Thursday, October 29, 2015

Tao of Sports Podcast

The latest Tao of Sports podcast is with .  The podcast covers a wide range of topics - new business development, branding, daily fantasy sports, my transition to a new position at Penn State and where the NCAA is heading in the future.  You can listen to the podcast via the web or download it for free and listen on Itunes.

If you aren't familiar with the Tao of Sports website, I encourage you to check it out.  It contains hundreds of information filled podcasts from across the sports spectrum.  This is a truly an amazing gem in the podcast landscape and is a very worthwhile investment of your time.

Thursday, October 15, 2015

Daily Fantasy Sports and Intercollegiate Athletics - Part 4 - What does the future hold?

The explosion of Daily Fantasy Sports (DFS), fueled by industry leaders DraftKings and FanDuel, has become a hot topic within intercollegiate athletic circles prompting significant questions and areas of debate.  The first three parts of this series examined whether or not DFS is gambling, whether daily fantasy sports erodes the integrity of college sports, and whether DFS is a solution to athletic budget concerns and a way to enhance student interest in college athletics.  The three prior articles lead to my predictions about the future relationship between Daily Fantasy Sports and intercollegiate athletics.

Like many decisions that Directors of Athletics have to make, this one is loaded with positives, negatives, ethical and financial dilemmas, and unintended consequences.  In the ideal situation, I believe the preference of nearly all athletic administrators would would be to keep Daily Fantasy Sports at arms length from college sports, and to maintain a moral high ground.  But the fulcrum balancing the benefits and concerns of DFS will be set in a manner that best addresses the greatest pressure on each college campus.  Budget, fan attendance, legality, NCAA rules, morality, presidential influence, donor demands, media scrutiny and slippery slope concerns are all pressure points.  My predictions for the future of this enterprise include:

Insider trading activities will have the media and congress and the FBI pursuing DFS like a junk yard dog. 

- Daily Fantasy Sports will become heavily scrutinized in the short term and regulated in the long term, and the activity will cease to be "self-regulated."

- DFS will continue to be legal because too many powerful and moneyed interests (NFL, NHL, NBA ESPN, etc.) will lobby to keep the enterprise legal.

- The economic incentive to retain the jobs created by DFS and potential tax revenue will outweigh concerns over appearances of legalized gambling.

- The number of Daily Fantasy Sports participants will grow, despite substantial evidence that the vast majority of participants lose and have the deck stacked against them by very sophisticated computer based algorithms.

- The NCAA will retain its prohibition against participating in the activity for money, regardless of how regulated or legally permissible the activity is.

- Student athletes will forfeit eligibility for participating in DFS.

- Student and adult sport fans will increasingly gravitate towards participatory activities - the rise of video gaming and ability to sell out video gaming championships is a prime example. 

Ultimately, I anticipate that Daily Fantasy Sports will remain a significant presence in the consciousness of sports fans, and as a result college athletics will perform a balancing act that allows grudging acceptance of Daily Fantasy Sports at a level below what is seen in professional sports.  

There is ample precedent in college athletics and higher education where opportunities that are morally or legally dubious have been adopted to respond to pressures facing those in leadership positions. 

The most obvious example involves alcohol.  Despite well known concerns about binge drinking and underage alcohol consumption, alcohol is nearly ubiquitous around sports in two primary ways - television and radio advertising (which gives arms length separation from campuses) and through direct sponsorship accepted under the guise of responsible alcohol use and supporting drinking age laws.  In addition, the acceptability of alcohol at college sporting events is growing.  More and more schools are selling alcohol in venue.  This shift is brought about by revenue needs, the desire for enhanced game attendance and by thoughtful recognition that in venue alcohol availability may discourage binge drinking prior to games. 

Similarly, as societal attitudes regarding drug use have changed - particularly the legalization of marijuana - college athletics has adapted.  NCAA penalties regarding a positive test for the use marijuana have been cut in half and the NCAA Competitive Safeguards and Medical Aspects of Sport Committee is considering further adjustments to completely remove both marijuana and heroin from the NCAA "banned" drug list

On the gambling front, the Mountain West Conference has proposed legislation to eliminate the ban on hosting NCAA championships in states where sports wagering is legal. 

