Sports

Sports and the Law: Could Yahoo Sale Kill Free Fantasy Sports?

Sports and the Law Above the Law blog.jpgReading documents as part of the Hart-Scott-Rodino Second Request Process is often as boring as watching paint dry while listening to the soundtrack from Waterworld: the Musical. However, for junior associates tasked with reviewing HSR documents, there may finally be a Second Request worthy of a second chance—one involving fantasy sports.
On Friday, February 1, Microsoft Corporation made a $44.6 billion hostile takeover offer to Yahoo Inc., which according to the American Antitrust Institute (“AAI”), “would effectively reduce the number of significant competitors from three to two in the paid search advertising market.” As a result, the proposed merger would likely lead to careful antitrust review.
If Microsoft’s proposed takeover bid fails, according to a February 4 article in the New York Times, Yahoo Inc. might then consider selling its company in piecemeal, with Yahoo Sports “sold to a company like ESPN.” This possibility would produce far less antitrust concern in advertising markets. However, it might still lead to competitive problems in the rapidly expanding markets for fantasy gaming.
Based on a down-and-dirty review of the fantasy sports marketplace, if either ESPN or CBS Sports were to attempt to purchase Yahoo Sports, the number of traditional websites that host fantasy sports games would fall from three to two—a general red flag in terms of competition law. In addition, if the market’s low price provider, Yahoo, were gobbled up by a website more likely to charge customer fees, another red flag would be triggered.
Read more, after the jump.


The market for fantasy sports is bigger than one may think. According to a recent Fantasy Sports Association study, over 12 million Americans compete in fantasy sports games each year. Those that play fantasy sports devote on average more than five hours per week to monitoring their fantasy teams. Many fantasy sports players even hire outside parties, such as one of my businesses — www.SportsJudge.com — to help resolve internal gaming disputes.
Web hosts play the most important role in fantasy sports competitions. Web hosts store and process player data, as well as transform player data into daily team statistics. Web hosts also provide a forum for fantasy sports contestants to conduct league drafts, process lineup changes, and “trash talk” with their opponents. Most fantasy sports contestants log on to their web host’s site several times per week to change their lineup and review their team’s performance. Some especially hardcore fantasy sports players even log onto their team page multiple times per day.
Currently, nearly all fantasy sports contestants use one of the three well-established web hosts—Yahoo Sports, CBS Sports (formerly Sportsline.com), or ESPN. Yahoo Sports and CBS Sports are generally perceived as the market leaders in terms of customer volume. ESPN is not far behind, and may actually lead in total revenue according to one informal estimate.
In terms of pricing strategy, each of these three web hosts implements a different approach. Yahoo Sports has always offered free hosting as a way to attract more viewers to their revenue-generating advertisements. CBS Sports, by contrast, charges a small fee, which is now up to $129.95 per league, or approximately $13 per customer. ESPN, meanwhile, has varied its pricing strategy over the years. Initially ESPN used its strong brand recognition to justify the industry’s highest fees of $25 per customer. However, more recently, ESPN has attempted to compete on price point more directly against Yahoo.
Based on these three disparate pricing strategies, Yahoo Sports plays a very important role in limiting price increases in the fantasy-sports hosting market. Presumably, if Yahoo were to leave the market, not only might free fantasy hosting disappear, but ESPN and CBS Sports might feel less constrained against increasing their own customer fees.
At this moment, it is too soon to predict what strategy Yahoo will adopt with respect to potentially selling some, if not all, of its businesses. But as long as the possibility of either ESPN or CBS Sports acquiring Yahoo Sports remains viable, it is worth careful attention.
No doubt, either an ESPN or CBS Sports acquisition of Yahoo Sports would be a huge disappointment to fantasy sports contestants, as it would call into doubt the future of free fantasy gaming. However, if it is any consolation (and probably it is not), just imagine the fun that junior associates will have reading documents about fantasy sports.
Google Works to Torpedo Microsoft Bid for Yahoo [New York Times]
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Marc Edelman is an attorney, business consultant, published author and professor, whose focus is on the fields of sports business and law. You can read his full bio by clicking here, and you can reach him by email by clicking here.

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34 Responses to “Sports and the Law: Could Yahoo Sale Kill Free Fantasy Sports?”

