The experience of fantasy sports start-ups DraftKings and FanDuel is seen as a cautionary tale for many in the sports business. Both rose to sky-high valuations only to crash into a regulatory wall as legal challenges complicated their ability to solicit payments from users. Last year, the two companies agreed to merge amid a broader restructuring.
But a group of powerful Washington-area investors thinks it’s found a way to engage sports fans in a similar way, minus the legal trouble.
The Washington professional basketball and hockey holding company Monumental Sports & Entertainment, Silver Spring-based Discovery Communications and former Washington Post owner Graham Holdings are joining a $12 million investment in WinView, a Silicon Valley start-up that lets users make minute-by-minute predictions on their smartphones during sports games. Users compete against one another and win small cash prizes if they’re right often enough. The firm’s executive chairman is Tom Rogers, a former television executive who headed NBC Cable and TiVo.
“We kind of put together a royal flush of Washington-area companies to get involved here,” Rogers said.
The idea is to let sports fans play along with live sporting events, harnessing the natural grandstanding and trash talking that happens during live events and watch parties. It’s different from sports betting, the company says, because there’s no download fee and users don’t put money down when they make predictions. The company makes money from advertising.
WinView is actually the third restart pushed forward by founder Dave Lockton, a sports executive responsible for founding and selling multiple firms. He founded the Ontario Motor Speedway among other media companies, briefly served as publisher of the California Business Magazine in Los Angeles and operates his own venture fund, Lockton Ventures.
Lockton’s first shot at interactive gaming was a company called Interactive Network, which he founded in the late 1980s before cellphones were commonplace. To make predictions on games, you had to buy a separate box that would sit on top of your entertainment unit. You couldn’t take it to a sports even or carry it in your pocket, so it attracted only the most dedicated, couch-ridden users.
“We hit the ceiling on the number of people who would pay $200 for this extra device, and the thing went kaput,” Rogers said.
Lockton tried again in 2005 with a company called Airplay Inc., which brought the idea onto cellphones. The company won investments from Silicon Valley giants like Qualcomm, Sprint and Motorola, but again found itself constrained by what mobile technology could do at the time.
“The device got in the way again … it went kaput again,” Rogers said of Lockton’s second try.
Then came the smartphone. By 2013, Lockton was showing up at venture capitalists’ doors with some 30 patents backing up the technology behind WinView. He persuaded deep-pocketed investors, including former Madison Square Garden chief executive Hank Ratner, that his app could capture a new generation of smartphone-obsessed fans.
He pitched it as something distinct from fantasy football, where bets are locked in before the game begins. For advertisers, it would be another way to market to sports fans when their eyes aren’t transfixed on the television.
“If I’m going to be looking at my phone no matter what it might as well be related to the game I’m watching,” said Zach Leonsis, who helps his father Ted Leonsis scout for investment opportunities at the family’s majority-owned Monumental Sports.
It’s too early to tell if WinView will catch on. The WinView app has 130,000 downloads for Android and iPhone. WinView executives say about 40 percent of those users use it regularly.
As long as it’s considered a game of skill and not luck, WinView executives say, the app should be legal in all 50 states. As it stands the company makes its money solely through big-money advertisers such as Pepsi and Mountain Dew. But that could change: executive chairman Rogers says he wants to start letting users place small bets through the app in states where it’s legal to do so.
Zach Leonsis says he hopes sports betting will become legal across the U.S., following what’s happened in some European countries. That would open WinView up to a busy group of users here that already find ways to bet on sporting events. It could also place the company on a collision course with the same forces that have dogged fantasy football.
Zach Leonsis uses Uber as an example of a company that “forced regulators to rewrite some rules,” suggesting regulators will ultimately bend to what users want.
“Any new disruptive technology is bound to butt heads with regulators but ultimately it gets worked out,” Zach Leonsis said. “Right now [WinView] is a game of skill, but if regulation ever allowed for gambling this would be a natural transition for the app.”