Organization: Fantasy Sports Trade Association
Launch date: 1999

As the FSTA gets ready to host its 2009 winter business conference this Tuesday and Wednesday in Florida, president Jeff Thomas (who also owns this site) and association manager Justin Cleveland took time out to answer some questions about the organization. In five cases, initials indicate the particular respondent to clarify first-person accounts. The other answers have been cobbled together from material supplied by both Thomas and Cleveland.

1) Can you describe the fantasy industry landscape of 1998-99, when the FSTA was being organized? How connected were companies and leaders in the industry at that point and before?
JT: In the 1997 to 1999 time frame, we were still primarily talking about pre-Internet fantasy sports. Games and leagues were just starting to cross over from PC to the Internet. Most content companies were still delivering their products via mail and fax. The larger game operators were managing games via interactive voice response systems and live customer service reps.

The industry was made up of a relatively small group of game and league operators. Anyone competing on the national scene kept in touch. We all knew each other. For some reason, a long list of companies claim to have been around during those times, but most were content-only companies or were operating games on a very small, local level. As larger companies started looking for help to run their games, they would reach out to a few companies. We quickly got to know each other, for many reasons, including the fact that we were bidding against each other for every project.

The challenges of the times were primarily licensing issues/expense and legality. Content companies have never had to deal with licensing issues, so it was a game- and league-operator issue only. All or most game operators looked at working with the players associations from a marketing perspective — work with them, pay them a bit of a ransom, and they will help promote your products. In the end, they didn’t do much to promote.

From a legality perspective, companies and players associations and leagues worked to communicate a simple message: Fantasy sports are games of skill. Many, to be safe, operated using a void-of-all-services, free-entry option.

2) The FSTA history page cites a 1997 meeting hosted by CDM Fantasy Sports, where they invited Sportsline, Prime Sports Interactive, Sports Buff, and Sporting News to St. Louis. Was this the first meeting of the FSTA?
JT: Not really. It was the first organized meeting of the top game and league management companies of the 1990s, and we discussed whether an association of some kind should be created. We were more focused on lobbying efforts that CDM was spearheading, to communicate why fantasy sports are legal and should be excluded from any gambling law that was being discussed.

In the mid-1990s, meetings and conventions were held in Nevada and Minnesota and Florida, hosted by Fantasy Insights and Fantasy Football Weekly. In 1998, during a Fantasy Insights Convention, a meeting was organized to again discuss pending legislation and several other topics related to the industry. The representatives from CDM, Fantasy Insights, EA Sports, The Sporting News, and USFANS decided that it was time to create an official organization to help promote fantasy sports, and the Fantasy Sports Trade Association was born. The first FSTA conference was held in 1999.

3) How did the FSTA go about trying to bring together fantasy sports companies at the start? How receptive of the idea were leaders around the industry in those early days?
JT: The first two FSTA Presidents were Carl Foster from USFANS and Greg Ambrosius from Krause. They both did a great job of creating opportunities for industry executives to network. We were a very small industry then, and we’re still small in many ways. The industry is like a poker game — we can learn a lot from each other, but nobody wants to show everything they’re working on. The network has definite benefits, but it’s certainly still true that industry participants don’t want to give away all of their plans.

4) Why was and is it important for fantasy sports companies to be unified in such a way? What has the FSTA enabled the industry to accomplish that the individual companies couldn’t have done themselves?
JC: Every fantasy sports company serves a different segment of the potential audience. By uniting through the FSTA, these companies can learn different ways of doing business that may attract new clients. It’s like a writer’s colloquium — we can get together and talk about our work in an open, honest environment and receive beneficial feedback.

It’s almost funny to think about any fantasy company needing another today, when the games have become a financial juggernaut and there are multinational corporations that are presenting fantasy sports products. The FSTA grew out of the era when fantasy sports were a cottage industry that appealed to a niche audience. By working together within the FSTA, these early companies were able to reinforce their strengths while collaborating on their weaknesses to create a more polished product that appealed to wider audiences. At the same time they were all innovating to set the standards we all enjoy today.

As for today, by providing a unified front through the FSTA, fantasy companies have been able to work with and understand rules and laws regarding copyrights and to differentiate games of skill from games of chance to follow guidelines published in UIGEA legislation. For example, I was working today with a gentleman who started up a company but was having trouble finding a merchant services provider. More than a few auditors have flagged fantasy sports as high risk. He called me and I was able to work with their legal department to differentiate fantasy sports from gambling and get his company’s application approved.

