The fantasy sports business was dealt a blow the past few days as a report out of Minneapolis had Liberty Media shutting down its Fanball operation amidst reports of an impending bankruptcy. In the process, the long-running line of ‘challenge’ contests and other fantasy sports formats that were originally run by CDM Inc. would be slashed, along with other offerings under the name of Fantasy Cup and possibly NFBC/NFFC, who had also been bought out by Liberty in recent years.

Although no official word has come out of Fanball through the weekend, Charlie Wiegert, one of CDM’s original founders, did acknowledge ‘I am very sad for all the dedicated employees and for the loyal customers who supported the games and services for nearly 20 years’.

From comments I read on Fanball’s various message boards over the weekend, it appears that the company has also pared it’s current telephone/support staff to a bare minimum.

Fanball did accept entries for it’s Fantasy Football Playoff Challenge, which obviously began with the NFL Wild Card round this past weekend and will continue through the Super Bowl. However, the company is no longer promoting contests for the upcoming NASCAR season (starts February 20) or for it’s flagship ‘Diamond Challenge’ (MLB season begins March 31). As of now, Fanball’s current basketball/hockey contests are running without interruption and will presumably continue through the end of the current seasons in April.

As someone who has been involved in participating in games under the CDM/Fanball umbrella for most of its history, I hate to say that although I am somewhat saddened, I am not nearly as surprised as others in the fantasy sports industry.

I speculated about the shutdown of Fanball when the company quietly announced last August the end of their ‘Fanbucks’ redemption program, in addition to the ‘budget formats ‘of the basketball and hockey games not being held this year. Also, Fanball slashed about one-third of it’s staff last April; included in the purge were CDM co-founders Carol (pictured right) and Brian Matthews. Those might be enough clues of a company on it’s deathbed.

For those not familiar, St. Louis-based CDM started in 1992 with it’s Diamond Challenge, sponsored at the time by The Sporting News. In the pre-internet days, the game proved hugely successful with it’s main forms of correspondence being making player transactions over the phone and results received by snail-mail. Unlike fantasy sports which involved player drafts, the object of the game was to produce the best stats out of players within a $30,000,000 salary caps. Before each season, all players were given salaries based on past performances with rookies/unlisted players then being given a set salary once the season began.

Within time, CDM’s Challenge formula was also used for games in football, basketball, and hockey – and all proved successful for years, and made a pretty seemless transition to being an internet-friendly games, in time the majority of transactions, along with daily updated standings, moved from over the phone to being made on-line.

It has to be said that 18+ years is a long time to stay above water in a challenging changing landscape such as fantasy sports. Even so, it also has to be wondered what has led the company to this day, and the potholes the original company had to deal with along the way…

GOVERNMENT ATTEMPT TO BAN FANTASY SPORTS (1990s) – Those in on-line poker know quite well the 2006 bill regarding the Safe Port Act, which was piggy-backed along with a bill banning cash transactions regarding on-line poker, and was quickly passed by the outgoing House/Senate and stamped by President Bush. Some poker sites still do business with U.S. customers by using off-shore financial institutions as a middle-man, but still the bill basically crippled the online poker industry in the United States.

Congress likewise moved towards banning online fantasy sports in the late 1990s, but ultimately the courts ruled in favor of the industry, noting that fantasy sports is a ‘game of skill’ v. being a game of chance. The 2006 Port Safe Act bill contained language that specifically excluded fantasy sports, as well as lotteries and horse/harness racing.

Still, the 1990s issue led to the formation of the Fantasy Sports Trade Association to contest the threat to the industry at that time – with CDM hiring a Washington lobbyist as well as New York lawyers, which turned out to be just the first time the company had to fight legally.

MLBAM v. CDM – Up until 2005, CDM’s games had official licenses from Major League Baseball along with the other professional sports leagues. The game-changer came in 2005 when MLBAM signed a $50 million rights deal with the MLB Players Association to acquire the players ‘online rights’. MLB allowed ESPN, CBS Sports, and Yahoo licenses at that point, but refused to play ball with CDM, who then continued the Diamond Challenge game but then was taken to court by MLBAM. At issue was that the player’s names and statistics were the property of Major League Baseball. Two years later CDM finally prevailed in District Court – but although they won the case the damage was done financially, leading to the company being sold to Liberty Media/Fanball shortly thereafter.

