Risk and a little uncertainty make an investment exciting. The same is true with fantasy sports. Not only is fantasy sports fun, but it can be lucrative as well. Fantasy sports is a fast-growing business. According to the Fantasy Sports Trade Association, an estimated 35 million online users wager money on fantasy sports. The new trend in fantasy sports is allowing participants to draft a team, place a wager, and get paid, all in one day rather than only once a season.
The new entrant
Comcast Corporation (NASDAQ:CMCSA) saw the promising possibilities of online gaming and fantasy sports last year. A sizable $11 million investment led Comcast Ventures into Series C financing for FanDuel, a fantasy sports site.
Comcast Corporation (NASDAQ:CMCSA) stock is currently hovering around $44. The company has a market cap of $116.68 billion and still gets the majority of its revenue from its solid grip on the media industry. Like any strategic business, it leverages this strength in order to firmly enter new spaces. Not only did it invest in FanDuel, but it has also teamed with various entertainment companies to offer premium gaming services as part of its pay cable package – a wise move that could benefit investors handsomely in the seasons to follow.
The overloaded giant
Comcast Corporation (NASDAQ:CMCSA) isn’t the only company to actively making inroads into this market. Time Warner Cable is making a play here as well, though it is also making several other moves, which could hurt its chances in the fantasy sports arena.
In terms of fantasy sports growth, Time Warner Cable is missing an opportunity and will subsequently lose ground to Comcast. The industry is relatively new and dominant companies have the ability to shut out a competitor at this early stage. Time Warner Cable and Comcast could control the board rather than succumbing to online players. The key factors to developing a successful fantasy sports empire would be to present easy and accessible user interaction (like Comcast is doing), or grow consumer awareness like the online players are doing. While I don’t think Time Warner Cable’s failure in this area will negatively impact its stock, I do think it will impede its revenue growth.
The juggernaut
Yahoo! Inc. (NASDAQ:YHOO) is no stranger to fantasy sports. In fact, fantasy sports is a big money maker for the company. Yahoo! Inc. (NASDAQ:YHOO) recently acquired mobile fantasy sports startup Bignoggins, the company behind Fantasy Monster and Draft Monster. Fantasy Monster is an app that allows users to manage multiple fantasy sports teams. It allows users to access stats, aggregate data and manage all major fantasy sports.
The key for Yahoo! Inc. (NASDAQ:YHOO) in terms of fantasy sports growth is its mobile push from CEO Marissa Mayer. This is highlighted by her announcement in early 2013 to streamline Yahoo!’s mobile apps and focus on product refinement. The big opportunity here is that nearly 30% of players used their mobile device to participate in fantasy sports in 2011, and this growth is only going to continue. In addition, fantasy sports is widely used as a second screen during NFL games. Bignoggins could be the next big thing for Yahoo! Inc. (NASDAQ:YHOO)’s fantasy sports growth.
Another company I want to mention here is MGT Capital Investments, which has been monetizing assets in the online and mobile gaming space for the last few years. MGT has an EPS (ttm) of -$2.79. The negative EPS is largely due to its acquisition and selling off of its other assets.
MGT acquired a popular fantasy sports site, Fanthrowdown.com this year, and not only is it generating revenue, it also added an approximated 4 million users to its database. However, additional strength comes from its offering of daily plays and payoffs. Season-long affairs have long been dominated by juggernauts like Disney subsidiary ESPN, Yahoo! Inc. (NASDAQ:YHOO) Fantasy Sports, and CBS Sports. It will need this piece of the market to compete with Time Warner Inc (NYSE:TWX) and Comcast, as these two are expanding into daily offerings as well.
Summary
Atlas Ventures predicts that daily fantasy sports will overtake traditional fantasy sports in 5 to 7 years and that daily fantasy wagering will generate $2 billion in fees by the year 2020, versus less than $100 million today. This is a huge pie from which companies should be carving out their own slice.
I like Comcast Corporation (NASDAQ:CMCSA) for its strategic movement and entry. Fantasy sports are no longer isolated to the world wide web. Comcast is showing that it can (and should) move to home cable and even mobile offerings. As for the online realm, the industry itself will inevitably experience consolidation, and the final handful of survivors will eventually be acquired by the major media companies. That is why my money is on the media powerhouses like Comcast as long-term investments in this area.
Bill Edson has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Bill is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Can Fantasy Sports Drive Your Portfolio Higher? originally appeared on Fool.com is written by Bill Edson.
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