How fantasy sports changed the NFL

Can daily fantasy football sites score financial touchdown?
Can daily fantasy football sites score financial touchdown?

A multi-billion dollar sport kicks off this week that fans have been eagerly awaiting for months

It involves an oblong ball, large players crashing into each other and it dominates the airwaves and the Internet.

Yup, it's the return of fantasy football.

Pro football was the nation's most popular sport -- and the highest-grossing -- long before there was a fantasy version. But it wouldn't be nearly as popular or financially successful without it.

The reason: Fantasy fans put together a hypothetical team of real players from teams across the country, and that's changed the way people follow the sport.

It used to be that NFL fans mostly paid attention to local games, tuning into big, nationally broadcast games now and then. Now every game -- even those involving last place teams thousands of miles away -- can be crucial to a fans' fantasy team. The upshot: people are watching a lot more football, making those out-of-town games more valuable to the league than ever.

A year ago the league renewed its exclusive contract with DirecTV to show those out-of-market games, for an average of $1.5 billion a year. That's $500 million a year more than the previous contract.

The league also started NFL RedZone, a premium cable channel with highlights and up-to-the-minute fantasy stats.

Stadiums now list fantasy stats of other games on their scoreboards so fans can follow along. And teams are upgrading wireless and wifi coverage in stadiums to help fans stay up-to-the-minute.

Related: NFL Kickoff pumps up big ratings for NBC

But it's not just the league raking in more money thanks to fantasy games. The fantasy companies themselves are also big winners.

Disney's (DIS) EPSN, Yahoo (YHOO) and CBS (CBS) are all big players in what is now a $1.5 billion industry, according to an estimate from research firm IBISWorld.

Upstarts DraftKings and FanDual are right behind them. FanDuel started in 2009, DraftKings in 2012. They've each recently raised about $300 million in financing, which they're using to blanket stadiums with ads. Between them, they have sponsorship deals with 28 of the 32 NFL teams, worth an estimated $6 million to $7 million to the teams, according to research firm IEG.

The NFL's popularity by the numbers
The NFL's popularity by the numbers

"These are entities (DraftKings and FanDuel) that didn't exist a few years ago now have multi-billion dollar valuations," said sports marketing consultant Marc Ganis. "Fantasy has been a major asset to the league and a meaningful driver of fan interest."

Both DraftKings and FanDuel have opened lounges in a number of stadiums where fans can watch other games while watching their own games live.

Fantasy sports aren't limited to football -- the concept actually began with baseball in 1979. But football accounts for about 36% of the estimated 40 million or so fantasy games that people play every year, according IBISWorld. That's twice the share of any other sport.

Related: NFL revenue: Here comes another record season

The popularity of fantasy sports is driven in large part by the huge prize money involved. DraftKings expects to pay out close to $2 billion in prizes this year, and some fantasy football games pay out as much as $10 million a week.

Fantasy sports come close to the line of sports gambling, which is illegal in all states except for Nevada.

But federal law has deemed that fantasy sports are game of skill which is therefore totally legal.

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