A college athletic department is typically a microcosm of its supporting University.  If you want to find a well run athletic program, its hard to do so in a poorly run university.  If a campus is suffering with inadequate budgets, the athletic program likely is too.  If a campus has lax standards regarding plagiarism, the athletic department will as well. 

As a microcosm of their sponsoring university, how an athletic program will handle DFS will rest on three issues - attitudes towards gambling, the brand of the institution and budgetary pressures.

Already on many campuses, simulated or low level gambling is accepted with much of the country living in close proximity to a casino.  Google the words "casino night university" and note the lengthy list of schools that utilize real or simulated gambling opportunities as fund raising, student affairs and orientation activities.  One could argue that DFS is among the least troublesome and lowest level forms of legal gambling and the addition of regulation could make the acceptance of this activity more palatable. 

For some institutions, their brand (such as religious affiliation) will make accepting this revenue directly highly unlikely, but these institutions are in the minority.  But what trumps these other two factors is that nearly every institution has revenue needs, so the motivation to accept DFS exists. Based on this analysis, I believe acceptance of Daily Fantasy Sports will slowly grow.  

The NCAA prohibition of gambling is essentially the only barrier to widespread acceptance of DFS in intercollegiate sports.  And as demonstrated above regarding alcohol and drugs, standards around these types of issues are not fixed in perpetuity but rather open to NCAA legislative action and interpretation that can adjust to reflect societal changes.  Barring a change in the law, legalized gambling has arrived and is here to stay - a daily fantasy come true for many people.

Thursday, October 8, 2015

Daily Fantasy Sports and Intercollegiate Athletics - Part 3 - A solution to budget and student attendance concerns?

The explosion of Daily Fantasy Sports (DFS), fueled by industry leaders Draft Kings and Fan Duel, has become a hot topic within intercollegiate athletic circles prompting significant questions and areas of debate.  Part one of this series addressed the question, is DFS gambling? And part two answered the question - Does DFS erode the integrity of college sports?  In this article addresses the question "Could Daily Fantasy Sports be a solution to athletic budget concerns and student attendance at games?" 

Higher education and intercollegiate athletics are under tremendous budgetary pressures. State budgets are soft.  College attendance by traditional age students is in decline and demographic trends suggest that this erosion will continue for years.  Further, college is increasingly viewed as a commodity where price can be negotiated and tuition price sensitivity is increasing with greater access to information.  

The search for athletic revenue is intense and two competing Daily Fantasy Sports titans, as well as numerous other companies who want a piece of the action, will spend hundreds of millions of dollars this year to attract new players to the activity or shift the spending by current participants from a competitor company to their own.  In the first week of the 2015 NFL season alone, $27 million was spent on fantasy sports television advertising. Other estimates are that Daily Fantasy Sports spent over $150 million on advertising in the three months leading into the 2015 NFL season.  

By comparison, the rights fee that CBS pays to the NCAA to broadcast the men's basketball championship is $10.8 billion over 14 years, an average of more than $750 million annually.  Annual advertising by Daily Fantasy Sports websites could eclipse this amount, in effect, acting as a second NCAA basketball championship. But the dollar amount alone doesn't make this spending meaningful. What makes it meaningful is the distribution mechanism for those who choose to accept these advertising dollars. 

Rights fees for the NCAA men's basketball tournament are huge, but by the time they make their way to the member campuses, they typically represent a very small fraction of an athletic department's budget.  The reduced impact of these funds happens for a variety of reasons:

  • the funds are paid over six years; 
  • the funds are paid to the conferences where the revenue is then divided across the conference office, tournament participants and then the member schools; 
  • the funds support NCAA operations; 
  • the funds support more than 80 championships and various programs to enhance student athlete welfare.
Although the NCAA isn't accepting Daily Fantasy advertising, conferences and campuses will access these funds directly by permitting the advertising on their own websites and in their multi-media rights agreements and more importantly, conference television rights, providing more direct access to this revenue.  And conferences have started to stake out their positions regarding the appropriateness of accepting DFS advertising.  The SEC has indicated they will not accept DFS revenue.  The Big Ten Network is accepting advertising and the Pac 12 network is currently doing the same as long as it doesn't promote college fantasy sports.  

