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Yahoo! Sports Forms ‘Alliance’ With NBC Sports, Time to Invest?

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Yahoo! (YHOO)Over the past few years, Yahoo! Inc. (NASDAQ:YHOO) has seen its fair share of criticism for a declining search engine market share and a lack of focus on mobile, but one area that has remained a bright spot in Sunnyvale is Yahoo! Sports. It’s estimated that the sporting news site is the second most popular of its kind in the United States, slightly behind The Walt Disney Company (NYSE:DIS)‘s ESPN, and ahead of Bleacher Report, which was acquired by Time Warner Inc. (NYSE:TWX) earlier this year.

While the introduction of Marissa Mayer as Yahoo’s new CEO has brought renewed focus on mobile and its e-mail services, the company is not resting on its laurels in the realm of sports. Earlier this week, Head of Yahoo! Sports Ken Fuchs announced “a new content alliance” with NBC Sports Group, via its corporate blog. In the post, Fuchs mentioned a few things that should have any sports fan’s mouth watering, including: (1) collaborative written content, (2) live streaming of thousands of sporting events, (3) more original video programming, (4) an exclusive partnership with NBC Sports’ Rotoworld fantasy service, and (5) a greater focus on local sports coverage.

Regarding point No. 4, it should be mentioned that while there aren’t any official user statistics, it’s widely accepted that Yahoo! Fantasy Sports already has more user accounts than peers like ESPN, CBS Corporation (NYSE:CBS), and Fox Sports, a subsidiary of News Corp (NASDAQ:NWSA). A partnership with Rotoworld only strengthens the breadth of this behemoth.

Though it’s tempting to believe that fantasy sports is a niche offering, this couldn’t be further from the truth. On the whole, the fantasy sports industry has grown by leaps and bounds since the proliferation of Web 2.0, currently generating $3 to $4 billion dollars in revenues per year. Since 2007, the number of active fantasy players has grown 60%, and surpassed 30 million people this past year. A whopping 20% of American males age 12 and older participate in at least one fantasy league each year.

Looking at fantasy sports in particular, we speculate that Yahoo’s decision to partner with NBC Sports was a natural reaction to ESPN’s integration of its own fantasy services into its various media outlets. Traditionally, the ability to advertise and feature analytical content has been an advantage of ESPN over Yahoo, so it’s encouraging to see the scales balance, so to speak.

Qualitatively speaking, a slightly outdated report by FantasyPros has determined that Yahoo’s staff is more accurate than the experts at ESPN, which undoubtedly have an effect on the service’s popularity. The inclusion of marketing materials in NBC Sports broadcasts like NFL Sunday Night Football, the U.S. Open, a potential MLB package (2014), a comprehensive NHL package, and Premier League Football (2013), will do wonders for the reach of Yahoo’s fantasy sports service.

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