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Fantasy sports on the fly: 'Daily' leagues take off

Chances are that if you don't know what a daily fantasy sports league is, you will soon. The once niche category of fantasy sports is going mainstream.

Los Angeles Clippers’ DeAndre Jordan (6) follows through on his slam-dunk over Portland Trail Blazers’ Chris Kaman (35) during an NBA basketball game in Los Angeles, Nov. 8, 2014.
Victor Decolongon | Getty Images
Los Angeles Clippers’ DeAndre Jordan (6) follows through on his slam-dunk over Portland Trail Blazers’ Chris Kaman (35) during an NBA basketball game in Los Angeles, Nov. 8, 2014.

In an era of instant gratification, daily fantasy sports sites are seeing explosive growth in both their number of players and dollars.

"Fantasy dailies are a natural evolution of fantasy sports," said Paul Charchian, president of the Fantasy Sports Trade Association.

Daily fantasy sites condense an entire season of play into just one day, eliminating the risk of players who may become injured and giving users the ability to enter a new competition every day. Combine that with major payouts—sometimes totaling $1 million, and it's proving to be a winning formula.

Pro sports leagues are taking notice.

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On Wednesday, the NBA announced a multiyear partnership with daily fantasy sports site FanDuel, a one-day fantasy sports site. The NBA has long been partners with Yahoo for traditional fantasy sports leagues, but the new partnership represents the league's first foray into the daily category.

"With fantasy dailies representing a growing segment of the market, we want to engage and grow our fan base," said Sal LaRocca, president of Global Operations and Merchandising for the NBA.

As part of the deal, the NBA will gain an equity stake in FanDuel and take a seat on its board.

"What we're doing is converting our users into fantasy basketball fans, which will cause them to watch a lot more basketball," said Nigel Eccles, CEO of FanDuel.

FanDuel will offer a free daily game on its website and NBA.com where fans can draft their own team based on the teams playing that day. Players will compete against other teams for NBA prizes that include everything from tickets and games to merchandise and memorabilia. The NBA will promote the competitions on its broadcast partner networks throughout the season and on its digital and mobile promotions.

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With 1.1 million active users, FanDuel added $70 million in series D funding in September from Shamrock Capital Investors, NBC Sports and KKR, and it said it commands 70 percent market share. The company expects to generate nearly $60 million in revenue in 2014, representing 328 percent growth over last year. It has awarded more than $500 million in prizes this year.

NBC Sports is a sister company of CNBC, both of which are units of NBC Universal.

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Wednesday's announcement comes less than a week after another major score for the fantasy dailies category. FanDuel rival DraftKings, which has more than a million registered users—a number that has risen 12-fold this season—announced a multiyear deal with the NHL to become that league's official daily fantasy game.

The Boston-based start-up DraftKings, launched in 2011. It has expanded rapidly, signing deals with not only the NHL but several MLB and NFL teams.

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In August, DraftKings raised $41 million in Series C funding; it recently made a series of acquisitions of rival sites, including DraftStreet and StarStreet.

Fantasy sports have grown from roughly 500,000 people in 1988 to more than 41 million participants in 2014. While the dailies category represents only about 3 percent of the market, according to the Fantasy Sports Trade Association, it's a huge growth opportunity for the category.

"The daily sites are in customer acquisition mode where they realize there is a tremendous untapped audience. They are scrambling to generate as many loyal players as they can," Charchian said.