Analysts: Fantasy Sports Drove Q3 Ad Gains

As FanDuel and DraftKings continue to try to convince New York’s Attorney General they are skill-based entertainment instead of games of chance, the loss of their substantial ad dollars could hurt cable and broadcast networks that have come to rely on the daily fantasy sports sites for ad revenue.

New York State attorney general Eric Schneiderman sought an injunction against both FanDuel and DraftKings from operating in the state, claiming the daily fantasy sports companies are basically illegal gambling sites. Both FanDuel and DraftKings have argued that they are skill-based entertainment, which would exempt them from regulation.

While the sites take in millions of dollars from fans that pick players for cash and can win money based on their game performance, TV networks have been a major beneficiary of the intense ad campaigns of both FanDuel and DraftKings. The ads, touting six-figure pay days won by some players, have peppered cable and broadcast networks for months.

According to Sanford Bernstein media analyst Todd Juenger, daily fantasy sports made up about 50% of cable networks advertising gains in the third quarter, or $134 million out of a total gain of $227 million.

In his research report, Juenger said the fantasy football category spent more ad dollars on sports networks than beer companies. That could mean that their potential ban would put a serious dent in ad revenue.

“Daily fantasy sports sites may not even exist next year. Even if they do, the probability that they grow, again, at these rates is very low (impossible?),” Juenger wrote.

Sports-centric networks like CBS, Disney and Fox received the most form the category, Juenger wrote.

In a separate note to clients, MoffettNathanson media analyst Michael Nathanson, using data from Kantar Media, wrote that Fox reaped $24 million in fantasy sports ads in September alone, followed by CBS ($21.5 million), NBC ($21.3 million) and ESPN ($17.9 million).  Nathanson noted that non-sports networks also received a fair amount of fantasy football ads, with DFS investing over $1 million in advertising on each of 13 broadcast and cable networks during the month.

Nathanson noted that DFS ads accounted for between 4% and 7% of total ads at networks like ESPN2, Fox Sports 1 and Fox. According to Nathanson, Draft Kings spent about $65 million in ads in September with FanDuel shelling out $53 million for a combined $118 million or 3% of total ad revenue.

The presence of DFS in expensive NFL ad time slots helped tighten the scatter market in September and driving up prices, Nathanson wrote. While not as large as other ad sectors like autos, films or health care, the analyst said that the new category was incremental to the market and was a factor in the revenue increases in the period. He added that looking forward, networks should be “concerned” if the government decides that DFS is essentially glorified sports betting.

“Killing the golden goose of DFS would definitely be against the interest of the NFL’s network partners,” Nathanson wrote.