LOSS OF SPONSORSHIP – As stated before, CDM originally had sponsorship with The Sporting News for much of the 1990s, and until the 2005 MLBAM case, by USA Today. Those sponsors gave CDM huge exposure, with entry forms and updates often provided in publications such as the USA Today paper and Baseball (Sports) Weekly. MSNBC and The Golf Channel, among others, have sponsored various games through the years. However USA Today parted ways with CDM immediately upon the 2005 lawsuit being filed, and CDM was never able to gain major sponsorship for it’s games since.

FANBALL TAKEOVER – The operation suddenly became known under many names. CDM was eventually sold to London-based Fun Technologies, who then sold to Liberty Media, which Fanball is run under. Fanball itself also filed bankruptcy in 2002, when Fanball operated as a company providing magazines and other media, along with providing an online service for ‘inside’ information on fantasy sports. Liberty Media also bought out successfully run entities such as Fantasy Cup (mostly NASCAR) and Tom Kessenich’s NFBC/NFFC fantasy baseball/football contests, which had gained much attention to recent years.

The result was a lot of the smaller guys being swallowed up by a larger organization, with the concept of customer service lost in the process.

CONCEPT SIMPLY GOT OLD – At its peak, around 1996/1997, the traditional trademark Diamond Challenge attracted over 15,000 entries playing for a grand prize, along with prizes for finishes in 25-team leagues and 250 team divisions. This past year the base Diamond Challenge topped out at around 3,000 entries. The concept in some respects had gotten stale, with players with cheap salaries (Jason Heyward in baseball last year an example) being literally on the rosters of every entrant. Also with many other contests being made available on the internet, there were simply more options.

CDM’s financial problems over the years did not help, with cases of winners being paid months later and one report at one time of a check or two being bounced (per complaints on CDM’s message boards). That obviously leads to lost business over time.

CDM GREED – In my opinion they tried too much stuff where they should have just known better, and should have just kept things simple rather than introducing strings such as Club membership (to be eligible for larger prizes).. Also, in 2000, CDM made the ludicrous announcement of launching a ‘Pro Wrestling Challenge Game’. Participants would get points for their wrestling by doing specific acts on televised pro wrestling programs, which at the time aired on Monday night. As you might expect, it took both the WWF (WWE) and WCW about two seconds to raise their objections, and the contest was quickly canceled. Pro wrestlers names and likenesses ARE trademarked, and probably gave MLBAM their idea to consider the statistics of it’s ‘entertainment’ to be their specific property years later.

CDM also toyed with bracket-style contests for the NCAA basketball tournament along with NFL ‘Survivor Pools’ over the years. That was until one year CDM continued the Survivor contest for the current year, but refunded entry fees. CDM’s statement at the time was that this was being done due to the ‘changing fantasy sports climate’. The truth: Survivor pools make the jump from being a ‘fantasy sports contest’ to ‘picking a winner of a game’, thus making the jump to being ‘gambling’. CDM was shaken down by the NFL or by a court or someone.

COSTS: For the full-service games there was costs for each transaction, which got extremely costly when at the last minute one decides he’s would be better off with ‘Player A’ and ‘Player B’ then Players X and Y. The result for myself and many others was winding up spending extra $$$, along with situations when breaking injury news concerning players hit at the last minute – which was very frustrating. In recent years Fanball offered a package for its game where a certain amount was paid up front. The upside was making unlimited transactions without additional cost, the downside was not being able to basically quit (not making any more moves) once it became obvious an entry would not be in contention for money.

RECESSION – The effect of the economic downturn has hit here and still hits, just like everywhere else. People not making as much, people are losing jobs, they have less discretionary income. Not much that’s not already known.

So what happens from here? The Fanball Message boards are filled with many grass roots ideas to create a new company – and the likes of Carol Matthews and Tom Kessenich could very much take their own entities back or create new companies. Still, the short-term solutions seem far fetched, especially with the new MLB season just 2 ½ months away. And people can be ambitious about starting a company, until faced with the start-up costs and hardware costs, and facing the same legal issues that CDM has dealt with over the years.

Also, I noticed the FSTA is currently run by Paul Charchian, one of Fanball’s original founders; not good considering Fanball’s financial history. Good comedian – but I would rather have someone like Kessenich running it and not from the Original Fanball camp that has now gone broke twice.

I should also note that someone found a site with one of Fanball’s baseball contests that apparently would be sponsored by cable provider Comcast. Is this something that has been, or is in the works?? There are many unanswered questions right now.

CDM/Fanball has had a good run, and their loss is significant in the fantasy sports industry – I will keep you updated on any new developments in the coming days/weeks.