In the short term, DFS can be a significant revenue generator for any entity that is willing to provide advertising inventory.  

DFS may also address concerns about declining student attendance and interest as well.  The Wall Street Journal noted the negative attendance trend more than two years ago and the concerns continue to exist with institutions continuing to look for creative ways to encourage students to come early and stay to the conclusion of contests.  These creative enhancements include expanded wifi connections, improved high end amenities and an experience that tries to compare to the experience you can have in your own living room.  

But regardless of these improvements, students (and in fact all fans) have numerous instantaneous entertainment options in the palm of their hand via their smartphone.  Students seek social opportunities with friends at every turn.  And they want to actively participate, not spectate.  Athletic administrators need to adapt to these demographic trends and have been searching for ways to do so. One possibility has dropped into our lap. 
"Experiential learning" is a popular concept in higher education.  Daily Fantasy Sports, for right or wrong, is experiential, immediate, impacts the individual directly, is emotional and is very social.  

In a recent Wall Street Journal interview of Oakland Athletics General Manager Billy Beane and Boston Red Sox senior advisor Bill James made the following observation about how sabermetrics have made baseball a better game to watch.

James: We produce information, and information ties the fans to the game. People in a culture with no information about baseball have no interest in baseball. If you give people a little bit of information about baseball, they have a little bit of interest, and if you give them a lot of information about baseball, there’s the potential that they have a lot of interest. 
Beane: It’s a different generation of fan that now has exposure and an interest in why things happen. Give them some rational reason for outcomes. We’re an information-hungry society, and one that is constantly trying to understand. I think there are a group of kids who love it for the numbers and love it for the information.
Fantasy sports is an extension of many people's desire to utilize information, learn and understand, to compete, and immerse themselves further into athletics.  This is a positive development for our fan bases and their future stability.  

Whether college athletic administrators will embrace Daily Fantasy Sports in some manner remains to be seen.  But the discovery of insider trading activities makes accepting DFS even more complicated for those who are open to the concept.  In the next installment in this series, I will analyze the entanglement between DFS and intercollegiate athletics and make some predictions about the future relationship between the two entities.   

What do you think?  Can Daily Fantasy Sports help enhance intercollegiate athletic budgets or improve student attendance?  Share your views in the comments section. 

Next: The future relationship between Daily Fantasy Sports and intercollegiate athletics.  

Monday, October 5, 2015

Daily Fantasy Sports and Intercollegiate Athletics - Part 2 - Does DFS erode the integrity of college sports?

The recent explosion of Daily Fantasy Sports (DFS), fueled by industry leaders DraftKings and FanDuel, has become a hot topic within intercollegiate athletic circles prompting significant questions and areas of debate.  In part one of this series, UltimateSportsInsider examined the question "Is DFS gambling?"  Other topics to be addressed in the series include the effect of DFS on student attendance at events, DFS as a possible solution to athletic department budget concerns and what the future holds regarding DFS and intercollegiate athletics.   

In this installment, addresses the question "Does Daily Fantasy Sports erode the integrity of intercollegiate sports?" 

Student athletes and gambling has been a topic of personal interest since the late 1990's when long-time friend and University of Michigan compliance director Ann Vollano and I teamed up to author a ground-breaking study of student-athlete gambling behaviors.  The concerns that our research revealed in 1999 about the potential for gambling to undermine the integrity of college sports continue to persist 15 years later.   

Since the 1950's, numerous intercollegiate athletes have performed at less than their best or colluded with others to manipulate the outcomes of contests. These situations involve "match fixing" where the participants purposely lose a contest or "point shaving" where one or more participants play to win, but by an amount less than the point spread of a particular contest. There are numerous examples of this manipulation, primarily in the sport of basketball, throughout the past seven decades, including: 

Unfortunately, it seems likely that point shaving and match fixing have occurred in other undiscovered cases over this span of time.  

In order for sports to have value, the outcome has to be unknown and requires the competitor's best attempt to do everything within the rules to win a contest.  And for college sports to have value, not only do the results need to be pure, but the participants need to act within the values of higher education and represent their institution with honor.  

