June, 2009

Rewarded Consumers Are Happy Consumers

Saturday, June 20th, 2009

Immediately following the Friday morning presentation from the founder and CEO of Bunchball, Athlon’s Nathan Karp tweeted, “Great presentation on user behaviors and psychology by Rajat Paharia.”

Reminiscent of those old Micromachines commercials, Paharia (after admitting that he tends to speak quickly) tore through a very interesting session on engaging users — obviously a topic of utmost importance to fantasy sports companies.

His overarching message was that sites need to leverage human desires to foster connectivity with users. By catering to what he termed “irrational but predictable reactions,” anyone looking to grow an online audience can build customer loyalty and engagement.

Paharia’s primary examples included Dunder Mifflin Infinity, an NBC online game platform that accompanies The Office, and teen-targeted sites Espin.com and Takkle.com. What each does is present some sort of virtual rewards system — whether it be Dunder’s Shrutebucks, Espin’s bottlecaps or Takkle’s trophies for levels of interaction.

Although none of these online goods/rewards has any real value, users love to earn them and boast their “earnings” as symbols of status or identity within their site communities. Systems of points and rewards and things like forum hierarchies certainly exist already throughout the fantasy community of sites, but there is always room for more.

Paharia also pointed out that delivering such virtual rewards in smaller, more frequent doses is ultimately most effective. Traffic will also remain stronger if the reward cycles stay variable rather than fixed, he said.


Panel Speaks to New Fantasy Businesses

Saturday, June 20th, 2009

Much of the crowd at each Fantasy Sports Trade Association conference is made up of industry veterans — people who have been attending for years and have made or are making their way in the business.

When Advanced Sports Media founder Ted Kasten asked how many out in the audience were in the first two years of starting up a company, roughly half of the 60 or so people in the room raised their hands. That’s what makes a panel such as Thursday afternoon’s “Fantasy Sports Business 101″ worthwhile.

Kasten was particularly candid about his experiences through the first five years plus of ASM, from discussing the benefits (cost) and downside (just about everything else) of hiring an Indian development team in the early stages. Although he preached thrift to anyone building a new business, he cautioned against looking solely at hourly rates — saying that more cost per hour doesn’t necessarily mean greater cost overall.

Lawyer Rishi Nangia of Winson & Strawn opened things — following an intro by Geoff Stein of Mock Draft Central — by running through the various ways of setting up your company and some good and bad features of each. Many single-person startups might favor a sole proprietorship and its dearth of necessary legal paperwork, but it’s an area that new companies need to consider carefully.

Some key reasons to do so came from panelist and accountant Kipp Imel of Professional Practice Consultants. Imel pointed out that incorporating in some way can bring with it legal protection, audit protection — he said sole proprietorships are seven times more likely to be audited by the IRS — and sheer legitimization.

No matter what route a company chooses, though, Imel cautioned to keep focus on debt management, which he called “the No. 1 killer of any business.”

Tai Ward of Fantasy Coverage spoke to the tech side and warned — as Imel did about hiring an accountant — that one needs to gather as much info as possible on potential design or development companies. Seek out recommendations, ask for samples and make sure that anyone you might choose to work with understands and fits within what you’re trying to do.

The fantasy sports industry is awash in startups and small businesses. Besides presenting a good product, those that make it will be those who are smart about the choices they make when getting going.


Growth in Fantasy Consumers Plateaued in Past Year

Friday, June 19th, 2009

After years of rapid growth in its consumer base, the fantasy sports industry saw things plateau a bit in the past year, according to two sets of research presented by Ipsos’ Aaron Amic and Dr. Kim Beason at the FSTA conference this week.

Over the previous five years, fantasy consumers were increasing at an average rate of about 23 percent. In the past year, though, Ipsos found that about the same number of people reported playing fantasy sports in the United States and Canada as had in the year prior.

It stands to reason that the big growth stats from the early 2000s wouldn’t continue forever, but why did the upward trend go flat at this point?

Is it money? No. Even in the toughest economic times that many of us have every seen, most of the respondents to the Ipsos suvery who had never played fantasy or quit said their decision was based on a mere lack of interest. On top of that, it’s always been true that many more fantasy players go for free leagues than pay games.

Is the audience maturing without bringing in new young people? It doesn’t seem that way. According to Ipsos, the 12-17 and 18-34 age ranges presented the largest saturation of fantasy players (i.e., a larger percentage within each of those groups played fantasy in the past year than the numbers for other ranges sampled).

Is it a matter of us all hitting a period that just required folks to turn their attention elsewhere? Maybe. The time commitment was another reason cited by those who gave up or avoided fantasy. Even if tightening budgets didn’t keep them away, perhaps sheer concern for their jobs and bank accounts led more people to decide they couldn’t afford to join a league.

Was it just a strange year? Perhaps. One year hardly constitutes a trend, and things could look significantly different in 2010.

Over the coming days and weeks, FSB.com will check in with folks around the industry to see what they think of the growth plateau and whether fantasy companies need to change anything to counter it. We’ll also get more into the material presented in this year’s editions of the annual Fantasy Sports Trade Association studies.


Fantasy Just Might be Recession-Resistant

Thursday, June 18th, 2009

Nothing 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.