That’s where the FSTA is as relevant as ever: We are a clearinghouse of information regarding the industry, a powerful networking tool and a backup for both fantasy sports providers and a protection for players.

5) What has the FSTA meant to the promotion of the fantasy sports industry as a whole and its acclimation into American sports’ mainstream?
As mentioned earlier, the early days of the FSTA were marked by a small group of dedicated game providers. Since then we have been part of a concerted effort to help promote the industry. What the FSTA does is provide a unified, unbiased perspective on fantasy sports games to the media and public. Since our research isn’t tied to any one company or type of game, we can speak for the industry as a whole and, at the same time, promote individuals.

Starting our marketing research efforts with Dr. Kim Beason of the University of Mississippi began to give us measurements to discuss, consumer behavior to discuss and debate, and answers to provide to journalists. Journalistic demand for our opinions and our statistical research has grown every year. It’s almost too much too keep up with now.

6) What are the benefits of membership in the FSTA? Why should a company join?
Anyone who has ever been a factor or will be a factor in the fantasy sports industry is a member of the FSTA or attends our conferences. We represent the large, medium, small and tiny companies. We represent the startups, the brands wanting to learn about fantasy sports and individuals that just want to brainstorm about potential entrepreneurial efforts.

Membership in the FSTA gives access to research that will help businesses better address their current clients and attract new traffic. Twice annually the FSTA holds a research symposium and business conference where everyone from upstart companies to the leaders of the industry convene for two days of networking and sharing ideas and successful strategies to help grow the industry. Being a member of the FSTA gives discounted conference registration.

Membership also provides instant recognition and legitimization — users can know that the FSTA seal is a mark of quality and integrity.

7) What was the impetus for the creation of the FSTA Industry Recognition Awards?
They were designed to celebrate the successes in our industry as recognized by our members. The awards are, like membership in the FSTA, a great way to prove the value of a product. Nothing validates more than a statue (or, in our case, a plaque and electronic icon)! The entire process was redesigned in 2005 to create a nomination process, a review and finalist process, and an audited final outcome for all categories.

How important are the awards to the overall value of the FSTA and membership in it?
Put yourself in the shoes of a fantasy sports startup trying to make a name for yourself or trying to impress investors. A FSTA Industry Recognition Award can help prove a concept and build business development opportunities along the way. Overall, the awards are just a small part of the value proposition of the FSTA. That said, making the finalist list or winning the award certainly brings 100 times the value of our low annual membership fee.

9) How has the FSTA changed to serve an industry that has exploded in size, reach and diversity of products, and how will it continue to adapt to a still-growing market?
Each president has moved the Association forward, with changes that have supported the industry along the way. We made some difficult decisions over the past three years, including taking on the responsibility of owning and managing our own business conferences twice a year. We now make modest profits on each conference, and the cash flow has helped hire a dedicated association manager to support the board of directors and the membership. We have also created several distinct committees and assigned board members to each committee. A board position isn’t something to add to your résumé or to impress co-workers. Board members must now contribute on a monthly basis. Committees include executive committee, business conference, finance, communication, membership, market research and awards. The committees report on progress during monthly board calls. If they do nothing or don’t accomplish much, they hear about it from other board members that are carrying their weight.

Committees are modified, added or discontinued to address current issues and needs. We added the communication committee in 2008 based on the sheer volume of communication that’s required to keep members up-to-date and to grow the Association.

10) What else should we expect to see from the FSTA, going forward?
JT: More of the same. We’ve created a model that works for our members. We will continue to evolve. One area to watch is the definition of “fantasy sports.” We now have the UIGEA and successful rulings in the CDM-MLB case to help guide our industry. This has also opened doors to companies that would like to use the “fantasy” label for their own gains. If a game is not fantasy, there’s nothing stopping a company from using the fantasy label, but we should provide clear guidelines, and I see some advancement in this area in the next year or two. Without this guideline, consumers and legislators could very well be confused, and that could end up reversing much of the hard work and accomplishment of the past five years.

