We gave away $375,000 in prizes to about 400 total players.  

The next year, we pivoted, an important lesson from me in my 20s.  We delivered The Triple Play package for baseball, which was a league manager, salary cap game, and The Advance Scout, which was a draft guide and in-season content and tools package.  It was wildly popular, and we were on our way.  We rolled out similar packages for the NFL, NHL, and NBA as we came around the calendar while ramping staff superfast.  

In 1997, SportsLine expanded its relationship with CBS, leagues, players associations, and major star athletes and went public.  I remember we spoke a lot about fantasy sports as a social engagement tool.  It was the first social network. Engagement drove advertising revenue and created a value proposition that people would pay for.

In 1998, we decided to combine forces with the NY-based Commissioner.com for our fantasy products so that the team in Florida could focus on the core parts of the business with Ed Bunnell running operations.  CBSSports.com would become a powerhouse in fantasy sports, office pool management, and contests for all types of fans on this new platform with its transformative leaders.

Side note:  The competition between Starwave and SportsLine was fierce.  Each day we scrubbed the signups and marked people that we thought were from Starwave.  When they would visit the site, it would be broken. They thought we sucked but we could innovate without worrying about idea stealing.

YAHOO!

Yahoo was quickly becoming the go-to search engine.  The Internet world was super competitive, and I won’t bore you with the drama and some companies and terms you have never heard of.  Yahoo! made the decision to produce a league manager and fantasy games for free to solidify surfers to be with them forever.  It worked.  Millions of fantasy players swarmed to the platform to start their fantasy life since online commissioner products like SportsLine’s cost money, and stats services cost even more.

This is a massive moment for the popularization of fantasy sports, but money talks which created some other issues for the young industry to deal with.

NFL.COM FANTASY POWERED BY CBS SPORTSLINE

The NFL had long been super worried about sports betting being associated with their league. In 2000, the executive team at CBS SportsLine believed that we could place our software and suite of fantasy sports products on the official sites in a white label form, plus owning “The Official Fantasy Provider of the NFL” was worth a lot to press the stock price of a public company.  CBS SportsLine paid high seven figures or possibly into the eight figures to the NFL for those rights.  

The deal made a lot of money for the partnership.  The NFL started their division right after the deal expired.  The marketing requirements in those huge deals are what was able to make mainstream sports fans no longer think of fantasy sports as gambling.  FANTASY SPORTS WAS MAINSTREAM.  

SPORTS BETTING & POKER WAS FUNDING ALL MEDIA COMPANIES

It seems that everyone has forgotten that the excitement over operators spending big money to buy media and partnerships existed starting in 1998 or so.  Offshore sportsbooks like BoDog & MVP Sportsbook were pumping money into the fantasy sports industry to control the fantasy sports players who were believed to be interested in sports betting.  MVP Sportsbook sponsored multiple FSTA conferences in the early 2000s when they had wiped the gambling label.

Poker was maybe more important. Party Poker funded many companies with advertising and the quarter line (25% of losses for players delivered to them). At Rotoworld, we used to play Party Poker in tournaments with Rotoworld users. We would watch our fantasy baseball teams, and during the summer of 2003, we thought about Sit & Go fantasy baseball. Draft your team and then play poker while you watch your team for the night. The idea of SnapDraft was born.

The amount of money flooding into the now mainstream hobby can be linked to UIGEA's work. It made it clear that the federal government wanted to stop the nefarious activity of offshore sportsbooks and pro poker players taking advantage of less skilled players. The federal government started by prosecuting operators offshore, but to stop their flow, they started attacking the media companies.

FINES FOR AIDING & ABETTING 

Starting around 2000, the federal government began prosecuting offshore books.  The prosecutors' inability to find all the illegal books in the U.S. or stop consumers from being fooled by offshores led to 15+ years of prosecutions.   

Prosecutions expanded to media companies by around 2004 or 2005. All the major media companies immediately stopped promoting the offshore books when The Sporting News paid a fine of $7.2M for aiding and abetting offshore sites.  The Sporting News was a founder of the FSGA, so this shook us to our core. In 2009, it continued when Google, Microsoft, and Yahoo! plea bargained into a $31.5M Settlement.  

Welp, that was way too long, but that is how fantasy sports became mainstream.  

Rick Wolf is a pioneer in the fantasy sports industry.  Wolf is a founding board member of the Fantasy Sports & Gaming Association. Wolf is also the Founder & President of Full Moon Sports who since 2001 has been providing solutions for sports media companies.  Through Full Moon he has consulted for CBS Sports, Rotoworld, NBC Sports and Fantasy Alarm. Full Moon is currently working with companies in the sports space including PrizePicks who is one of the leaders in skill based sports games.