  1. Anonymous says:

    I’m in 100% agreement. Yahoo helped bring down the price of Sportsline at the outset, and when ESPN entered the market later, it realized that it couldn’t charge as much as it wanted. Yahoo could easily charge a nominal fee ($10 per user) and still retain much of its business. In my experience, the style and structure of the site is superior to that of Sportsline or ESPN, and Yahoo has much better content. Fantasy sports enthusiasts survived a big challenge in the CBC v. MLBAM case (505 F.3d 818 (8th Cir. 2007)) — can you imagine if the sports leagues took control of fantasy sports and what they would charge? — but if Yahoo ends up swallowed up by a competitor, look for ESPN and CBS Sportsline to breath a sigh of relief and hike up their prices.

  2. Anonymous says:

    I’m in 100% agreement. Yahoo helped bring down the price of Sportsline at the outset, and when ESPN entered the market later, it realized that it couldn’t charge as much as it wanted. Yahoo could easily charge a nominal fee ($10 per user) and still retain much of its business. In my experience, the style and structure of the site is superior to that of Sportsline or ESPN, and Yahoo has much better content. Fantasy sports enthusiasts survived a big challenge in the CBC v. MLBAM case (505 F.3d 818 (8th Cir. 2007)) — can you imagine if the sports leagues took control of fantasy sports and what they would charge? — but if Yahoo ends up swallowed up by a competitor, look for ESPN and CBS Sportsline to breath a sigh of relief and hike up their prices.

  3. Anonymous says:

    dude, for the love of god, change your icon

  4. Anonymous says:

    dude, for the love of god, change your icon

  5. Anonymous says:

    Interesting column – I hadn’t thought about the fantasy sports implications of the MSFT-YHOO bid.

  6. Anonymous says:

    Interesting column – I hadn’t thought about the fantasy sports implications of the MSFT-YHOO bid.

  7. I don't even like chicken says:

    Yahoo Sports should remind the DOJ that this practice is actually called rotisserie for which Boston Market and KFC gross far more revenue.

  8. I don't even like chicken says:

    Yahoo Sports should remind the DOJ that this practice is actually called rotisserie for which Boston Market and KFC gross far more revenue.

  9. Anonymous says:

    Nice plug for sportsjudge.com. But come on… the “Court of Fantasy Baseball, General Division,” “The Court of Fantasy Football, Comissioner Appeals Division…” This is more depressingly delusional than my freshman roommate who dressed up like a wizard and slew dragons on the marching band’s practice field.

  10. Anonymous says:

    Nice plug for sportsjudge.com. But come on… the “Court of Fantasy Baseball, General Division,” “The Court of Fantasy Football, Comissioner Appeals Division…” This is more depressingly delusional than my freshman roommate who dressed up like a wizard and slew dragons on the marching band’s practice field.

  11. Anonymous says:

    Sorry, 8:59, but I have to disagree. I’m in a CBS league and a Yahoo league. Yahoo doesn’t even give you live scoring unless-ta dah!-you pay for it.

  12. Anonymous says:

    Sorry, 8:59, but I have to disagree. I’m in a CBS league and a Yahoo league. Yahoo doesn’t even give you live scoring unless-ta dah!-you pay for it.

  13. Anonymous says:

    I agree with 9:00 AM. I cannot in good conscience read this column when it is adorned with that uninspired clipart.

  14. Anonymous says:

    I agree with 9:00 AM. I cannot in good conscience read this column when it is adorned with that uninspired clipart.

  15. Anon says:

    10:05 is correct. Yahoo isn’t particularly good (what idiot pays for live scoring when they can review the box scores on Yahoo for free?); ESPN is superior and is free. But I doubt MicroSoft’s bid will fail in the first place.

  16. Anon says:

    10:05 is correct. Yahoo isn’t particularly good (what idiot pays for live scoring when they can review the box scores on Yahoo for free?); ESPN is superior and is free. But I doubt MicroSoft’s bid will fail in the first place.

  17. Zeus says:

    I agree with 9AM and 1037AM that the clipart is awful. perhaps this could be the logo:
    http://www.msnbc.com/modules/interactive.aspx?type=ss&launch=22980427,6840160&pg=1

  18. Zeus says:

    I agree with 9AM and 1037AM that the clipart is awful. perhaps this could be the logo:
    http://www.msnbc.com/modules/interactive.aspx?type=ss&launch=22980427,6840160&pg=1

  19. anonymous says:

    I like the interface of Yahoo, and the fact that it’s free is a definite plus.
    That having been said, my NBA fantasy team has been a massive failure, so if MSFT and Yahoo could conclude this affair before the regular season ends and then sell off the fantasy division, I would be much obliged…

  20. anonymous says:

    I like the interface of Yahoo, and the fact that it’s free is a definite plus.
    That having been said, my NBA fantasy team has been a massive failure, so if MSFT and Yahoo could conclude this affair before the regular season ends and then sell off the fantasy division, I would be much obliged…

  21. Anonymous says:

    Oh noes! Yahoo Fantasy Sports FTW. Best interface. I would actually pay more to use it over the bulky CBS Sportsline or ESPN Fantasy versions. Those are terrible.