Who: Dr. Kim Beason

What: Associate professor, park and recreation management, Ole Miss

Founder, Fantasy Sport Research Specialists LLC

Back in 2001, Dr. Beason went searching for studies on fantasy sports consumers, curious to find out why people played and what impact these games had on professional sports. He found the area lacking. Seeing a need for better understanding of this growing phenomenon, he decided to collect the data on his own but was stonewalled in his attempts to connect with companies that could provide customer lists.

That led the Ole Miss professor to trudge out to Las Vegas (not a bad destination if you have to trudge) and pitched his idea to the Fantasy Sports Trade Association (then known as the Fantasy Sports Players Association). He offered to match the group’s funding through the first three years of a research project in return for the FSTA encouraging its members to supply consumer targets for the research. A partnership was born.

From the first study in 2002 and 2003, Beason’s pursuit of learning more about those who play fantasy sports quickly grew into popular and valuable research on the fantasy market and the consumer-spending habits of participants. Businesses used the data to court advertisers and more effectively target consumers. Media outlets latched onto the numbers to reflect the growth in this particular entertainment industry. Perhaps most importantly, the study’s valuable findings have driven up inquiries from FSTA constituents, which has in turn enhanced the breadth and depth of the information collected.

“Dr. Beason is the godfather of fantasy sports market research,” says Jeff Thomas, president of the FSTA and CEO of SportsBuff.com, which owns this site. “He took a chance on our small association many years ago, funded many of his own expenses to help kick off our research efforts and is now recognized as the top fantasy sports consumer behavior expert in the world.”

The project grew to the point that in 2006, Beason founded Fantasy Sport Research Specialists LLC “to serve as a clearinghouse for research,” an enterprise he shares with three partners. Although the annual FSTA study - whose sixth set of annual results were presented at the FSTA conference in Chicago on July 8 and 9 - is the company’s primary focus, there are other considerations as well.

“We also explore fantasy sport as a medium to teach children, relationships and differences between the fantasy sports and gaming industries, and fantasy sport in the workplace,” Beason says. “FSRS also conduct specialty-market, branding and product-development research for individual fantasy sport companies.”

Not surprisingly, all of this work stemmed from a career as a fantasy-sports player that began in 1989 with a keeper football league at Ole Miss. Beason quickly learned in his second season not to mix business too closely with pleasure, however, when hosting the league’s draft in a campus classroom nearly got him fired.

“My butt was in a sling for about 2 weeks,” he says. “I had to convince them (they were still skeptical) that what we did wasn’t gambling but a game of skill, and the league fees - 30 bucks - was given to the winner.  I ended up hanging on to my job by promising to never, ever, conduct another fantasy sport event on campus.”

Then again, one might argue that the lesson didn’t really take root.

“Heck, I play and research fantasy sport as a (small) part of my job!” Beason says. “Talk about fortunate.”

I find Stephen A. Smith quite annoying, but that wasn’t always the case. Back before he was just another loudmouth on ESPN yelling about everything (and nothing), I knew him simply as a columnist for the Philadelphia Inquirer, the paper delivered to my house every day through my final three years of high school.

Back then, his words had no volume. He was merely an intelligent writer who addressed more than the monotonous “why isn’t Donovan McNabb smiling today” that many in Philly pass off as sports journalism.

I use this roundabout introduction to bring you to the latest column that he wrote for ESPN the Magazine, which raises a topic worth addressing in our industry: Why is the face of fantasy sports so white?

Smith cites a Fantasy Sports Trade Association study that finds about 93 percent of fantasy sports players are white, with Latinos making up 2.3 percent of the market, blacks 1.6 percent and Asians 1.1 percent. He then focuses on why more black people don’t participate in fantasy, but he fails to really find an answer.

Smith basically provides his own opinion (shockingly) that fantasy sports are nerdy (which they certainly are, to a degree) and actually writes the following: “The more I learn about the typical fantasy player, the more I think most minorities simply have better things to do.”

Smith then proceeds to cite black comedian Guy Torry as an avid fantasy player and shares Torry’s reasons for loving the game but stops short of digging further into why more minorities don’t play. Fortunately, at least Dr. Kim Beason steps in to offer some insight.

“When you break it down, it appears the disparity has to do with a critical mass of individuals who are together discussing fantasy sports,” Smith quotes Beason as saying. “Up to now, that has mostly occurred in the white workplace. And a lot of time, it’s on the Internet.”

But Smith stops there.

