The legal scrutiny against daily fantasy sports websites could soon cause problems to television networks. The amount of money spent by the fantasy websites on television advertisements is huge, and television networks would absolutely hate to lose out on this easy form of profit.
Last quarter, there was a major increase in the revenue from television advertising. This is largely because daily fantasy sports websites flourished, and it quickly became almost impossible to turn on the TV without seeing an advertisement for fantasy sports.
Almost 60% of the sales growth in advertising revenue came from daily fantasy sports. This represents $134 million dollars. In total, advertising revenue increase by $227 million.
However, trouble could be looming. New York Attorney General Eric Schneiderman is doing everything he can to prevent daily fantasy sports websites from operating in the state. According to Schneiderman, daily fantasy sports are a form of illegal gambling, and therefore they must be immediately shut down. On November 25, a Manhattan judge is set to determine whether or not daily fantasy sports websites will be allowed to continue to operate in New York.
If the websites are forced to close up shop in New York, the effects will be devastating for TV networks. However, other companies might appreciate the move, since it will likely lead to decreased prices for television advertising.
Earlier this year, the two major daily fantasy sports websites, DraftKings and FanDuel, were both among the top ten biggest spenders in terms of television advertisement. Both have since fallen off that list. DraftKings has since asked TV networks if it could cut back on advertising commitments.
This year alone, DraftKings has spent more than $154 million on television advertisements, while FanDuel has shelled out nearly $112 million. Both of the companies are valued at more than $1 billion each, and they have managed to raise a combined $575 million from investors.