As FanDuel and DraftKings Vow to Fight 'Gambling' Tag, Ad Strategies Diverge

Ban on Daily Fantasy Already Taking a Bite Out of TV Spend

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TV ad sales reps are particularly interested in the battle between New York State Attorney General Eric Schneiderman and two of the biggest advertisers right now.
TV ad sales reps are particularly interested in the battle between New York State Attorney General Eric Schneiderman and two of the biggest advertisers right now.

The day after New York's chief legal officer declared that the daily fantasy sports sites FanDuel and DraftKings were fostering a "multi-billion-dollar" illegal gambling scheme, both companies said they would fight the order to cease operations in the state. And while the rivals are putting up somewhat of a unified front, their short-term advertising strategies have diverged significantly.

State Attorney General Eric Schneiderman on Tuesday ordered FanDuel and DraftKings to immediately refrain from accepting any further "wagers" from New York residents, declaring that both businesses are engaged in illegal gambling as defined under state law. DraftKings fired back with a declaration of war. "There is a process by which hasty and uninformed opinions can be challenged in a court of law, which would allow DraftKings to not have to cease operations in the state," the company said in a statement. "We will pursue this fight to the fullest."

FanDuel countered Mr. Scheniderman by arguing that daily fantasy is "a game of skill," while vowing to "fight back with everything in our arsenal." The companies have five days to respond to the AG's order; as of Wednesday afternoon, both shops were collecting entries from New York-based fantasy enthusiasts.

FanDuel and DraftKings already have been forced to block players in six states: Arizona, Iowa, Louisiana, Montana, Nevada and Washington. Last month, the Nevada Gaming Control Board ruled that all unlicensed sites that operate daily fantasy sports contests for cash were to cease operations in the Silver State. Among the states that are currently investigating the legality of the games are New Jersey, Florida and Illinois.

Getting shut out of New York likely would prove a crushing blow to the two leading daily fantasy sites, because the state boasts more fantasy players than any other. FanDuel counts 600,000 in-state players, while DraftKings' roster is around 500,000.

Despite the AG's order, don't expect the sites to go dark overnight. Unless the presiding judge issues a temporary order for the two companies to close up shop while their cases are being heard, it could take years for the matter to be litigated.

TV ad sales reps are particularly interested in seeing how the whole illegal-wagering-vs.-games-of-skill argument shakes out. FanDuel and DraftKings since Jan. 1 have funneled more than $260 million into the national TV ad market, according to estimates, with the vast majority earmarked for live sporting events and various types of shoulder programming. A year ago, that joint expenditure would have made FanDuel and DraftKings the No. 6 TV sports advertiser behind Budweiser ($267.2 million for all of 2014).

While FanDuel and DraftKings have taken similar steps toward reassuring users that it'll be business as usual this weekend, their respective ad strategies appear to be headed in opposite directions. On Wednesday through 3 p.m. EST, FanDuel spent $75,338 on 136 ads that aired nationally on 18 cable networks. (ESPN alone accounted for a quarter of that spend.) In the same 15-hour period, DraftKings spent just $2,552 on 8 spots -- four of which aired on NFL Network and four on FS1.

On the day the AG sent the cease-and-desist notices, FanDuel spent $206,931 on 226 spots, while DraftKings invested $25,725 on 20 ad units.

DraftKings' decelerated ad spend is a rather recent development. In the last 30 days, the daily-fantasy upstart has spent $19.9 million on national TV inventory to FanDuel's $21.5 million. Since the start of the 2015 NFL season, FanDuel has been slightly more keen on big-reach TV buys, spending $90.7 million as of Sept. 10. DraftKings in the same two-month window invested $75.9 million in TV.

One area in which DraftKings particularly has slowed down its spending pace is live NFL games. One month ago, DraftKings was the No. 2 NFL in-game advertiser (Verizon was No. 1), boasting an outlay of $29.8 million, slightly more than the $24.9 million invested by No. 3 FanDuel. Since then, FanDuel has doubled its one-month spend, leading all comers with an overall NFL tally of $49.9 million. At the same time, DraftKings has added just $6.6 million to its initial tab, slipping to the No. 8 slot with $36.4 million in NFL inventory.

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