Well, race can be an uncomfortable topic in nearly any circumstance, but there’s more to say in this case, and I believe that someone should say it.

From what I can tell, the biggest reason for the lack of diversity in the fantasy sports market seems relatively simple. What do we know about the average fantasy sports player? He tends to have a college education, make an average salary of somewhere around $50,000 and/or contribute to a household income that averages $75,000 to $80,000 a year, work an office job with access to a computer and do his playing online.

The key stats there are those representing income, and unfortunately, the two largest minority populations in this country lag way behind in median income. According to the U.S. Census Bureau, non-Hispanic white households had a median income of $54,920 in 2007. Black and Latino households, on the other hand, brought in median sums of only $33,916 and $38,679, respectively.

Logically, an income disparity of $16,000 to $20,000 per family means fewer computers in minority households and less-widespread Internet access, two crucial components to fantasy participation. The lower income will also, realistically, tend to mean tougher working conditions — certainly fewer computer jobs — which strikes at the reasoning given by Dr. Beason. (As for the remaining characteristic of the average fantasy player, nobody needs a college degree to play fantasy sports. That’s just part of the path that leads to the others.)

It’s extremely unfortunate, disappointing and ultimately unfair, but the relative lack of minorities in the fantasy market points to much larger issues of inequality within our society.

Now, that still leaves out the Asian portion of the market, a group that earned a higher median household income than whites in 2007. That section of the population, however, is roughly a third the size of either the Latino or black sectors. The fact that Asians participate in fantasy sports at a rate not far behind two other minority populations that far outnumber them only supports the idea that socioeconomic status lies at the heart of the issue.

As for why the Asian portion of the fantasy market doesn’t match its slice of the overall population, well, just think of how many Asian athletes you see in the major American sports. Baseball has seen growth on that front since the mid-to-late 1990s, and Asian players now dot the rosters of the NBA. Football, however, is the indisputable king of fantasy and also nearly devoid of Asian athletes.

It stands to reason that a population that hasn’t truly been integrated into a sport will be less likely to follow it. Americans, for example, have never really embraced the NHL or professional soccer, both national games of other nations and populated by a large number of foreign players.

None of this is meant to propagate stereotypes. I don’t believe that black and Hispanic people are poor folks without computers, and I know that the NFL can count plenty of fans with Asian origins. This is an attempt to connect the dots between facts and outline the hurdles that stand in the way of diversifying the fantasy landscape.

Unfortunately, I don’t know how much we in the fantasy sports community can do to effect the kind of societal change that would balance things a bit more. I just know that it’s a discussion worth having and an issue worth drawing out.

Our response to the poor “research” by Challenger, Gray & Christmas that has fantasy football costing employers billions each season ran earlier this week, but we’re not yet ready to drop the subject.

Dr. Kim Beason, who knows a thing or two about fantasy sports research, has this response to the $9 billion folks:

Challenger leans heavily on internet use as the waster of most time. Clearly, much time at work is not “work.” If someone does primarily work on the computer, they can multitask easily, limiting the impact of online fantasy sport consumption. Furthermore, Much fantasy sport talk around the computer “wastes” the same amount of time as any other frivolous chat, gossip, etc.

Therefore, much of Challenger’s “waste” occurs regardless of fantasy sport. In reality, fantasy sport in the workplace does take time away from production, but the tradeoff is significant. Undeniably, fantasy sport is a significant workplace dynamic.

Work time is wasted by consumers playing fantasy football, but, once again, the focus must also include the positive, which include building social networks (a key to the Japanese-style of management, and we see what that has done for them!).

Less than 30 percent of workers say the time they “waste” interferes with their work productivity. A very significant number (53 percent) state that fantasy sport increases camaraderie, and 48 percent have made friends playing fantasy sport in the workplace. My comments to media sources in the past have gone something like this …

“Fantasy sport is a dynamic that has developed within the workplace over the past 10 years. Friendships, workplace camaraderie, business contacts and fun offset the amount of productivity lost. Most productivity lost would happen regardless of fantasy sport participation through gossip, computer games, daydreaming and similar outlets. However, fantasy sport appears to not have as high a degree of negative impact as the other ‘time wasters.’ Conversely, it has increased the cohesiveness of workers and thus must improve work productivity, decrease absenteeism and sick leave and, most importantly, develop social networks that support organizational and interorganizational relations and growth.”