Why Mark Cuban Is Smart To Be On His Soapbox For Fantasy Sports

Why Mark Cuban Is Smart To Be On His Soapbox For Fantasy Sports

Mark Cuban just penned an op-ed in the USA Today, provocatively titled“Mark Cuban To Politicians: Good Luck Killing Fantasy Sports”. This just a month after being the keynote speaker at the Fantasy Sports Trade Association (FSTA) Winter conference.

Cynics are quick to look at the low hanging fruit rationale, that Cuban invested in two companies related to fantasy sports over the last 6 months, Fantasy Labs and Sportradar US, for justification.

But that justification completely misses the point. Cuban’s financial interests in those two companies are collectively irrelevant to his private equity portfolio, much less his net worth. However, fantasy sports is very important to Cuban’s most important and relevant asset, the Dallas Mavericks.

Cuban hints at this in the op-ed:

My rationale is twofold: First, fantasy sports create exponential value for the sports, entertainment and tech industries. They are complementary to just about every entertainment product I enjoy and that we, as Americans, collectively love.

The daily fantasy format is much more conducive to NBA and MLB formats than the NFL, so it wasn’t until the rise of daily fantasy sports that the data confirmed for NBA and MLB owners what NFL owners had figured out a few years prior: Fantasy sports significantly moves the needle for these mega-industries. There isn’t a relevant business metric for professional sports leagues that doesn’t benefit substantially from the availability of and participation in fantasy sports.

Thus, those who stand to gain the most from the continued rise of fantasy sports are the professional sports leagues and their biggest stakeholders, franchise owners. But the short term politics of the situation are messy, so you see everything from lukewarm to half-hearted statements of support from spokespeople from the leagues themselves. Adam Silver continues to be the most aggressive commissioner on this front, with Rob Manfred offering mixed sentiments and Roger Goodell erring in distancing the NFL from the issue.

With the confused politics of the largest stakeholders keeping the logical supporters on the sidelines, who better to provide some public leadership on the issue than America’s favorite outspoken, Shark capitalist?

While the short term situation remains messy at best, Cuban is right to note that the longer term outlook is far, far rosier than the current narrative suggests.

While there is some obvious political grandstanding ongoing here that could cause some degree of damage to the industry, it’s very clear that fantasy sports is not going anywhere, as Cuban points out and as the American people want. In a bizarre political era where conservatives are being represented by a reality show host and the liberals are represented by a socialist, one thing Americans are pretty unified about is that the government should not stop people from playing fantasy sports.

Even in New York and California, where contentious legal battles are ongoing, savvy elected officials have introduced legislation to legalize and regulate fantasy sports, seizing on the stupidity of the political grandstanding. So even if the fantasy sports industry were to lose some of the high profile court cases, effectively ruling that fantasy sports is “illegal gambling”, there is already legislation in process to overrule those legal decisions in numerous key states.

While the industry clearly waited too long to engage legislators and regulation, the pace of progress since that effort began is almost unprecedented. Over two dozen states already have active legislative action around fantasy sports. And while there is still plenty of uncertainty and variance depending on the outcome of a few key states, the future is still bright.

eilers-dfs-projections-2016

Eilers and Krejcik just came out with their (excellent) revised industry report with revised industry estimates based on recent developments. According to their projected worst case, fantasy sports entry fees would still top $3B in 2020. To put some perspective around that, the worst case scenario for fantasy sports is still ~3X the projected size of the much-hyped eSports market. Anyone following the public narratives for both markets would never guess this was the case, and yet progress to date suggests an outcome far better than the worst case scenario.

To plagiarize Cuban’s closing line: Fantasy sports is here to stay, and that’s a good thing.