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Media & Entertainment Law

: Sports Law Blog

Potential Sale of Yahoo may have Huge Implications in the Market for Hosting Fantasy Sports Games

By Rick Karcher, Michael McCann, Geoffrey Rapp, Greg Skidmore, and Howard Wasserman

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On Friday Febuary 4, Microsoft Corporation made a $44.6 billion hostile bid to take over Yahoo. Since the bid was announced, Yahoo bankers have begun to seek rival bids to acquire the Yahoo business either in its entirety or in subparts.

While most antitrust experts have discussed potential hurdles to either a Microsoft or Google acquisition of Yahoo based on purported anticompetitive effects in search engine markets, it is also worth noting the potential hurdles to such a transaction in fantasy-sports hosting markets.

Speaking purely from industry expertise, it seems that Yahoo and CBS Sports (Sportsline) share category leadership in hosting fantasy sports games, with ESPN.com a close third in the category. Amongst these three main competitors, only Yahoo has regulatly offered free hosting services for private leagues (with additional features available at an add-on cost). CBS Sports offers a private-league hosting feature through its Fantasy Baseball Commissioner product for $129.95. Meanwhile, ESPN.com has varied its strategy from year-to-year based on marketplace trends.

A potential Microsoft or Google acquisition of Yahoo, while most problematic from an antitrust perspective in the search engine market, would in itself present little-to-no concern in the market for hosting fantasy sports. However, should Yahoo instead divest its fantasy sports business to ESPN.com (as suggested by a recent New York Times article), this would likely harm consumers by signaling an end to free fantasy-sports hosting. In addition, should either Microsoft or Google seek to acquire Yahoo and then immediately divest of Yahoo's fantasy sports business to either ESPN.com or CBS Sports, substantial antitrust concerns would rightfully follow.

With that said, it is beginning to look plausible that the Federal Trade Commission and Department of Justice are not far away from looking at the unilateral and concerted effects of a horizontal merger in the fantasy sports marketplace. Who ever said Hart-Scott-Rodino compliance was boring?

Full post as published by Sports Law Blog on February 06, 2008 (boomark / email).