As a stand-alone activity, I do not believe Daily Fantasy Sports erode the integrity of intercollegiate athletics. A student-athlete in the sport of fencing spending $5 on a professional football fantasy team simply does not challenge the legitimacy of either college football or fencing.  

But DFS participants are susceptible to the always prevalent "slippery slope" and it is in this area that the integrity concerns are legitimate.  Just as there are "gateway drugs" - providing entry to other more addictive forms of drug use, there can be "gateway wagering."  Student-athletes don't stumble across point shaving and match fixing opportunities randomly.  These situations develop because the student-athlete (or an official) is seeking a quick payout or is in deep debt to someone who threatens their career over those debts and related gambling activities.

The sums of money that can be wagered and won playing DFS are significant enough to attract criminal activity.  Further, gambling is an addictive activity for some people that we know can lead to financial problems.  People chase losses with larger sums to get out of debt or to get the same rush from the activity that they got at lower amounts.  When the losses get too big, people are open to manipulation.  

While the slippery slope is hypothetical, one look at the earlier list of point shaving scandals makes concern over gambling very real. Attempting to educate about the nuances between permissible and impermissible sports related gambling is nearly impossible across hundreds of thousands of athletes, hence the NCAA's zero tolerance stance regarding sports-related gambling. While Daily Fantasy Sports doesn't in and of itself erode sports integrity, it provides entry into numerous activities that absolutely can erode the integrity of college sports, making their prohibition for student-athletes, officials and staff the proper stance.  

What do you think?  Do Daily Fantasy Sports erode the integrity of college sports?  Share your thoughts in the comments section.  

Next - Could Daily Fantasy Sports effect student attendance or provide a solution to budget concerns?  

Friday, October 2, 2015

Daily Fantasy Sports and Intercollegiate Athletics - Part 1 - Are Daily Fantasy Sports Gambling?

The explosion of Daily Fantasy Sports (DFS), fueled by industry leaders DraftKings and FanDuel, has become a hot topic within intercollegiate athletic circles prompting significant questions and areas of debate.  Is it or isn't it gambling?  Does it erode the integrity of college sports?  Could it effect student attendance at events?  Could DFS be a solution to athletic department budget concerns? What does the future look like regarding the issue? 

This is the first in a series of articles addressing each of these questions.  In this installment, addresses the question "Are Daily Fantasy Sports (DFS) gambling?" 

It isn't hard to develop a coherent argument on either side of this topic.  The answer depends on who you want to view as the controlling legal authority.  DFS website Rotogrinders provides a clear and simple overview of the issue from a legal standpoint, based around the 2006 passage of the Unlawful Internet Gambling Enforcement Act (UIGEA).  

The UIEGA specifically carved out an exemption around fantasy sports, albeit at a time when the activity was far less popular and less automated via computer. It was intended to avoid turning stat obsessed "fantasy geeks," college fraternities and sports junkies into criminals.  But the law of unintended consequences is an amazing thing and some entrepreneurial people exploited a loophole to establish a multi-billion dollar industry seemingly overnight.  

The legal language that makes DFS permissible (outlined in the above referenced link) is well thought-out and DFS fits each of the criteria that make it legal in most places.  

The NCAA has quickly taken a position on the matter consistent with its previous stances regarding sports related gambling. The Association unequivocally considers Daily Fantasy Sports to be gambling and has a zero tolerance approach to the activity.  As such, student athletes and athletic department staff members are prohibited from engaging in the activity if they have to pay any type of entry fee to participate and if it involves a sport that the NCAA sponsors.  

So, are Daily Fantasy Sports gambling?  The simple answer is yes, especially when you define it using a more relevant term, "wagering" - simply defined as betting on the outcome of an external event(s) - in this case the aggregated results of a number of external individual performances.  But it is a legal form of wagering in many places due to the UIEGA.  If you are considering engaging in the activity, ask before you act, and check with your NCAA compliance coordinator and/or attorney.  Failure to get proper guidance about what is and isn't permissible is definitely a gamble that can put athletic eligibility or a career at risk. 

What do you think?  Is Daily Fantasy Sports Gambling? Share your thoughts in the comments section. 

Next: Do daily fantasy sports erode the integrity of college sports?