  22. Anonymous says:

    Oh noes! Yahoo Fantasy Sports FTW. Best interface. I would actually pay more to use it over the bulky CBS Sportsline or ESPN Fantasy versions. Those are terrible.

  23. Chris says:

    I doubt Yahoo leaving would kill free fantasy gaming. There are other sites out there that provide it (Fox, FleaFlicker), and if there is one thing that the internet has shown, it’s that when one free option for entertainment is shut down, they will quickly find another one. (See Napster -> Kazaa -> Bit Torrent)

  24. Chris says:

    I doubt Yahoo leaving would kill free fantasy gaming. There are other sites out there that provide it (Fox, FleaFlicker), and if there is one thing that the internet has shown, it’s that when one free option for entertainment is shut down, they will quickly find another one. (See Napster -> Kazaa -> Bit Torrent)

  25. Anonymous says:

    I doubt Yahoo leaving would kill free fantasy gaming. There are other sites out there that provide it (Fox, FleaFlicker), and if there is one thing that the internet has shown, it’s that when one free option for entertainment is shut down, they will quickly find another one. (See Napster -> Kazaa -> Bit Torrent)

  26. Anonymous says:

    I doubt Yahoo leaving would kill free fantasy gaming. There are other sites out there that provide it (Fox, FleaFlicker), and if there is one thing that the internet has shown, it’s that when one free option for entertainment is shut down, they will quickly find another one. (See Napster -> Kazaa -> Bit Torrent)

  27. Anonymous says:

    Sorry for the double post.

  28. Anonymous says:

    Sorry for the double post.

  29. Anonymous says:

    I’d be willing to bet (since we’re talking about antitrust law here) that Yahoo has a pretty significant market share. I’d be curious to see the HHI numbers…

  30. Anonymous says:

    I’d be willing to bet (since we’re talking about antitrust law here) that Yahoo has a pretty significant market share. I’d be curious to see the HHI numbers…

  31. Bill gates says:

    Are you aware that Yahoo sports activities amounts to about 1% of Yahoo revenues. I know you love sports, but sports is immaterial to this deal.

  32. Bill gates says:

    Are you aware that Yahoo sports activities amounts to about 1% of Yahoo revenues. I know you love sports, but sports is immaterial to this deal.

  33. guest says:

    This article does a good job of not showing the total picture and misrepresenting the facts. The author stats that Yahoo allows for free hosting of its fantasy games while other sites like ESPN and CBS charge fees. This is not an accurate description and is written from a slant that wants the reader to feel sorry for Yahoo.
    The TRUTH is that Yahoo also charges fees. They actually charge fees for services that are FREE in the basic ESPN and CBS leagues. Yes, you heard me right. ESPN and CBS also have free leagues as well. I participate in them every year. The ability to track stats in real time is a free service that is provided in the free leagues as ESPN and CBS. Yahoo? Not so much. You have to pay $20 for it.
    So before everyone starts blasting CBS and ESPN for “charging” their customers, all three of these entities offer FREE and FEE BASED fantasy games. The only difference is that you have pay an additional fee at Yahoo for services that are free everywhere else.
    I for one am glad that Yahoo and their below average fantasy model is going away. Their applets are 6 years old. They should have joined the 21st century before they were bought.

  34. guest says:

    This article does a good job of not showing the total picture and misrepresenting the facts. The author stats that Yahoo allows for free hosting of its fantasy games while other sites like ESPN and CBS charge fees. This is not an accurate description and is written from a slant that wants the reader to feel sorry for Yahoo.
    The TRUTH is that Yahoo also charges fees. They actually charge fees for services that are FREE in the basic ESPN and CBS leagues. Yes, you heard me right. ESPN and CBS also have free leagues as well. I participate in them every year. The ability to track stats in real time is a free service that is provided in the free leagues as ESPN and CBS. Yahoo? Not so much. You have to pay $20 for it.
    So before everyone starts blasting CBS and ESPN for “charging” their customers, all three of these entities offer FREE and FEE BASED fantasy games. The only difference is that you have pay an additional fee at Yahoo for services that are free everywhere else.
    I for one am glad that Yahoo and their below average fantasy model is going away. Their applets are 6 years old. They should have joined the 21st century before they were bought.

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