Can a risky deal with DraftKings help MLB reconnect with young fans without selling its soul?

Share

baseball2

In 2013, DraftKings and Major League Baseball struck one of the first-ever partnerships between a fantasy sports company and a major US sports league. And according to an announcement made yesterday — just a few days ahead of Opening Day — the relationship between the two organizations will now run deeper than ever.

Thanks to the new deal, DraftKings is now the exclusive and “official” daily fantasy game of MLB. That’s more than a mere vanity title. In addition to giving DraftKings a larger brand presence as a sponsor of the MLB All-Star Game and postseason, the company will also gain extensive access to MLB video content. For example, official MLB highlight videos will now be available on DraftKings’ site so users won’t always have to turn on the television or go to sites like ESPN.com to watch their fantasy stars in action.

And that’s just the beginning of how DraftKings will leverage this content. Jason Robins, DraftKings co-founder and chief executive, said there are also plans for a feature he calls “Fantasy Player,” which would provide real-time telecasts of game segments as they unfold. Robins likened the product to the NFL’s RedZone channel, which constantly switches between live games to show only the most exciting moments of each. The difference is that “Fantasy Player” will be able to “read” a user’s fantasy team and create a custom channel that pulls content from multiple MLB TV feeds, showing the user’s players in action as games unfold.

“This is like the RedZone experience, but just with your players instead of everybody,” said Robins.

With access to highlights and live game telecasts, along with the increased brand awareness that will come out of the deal, this partnership is a huge win for DraftKings. As icing on the cake, DraftKings users even get the chance to win special ballpark experiences, like throwing out the first pitch at a game. And it all caps off a blockbuster week for the fantasy sports site, which according to the Wall Street Journal is receiving a $ 250 million investment from Disney — ESPN’s parent company — that values the company at $ 900 million. In turn, DraftKings will commit $ 500 million in ad buys on ESPN’s platforms over the next few years.

That’s all good news for DraftKings. But what’s in it for Major League Baseball? To even partner at all with DraftKings, where money is won or lost based on the performance of professional athletes, is a risky move for a league with very strict rules against gambling. This stems from a history that includes the infamous “Black Sox” scandal, where a group of Chicago White Sox players were found to have “thrown” the 1919 World Series, and the controversy surrounding legendary player/coach Pete Rose who was banned from baseball for life after he was found to have bet on his own team’s games.

But fantasy baseball isn’t “gambling” per se. That’s because unlike “games of chance,” like online blackjack and sports book betting — in which people can bet on the the winner of specific games, or outcomes like the total amount of points scored — daily fantasy sports falls under the regulatory umbrella of “games of skill.”

The logic goes that in order to win at fantasy sports a participant must possess more knowledge of each athlete’s abilities and limitations on any given day. Therefore it is the acumen of the participant and not chance that decides the winner in fantasy sports competitions.

In most states, it is legal to wager money on games of skill. Nevertheless, this is still murky water for sports leagues to be wading into, especially Major League Baseball.

But according to Noah Garden, Major League Baseball’s executive vice president of business, the league fully vetted DraftKings during its earlier partnership and hired an outside firm to investigate the issue surrounding games of skill.

“Certainly we’ve taken a tremendous leap with them,” Garden said. “We had a small deal to learn more about the company and how people use the product, and once we got comfortable with that, we’ve taken the next step to do much bigger things.”

“We’ve done our homework,” Garden added, stating that the unnamed outside firm found that DraftKings’ games are “overwhelmingly” games of skill, not chance.

That may be true, but the partnership is still a bit risky. So what benefits does the deal offer to MLB in order to justify that risk?

Money and youth.

The money part of the equation is simple: According to Forbes, DraftKings’ initial partnership with MLB involved an exchange of equity, and thus part ownership of the company.

But what’s even most intriguing for MLB is the reach DraftKings has with younger sports fans. And if you didn’t know, MLB is having a hard time attracting younger fans these days.

“[DraftKings] have been reaching younger fans and certainly, our new commissioner is focused on the youth movement and reaching younger fans, and this seemed to line up perfectly with those goals,” said Garden.

That doesn’t mean there won’t be kinks that need to be worked out. One problem is that two of the league’s teams, the Arizona Diamondbacks and the Seattle Mariners, are located in states where it’s illegal to bet money on games of skill. For the time being, Garden said those teams will promote the free version of DraftKings where no money is exchanged. There have been some legislative attempts in the Mariners’ home state of Washington to change these rules, however they have not yet been successful.

“Obviously it’s not something that we take very lightly here at Major League Baseball,” Garden said. “If that study had come back and had it been a situation that made us feel uncomfortable, we certainly wouldn’t have moved forward. We feel pretty confident with the information that we have.”

Only time will tell if Major League Baseball sold its soul to reconnect with younger fans, but one thing is sure: In its battle with FanDuel for fantasy sports supremacy, DraftKings had a big win this week.

[photo by Gary Graves]

PandoDaily

Share