Daily fantasy backlash? Players still turning up

Andrew Harrer | Bloomberg | Getty Images

As DraftKings and FanDuel face increased scrutiny from the government and the public after alleged "insider trading" practices, many people are becoming even more critical of their deluge of advertising that promises to make the every man a winner without addressing the scandal.

Ad backlash or not, the controversy doesn't seem to be slowing down daily fantasy players. According to analytics company SuperLobby, both sites attracted their highest number of entrants this weekend, a total of 7.4 million players. It also was the most profitable week of the season for both companies who took in a total of $45.6 million in fees, according to SuperLobby. DraftKings confirmed the record-setting weekend.

Kam Chancellor of the Seattle Seahawks forces Calvin Johnson of the Detroit Lions to fumble near the goal line during their game at CenturyLink Field on Oct. 5, 2015, in Seattle.
DraftKings, FanDuel probe ups daily fantasy doubts

Crisis management strategists said the companies are handling the situation appropriately and should be able to weather the storm for now, barring any legal repercussions. Corporate crisis firm Group Gordon CEO Michael Gordon said that when it comes to its advertising and sponsorships, it's smart for DraftKings and FanDuel to continue business as usual until they are found at fault.

"The issue here is that perhaps the scandal has not reached DefCon 1 level yet, or DefCon 2," he said. "All the (media) sites still need them to pay their bills."

Gordon said that at some point the daily fantasy companies will have to address the issues surrounding them and show a level of "contrition." However, until they are found at fault, the industry should continue their positive messaging.

"That is a better PR message now and a better advertising message later," he said. "The issue is that not all the facts have come to light."

Both companies are pushing forward with their aggressive advertising agendas, said media agency Noble People broadcast director Aaron Perlstein.

"Unless there is a huge backlash, this is just a blip on the radar," he said. "TV networks at the moment have zero interest in getting in the way."

This NFL season, the daily fantasy firms were among the top advertisers across all media. However at the height of the scandal, many people noticed one of their top partners, ESPN, scaling down their affiliation with DraftKings.

DraftKings said ESPN pulled sponsored segments for its shows because the company was in the news cycle, including integrations into its newscast and "sponsored by" digital billboards. The daily fantasy company, however, led the charge to decrease its other advertising with ESPN for about eight hours. A few days later, its advertising buys returned to normal.

ESPN declined to comment.

New York Attorney General Opens Inquiry Into Fantasy Sports Sites

"At this point (daily fantasy companies) are having to make decisions based on legal realities," said Ervin | Hill Strategy president Dan Hill. "If they think there's a good chance they're going to be shut down at one point, they're thinking 'Let's maximize everything we can at this particular moment.' "

Paul Hastings attorney Behnam Dayanim pointed out that there's nothing legally wrong with advertising daily fantasy, even if its legal status is being threatened in several states.

"The fact that DraftKings and FanDuel continue to advertise does not create any greater legal exposure for them," said Dayanim, who chairs the firm's advertising and promotions practice. "It magnifies their presence, and so optically it makes more folks aware of them, even though they have quite high public awareness to begin with."

What he worries about is the legality of the core business going forward. Before the scandal erupted, about a dozen states had introduced daily fantasy regulation bills in their legislature. Dayanim said more attention is going to be paid to the industry by political officials.

"It's incredibly important for fantasy sports sites to show strong internal compliance to ensure safeguarding of funds and to prevent collusion or cheating on sites," he said. "There's a risk that the business could be found to be illegal, but it's clearly the case that the industry believes it has a reasonable basis to defend its legality."

Still Dayanim and Hill admitted they still played daily fantasy this weekend.

"I didn't put enough money in to be concerned," Hill said.

Disclosure: Comcast and NBC are investors in FanDuel.