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Innovation Economy

Sports sites find staying in the game isn’t easy

One start-up, StarStreet, lets users trade players, such as Tom Brady, the same way they would trade commodities. One start-up, StarStreet, lets users trade players, such as Tom Brady, the same way they would trade commodities. (Jim Davis/ Globe Staff)
By Scott Kirsner
Globe Columnist / January 23, 2011

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Shares of Tom Brady had a decent run this season: The New England Patriots quarterback IPO’ed at $2.64, and closed last weekend at $3.77. But just as Brady’s shares finished trading when the Patriots season ended, the market value of New York Jets’ quarterback Mark Sanchez was starting to rise.

The shares in Brady, Sanchez, and many other NFL players can be traded on an online exchange run by Cambridge-based StarStreet Inc. StarStreet is one of several Boston-area Internet companies hoping that tapping into sports fans’ passions can power them to profitability.

Most are still small, with just a few employees and minimal funding. One of the biggest, with 25 employees, is Foxborough-based Quick Hit Inc., which recently added the Kraft Group, owners of the Patriots and the New England Revolution, to its roster of investors. Quick Hit has raised $18 million for its Web-based football strategy game.

Not surprisingly, many digital sports entrepreneurs are themselves fanatics. StarStreet founder Jeremy Levine collected trading cards as a kid, assembling imaginary teams with his friends. Once he accepted that his athletic abilities wouldn’t put his mug on a card, he set his sights on becoming general manager of a Boston sports team. Now, at 24, he says he has decided to take “the Mark Cuban route.’’ Cuban sold his tech company to Yahoo back in the dot-com era, then bought the Dallas Mavericks NBA franchise.

StarStreet invites players to plunk down $25, which they use to buy shares in specific players. For its first season of trading, StarStreet hasn’t taken commissions on trades, though it will eventually.

Levine describes StarStreet as a “zero sum’’ market, meaning that as one athlete’s value rises, another’s must fall. About 200 traders have been active over the football season, and StarStreet will launch trading in basketball players just after the Super Bowl.

Levine contends that StarStreet players aren’t gambling, since it requires skill to select athletes most likely to have a good string of games. (He says he has an attorney’s opinion to back him up.) And he says he’s not creating a securities market, which might require government oversight.

But if StarStreet proves successful, it could attract regulatory scrutiny. Two Boston lawyers I spoke with last week had different takes on StarStreet: One said it might be viewed as a lottery, and the other said the shares of athletes could be construed as futures contracts.

A similar site, launched in California in 2009, but didn’t run into trouble from regulators. OneSeason.com, funded by Waltham venture capital firm Charles River Ventures, got sacked a different way: It didn’t attract enough users, says George Zachary, partner at Charles River.

Another game developed locally, Gameday Tycoon, invites players to pick the team they think will prevail in a given match-up, but there’s only virtual money at stake. Played within Facebook, Gameday Tycoon focuses more on the opportunity to track who’s best at predicting winners within your social circle.

Founder Erik Chan, who launched Gameday Tycoon last year, just a few months after finishing business school at MIT, says he has been attracting lots of players interested in the National Hockey League. “My assumption is that there just aren’t enough fantasy hockey games for people to play,’’ he says. The game generates money by selling virtual currency and “reputation points,’’ which raise a player’s status in the game.

Chan says simplicity has been the guiding design principle. “On the Web, users don’t want to read, learn, or think,’’ says Chan, who earlier worked as a video game programmer. “With a console video game, because you’ve bought it for $50, you’ll give it your time and make a commitment to figure out how it works.’’

A group of local media entrepreneurs (including Scott Cohen and Frank Hertz, who were part of the team that originally built Boston.com, the Globe’s online affiliate) is about to unveil a site called FanTab.com. Their plan is to use the site and a companion mobile app to collect fans’ opinions. Want to know how Red Sox Nation feels in advance of spring training, or how Patriots season ticket-holders are reacting to the latest draft picks? FanTab aims to chart fans’ feelings, and deliver that information to marketers who may want to target their advertising more intelligently, buy TV spots, or splash their logo around a stadium.

Of all these sports businesses, Quick Hit is the oldest (founded way back in 2008), and most successful at attracting players, though it isn’t yet profitable. The company says more than 3 million people have registered to assemble fantasy football teams and pit them against a computer-coached opponent in an animated, online contest. This week, the company is launching a version of its game that can be played within Facebook.

Quick Hit’s game is free to play, but the company sells ads that appear within the game. Players can also buy virtual items, such as offensive plays their teams can run.

Quick Hit chief executive Jeffrey Anderson says partnerships with sites like NFL.com, Yahoo Sports, and Fox Sports have been instrumental in attracting large numbers of players. But few partnerships come without strings attached. Often, highly trafficked sites ask for a share of the revenue produced by Quick Hit, or they may charge a small referral fee for every new player who registers.

While fans’ dedication to their favorite teams can sometimes seem an endlessly renewable resource, building a viable online sports business isn’t a breeze. “It’s a highly competitive market,’’ Anderson says.

Professional sports franchises, after all, spend millions of dollars a year stoking fans’ enthusiasm not to mention the free promotion they get from ESPN, Sports Illustrated, and other media. “On the Web, you’ve got a tremendous flow of users who love sports, and might potentially be interested in your game,’’ says Chan. “But it’s also kind of a ‘catch them if you can’ situation.’’

Scott Kirsner can be reached at kirsner@pobox.com. Follow him on Twitter @ScottKirsner.