Fantasy sports goes big time, with potential pitfalls

Rod Beard
The Detroit News

Detroit — Brandon McAfee thought he hit the jackpot.

In a fantasy baseball pool with thousands of entrants, McAfee put together a team that scored the most points and was in line to win $3,500 from a $1 entry.

There was a catch, though: McAfee had entered a double-down pool, and the scores needed to be totaled for two days instead of one.

It turned out to be a critical lesson for McAfee, a producer for the "Drew and Marc Show" on WMGC: Know all the rules.

"The only fantasy games I was used to were the (traditional) ones," said McAfee, 31. "When Fan Duel (became a sponsor for WMGC), I got a chance to dive in, especially for baseball."

Daily fantasy sports sites such as FanDuel and DraftKings are exploding in popularity and looking to grab their share of about 57 million — and growing — fantasy players. Daily games offer more flexibility, less commitment and more chances to win than traditional season-long leagues.

But there are pitfalls.

While traditional seasonal leagues require players to have a draft before the season and keep most of the same players the entire year, daily leagues allow owners to pick teams each day based off a salary cap. The owner whose players total the most points wins the top prize. Other pools are structured so prizes are spread around.

Fans also can enter different pools, so the chance to win — or lose — can build quickly. Although some pools are free to enter, entry fees are as low as $1 and escalate into the thousands with chances to win millions.

'Bucket of money'

Fantasy sports, once relegated to small hordes of stats fanatics and diehards, is becoming a social phenomenon. But unlike office pools and groups of friends playing for small stakes, daily fantasy has turned into a billion-dollar venture.

FanDuel, founded in 2009, gets about 10 percent of each of the thousands of pools daily, generating about $57 million in annual revenue in 2014. DraftKings wasn't far behind, with $40 million.

With each business valued at almost $1 billion, daily fantasy is scoring points not only with casual fans, but big business as well, backed by large corporations such as Comcast, NBC and Yahoo.

"Fantasy sports have proven to be highly lucrative and people want to invest because it's a form of entertainment," said Andrew Nusca, a senior editor at Fortune Magazine. "With it a being a new bucket of money, that's why you're seeing so much investment and growth."

Even pro leagues are getting involved, with the NBA owning an equity stake in FanDuel and Major League Baseball backing DraftKings. The NFL doesn't have an agreement with either company, but 16 teams have their own deals with FanDuel.

FanDuel has partnerships with 13 NBA teams, including the Pistons, who sold exclusive naming rights to the Club 300 at The Palace. Dennis Mannion, president and CEO of Palace Sports and Entertainment, sees value in promoting the Pistons through daily fantasy ventures.

"In football, it brought so much more awareness to the players in the league because a lot of them go unnoticed," Mannion said. "In basketball, it's a breakthrough because it gives us a chance to expose all the athletic players that exist in the league because so much of the reward points are based on scoring and rebounds and assists."

The effort is to boost the fan experience. And for many, having the opportunity to watch the game in person is enhanced by having a financial stake involved.

"Arenas are trying to figure out how to exist when TV is so good and TV is trying to figure out how to exist when Internet is growing," Nusca said. "You're seeing all these things start to knit together. The arena experience, when done right, is becoming more of an experience and they're going to emphasize what makes an in-person experience different than the TV experience."

During games next season, the Pistons will have employees roaming the arena to introduce the enhanced features to fans.

That mixing of opportunity to gamble at sports venues, however, is a touchy subject for some fans, many of whom would like to keep the worlds separate.

"If you bring it into stadiums, that seems to run quite contradictory to the messages you're getting, especially when you look at Pete Rose and the controversy he's facing," said Mike Knoll, 40, of London, Ontario. "I don't think there's any way gambling should be inside sports arenas."

Tigers pitcher David Price likens having fantasy sports in arenas to the illegal person-to-person wagers that still dwarf the money involved in fantasy.

"People are putting thousands of dollars on every game; I don't see any difference in that," Price said. "Stadiums have DraftKings on the billboards. You see that everywhere; it doesn't affect me."

Landing in rehab

Although some entry fees can be minimal, daily fantasy still is gambling, and athletes are not allowed to play their particular sport.

Adam Silver, shaking hands with Stanley Johnson at the NBA draft: “There is an obvious appetite among sports fans for a safe and legal way to wager on professional sporting events.”

NBA commissioner Adam Silver foreshadowed an interest in allowing legalized sports betting in an op-ed piece in the New York Times last year.

"There is an obvious appetite among sports fans for a safe and legal way to wager on professional sporting events," Silver wrote. "But I believe that sports betting should be brought out of the underground and into the sunlight where it can be appropriately monitored and regulated."

During the online poker boom of the 2000s, pro players dominated the landscape. But as it gained popularity, more amateur players joined the fray, providing ample targets for the pros to profit. With more novices joining daily fantasy leagues, pro players who rely on advanced statistics and hours of research, are able to do well and take most of the prize money.

"More than 50 percent of the money in play comes from between five and 10 percent of the people," said Paul Bessire, who holds a Master's degree in quantitative analysis and runs "That's similar to the poker boom in that the people who have a clue of what they're doing are cleaning up on those that are inexperienced and think they might have an edge — but clearly don't ultimately have an edge, once they join the top groups."

The potential also exists for smaller wagers to get out of hand, with people grasping at chances to win bigger pots activating issues with problem gambling.

"We are seeing now people who come in for treatment who report that their gambling problems are either exacerbated by or exclusively caused by their daily fantasy sports play," said Keith Whyte, executive director of the National Council on Problem Gambling. "I know of one young guy in his early 20s who previously had a sports betting problem and after he sought treatment, got into fantasy and daily fantasy.

"He lost well over five figures in a space of several months before seeking treatment again."

For McAfee, stories like that are cautionary tales. While McAfee mainly uses the show's FanDuel account to enter bigger pools, the main objective is to interact with listeners.

"I put $25 in my personal (FanDuel) account a couple months ago and it's lasted me over two months," said McAfee, who says he doesn't wager more than $5 per game. "Once I lose a certain amount, I don't want to go back because I fear losing all my money."