Fantasy Just Might be Recession-Resistant
Thursday, June 18th, 2009Nothing is recession-proof, but sports tend to be recession-resistant. That was the key message from Dr. John-Charles Bradbury, economics professor at Kennesaw State University and author of The Baseball Economist.
People are generally spending less money on everything these days, which clearly isn’t a good thing for anyone who tries to sell stuff. With less disposable income around, consumers will naturally cut back on expenditures. Bradbury says that sports are a bit more insulated than other areas when it comes to cutting.
Sports fans are passionate about their teams and thus less willing to trade them in for more spending freedom elsewhere. Within that group of sports fans, fantasy players tend to be even more passionate. Attendees of the Fantasy Sports Trade Association saw in research collected by Ipsos that fantasy players — whether they’re thinking of quitting or continuing to play — don’t consider cost an overly important factor.
Further, some fantasy game providers could be in pretty good position. Bradbury told us that many consumers will seek out cheaper options for their sports dollar as they tighten budgets, rather than stop spending money in the area altogether. Of course, the tightening of belts will make free and lower-cost options more attractive and could negatively impact the higher-cost pay-to-play and league-manager products.
At the same time, all we can do is speculate about the impact on an industry that’s still too new for us to be able to predict. Carmakers, for instance, have been around long enough to have traveled through many recession periods.
“The interesting thing about the fantasy industry is that it’s so new,” Bradbury told us. “We really have no information on the industry.”
Another part of being relatively new, Bradbury pointed out, is that the industry is malleable. Many companies — particularly the smaller sites that are plentiful on the fantasy landscape — have options when plotting their path through a down economy.
Bradbury recommended that fantasy sports companies who might be going through a period of downturn (or even slowed growth) take the opportunity to regroup and spend some time on research and development. For some, perhaps consolidation with other smaller companies could create a stronger business on the other side of the recession.
Overall, though, sports seem to weather economic storms relatively well, according to Bradbury’s presentation. Game attendance tends to level off in the major professional sports through recession periods but have continued to rise afterward. Sports, he added, are a “normal good,” meaning that demand rises and falls with income levels. Fantasy’s wealthier consumer base helps to keep those lows from going too low.