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Let's Get 'Er Done Boys

Postby JTWood » Fri Apr 21, 2006 7:13 am

This is an article regarding the battle between CDM and MLBAM. Check out the highlighted part at the bottom.

Draft day is the best day of the year. For eight hours, my friends and I drink cold beverages, indulge in food fit for a study on clogged arteries and hold our annual fantasy baseball draft. Only a 50-inch HDTV could make the day any better, and, by heavens, we had one of those this year, too.

We did not discuss right-to-publicity law and how it applies to fantasy sports. We did not talk about licensing, legalities or lawsuits. In fact, the only time we've talked about anything to do with justice was in 1995 when we threatened to send our friend Bruce to fantasy prison for wasting a pick on an A-ball pitcher named Bart Evans.

Yet all fantasy players should at least be aware of what's bubbling in their leagues' background, because it could transform the industry: It's a grab for money and control, a play of greed, an entree into the ugly sides of baseball to which fantasy sports seemed immune.

In February, the owners of CDM Sports sued Major League Baseball Advanced Media, baseball's Internet arm, and the Major League Baseball Players' Association to keep them from requiring licenses to use statistics for fantasy games. At issue isn't whether statistics are historical record – both sides concede they are – but the value of statistics when attached to names of professional players.

CDM, based in St. Louis, believes that they provide an accounting and news service by compiling and delivering the data, and that they should receive the same immunity as newspapers that print box scores. MLB counters that CDM is using player names for a purely commercial venture and that, like video games and baseball cards, fantasy providers must pay a licensing fee to use the likenesses.

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On one side is baseball trying to protect its business.

"What people have to understand is, this is a baseball game with a single purpose," MLBAM spokesman Jim Gallagher said. "How do they make money? They do it on people building a team using named baseball players. Not fictitious. They're the guy's name, the picture – the specifics."

On the other is CDM trying to save its business.

"Fantasy baseball is a game for the fans," said Charlie Wiegert, the company's co-founder. "They're the ones who make up the teams. They're the ones who follow these players. If there's anything pure in fantasy, it's that they've made up these games, gotten together and drafted, and they did it all without Major League Baseball and the players' association. They found a way they could enjoy the sport as fans without the other side."

Stuck in the middle is the public, which, depending on the case's outcome, could see a free market or one run by the brand names that already dominate the industry.

The tussle started in January 2005, 25 years after a group of friends met at Manhattan restaurant La Rotisserie Francaise and conceived the first fantasy league. The MLB Players' Association, which used to receive licensing fees from the reputable fantasy proprietors – CDM paid 9 percent of its gross per season, though there were constant tussles on the actual dollar amounts CDM owed – sold licensing rights to MLBAM for $50 million over five years.

With the number of fantasy baseball players estimated at 16 million, MLBAM, which runs MLB.com, wanted to solidify its own game. At the same time, it would sublicense the statistics to sites of its choosing. This year, the big three – Yahoo!, ESPN, and CBS SportsLine – are licensed, along with a handful of smaller companies. In the interest of full disclosure, Yahoo!, which runs free and pay leagues and is the Internet's largest fantasy sports site, pays MLBAM a licensing fee of around $3 million per year.

Gallagher said MLBAM offered CDM a one-year license before the 2005 season. Wiegert said the offer was for CDM to refer its clients to MLB.com and receive a one-time payment of 10 percent of whatever revenue those players generated.

"It was either file something against them," Wiegert said, "or go out of business."

CDM turned down the deal, carried on without a license and still runs its sites, including TQ Stats and Diamond Challenge Fantasy Baseball, which pays the grand-prize winner $25,000.

"It's not that we want the whole kit," said Rudy Telscher, the lead attorney for CDM. "We want to run a business and improve the games."

All of this came after years of fantasy baseball operated in Pleasantville. The original fantasy leagues relied on the Sunday newspaper or The Sporting News for their numbers, then compiled them longhand. The revealing of fantasy baseball standings made Mondays tolerable.

Then came the Internet, and it was nirvana. Forget weekly stats. For around $100 a season, every league could have up-to-the-minute numbers. The ease of fantasy leagues encouraged millions of new players. CDM, which had a 30 percent market share before the Web, now has less than 5 percent and, Wiegert said, grosses around $8.5 million a year. Whereas fantasy in the past was reserved to the dedicated, it was now a paint-by-numbers game with as few as two steps: draft and follow.

Of course, with commercialization came entanglement. Baseball saw the money generated by fantasy leagues and wanted its cut. And though it may seem baseball was trying to monopolize the industry, the players' association could sell the licenses to whomever it pleased, and that happened to be the company it works arm in arm with.

At issue now is whether the licenses were ever necessary. Either way, a Pandora's Box opens. Should CDM win the case, new providers would flood the market, and the ramifications could carry over to every professional sports league, including the NFL, which is the most popular fantasy game.

If the verdict sides with MLBAM and the players' association, though, it opens huge loopholes for sports without unions – could fantasy providers really approach every golfer about an individual license? – and could dramatically limit the number of companies offering fantasy games. Currently, there are 242 companies in the Fantasy Sports Trade Association.

"If that happens," Gallagher said, "I don't think you'll see any effect on the prices of pay-to-play games at all. You can hold me to it. I don't expect that at all."

Gallagher does expect an increase in participants, which he believes can double to almost 30 million. He cites some one-click games on MLB.com that call for one or two minutes a day as opposed to the research needed to stay up on day-by-day fantasy leagues.

But Greg Ambrosius, the former president of the FSTA and editor of Fantasy Sports Magazine, says a verdict in favor of MLBAM could hinder the progress fantasy sports providers have made. "Right now, there's a lot of innovation by entrepreneurs who have been in this for a while," he said. "It's possible, if that happens, the innovation might not continue."

What neither side denies is the transmogrification of fantasy baseball into just another business. While it's still an escape from $10 beers and $40 bleacher seats, the old-fashioned behind-the-scenes brouhaha is classic big business.

Sure, it won't prevent my friends from sending e-mails to one another with subject lines like "You are undoubtedly the worst fantasy GM of all time" or "I hate you" or, simply, "Pujols!"

But the case is expected to drag on, and as it does, it will drag fantasy baseball's name along with it. There will be citation of case law, like Gionfriddo v. Major League Baseball from 2001, where a California Court of Appeal ruled in favor of MLB's inclusion of names and statistics of retired players in programs. Baseball, in the current case, is fighting against exactly what it sought five years ago.

"If this applies to baseball players [like MLBAM says], in a Trivial Pursuit game, I can't use Sylvester Stallone, Arnold Schwarzenegger, presidents," Telscher, CDM's lead attorney, said. "They have a right of publicity, right?

"If you're using player identities, singling them out, promoting products individually, of course players should get something for that. If you're using raw, mass data, that is owned by the public. It's historical facts."

That's for a judge or jury to decide. MLBAM and the players' association have sought a declaratory judgment, which could end the case. A judge is expected to rule on that around July. If it's denied, the case will go to a jury.

Which would put the issue in the hands of St. Louis citizens. Perhaps a couple fantasy baseball players would land on the jury. The man might remember the time his friend chose Greg Vaughn in the first round instead of Mo Vaughn. Or the woman might laugh at the draft where someone had too much to drink and passed out before the final pick.

And then they'd look up, at the expert witnesses and cross-examinations and the exhibits, and find some bit of macabre humor in money tainting baseball – their game – once again.

Let's hope the people of this great baseball town are up to the task.

;-D
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