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Flight of fantasy: RotoWire.com folks live their dream in Madison

Dennis Punzel  —  8/11/2008 4:04 pm

Peter Schoenke admits his story is the stuff of fantasy.

The short attention span version goes something like this: Schoenke and a couple of his buddies at Northwestern University come up with the idea of a fantasy sports business and create the concept of daily player notes and analysis. The business becomes a big hit and is sold for a relative fortune and they move to Los Angeles. Their new parent company, however, goes belly up in the dot-com crash. They re-form the company under a new name and eventually move to Madison, where they operate the largest privately-owned fantasy sports operation out of an unremarkable looking building on North Bassett Street.

But as unlikely a tale as it might seem, take away the bankruptcy and maybe the cross-country moves, things have gone pretty much according to Schoenke's plan.

"I could easily beat myself up over the money we could have made had we played our cards perfectly, but where we are now is about what we had hoped for when we started," Schoenke wrote in a recent blog on ESPN.com. "We just never expected the wild ride of being paper millionaires and bankrupt along the way."

The idea for what would originally become RotoNews.com was born on the trading floor of the Chicago Board of Trade. Schoenke, then a reporter for Dow Jones Newswire, was impressed by the amount of information available on companies just by typing in a stock symbol. If only, he thought, you could get as much information as easily on the fourth outfielder for the San Diego Padres. Now, that would be truly useful.

So in 1997 he and partners Herb Ilk (the technology guy) and Jeff Erickson (the sports guru) jumped on the Internet with RotoNews, the first real-time player information statistics Web site for fantasy sports.

"It's funny," Schoenke says, "I started the company with two guys who didn't even own computers at the time. But it was a hit from day one. It just took off."

RotoNews quickly became one of the top 10 trafficked sports Web sites. In 1999 the partners sold their company to Broadband Sports and moved to Los Angeles to operate the site under the new owners.

"We were chasing the dot-com dream like everyone else back then," Schoenke says. "We had a lot of traffic, but not a lot of revenue."

When the dot-com bubble burst in 2001, Schoenke, Ilk and Erickson were back to square one. But they were undaunted.

"We liked what we were doing," Schoenke says, "so we just walked across the street and started the company up again and changed the name to RotoWire.com."

Fantasy explosion

While the dot-com bubble was popping, the fantasy sports wave -- which began with the invention of Rotisserie League Baseball in 1980 -- was just building momentum.

For the uninitiated, fantasy sports participants build teams of real players and compete with others based on the statistical performance of those players.

Once the province of extreme baseball geeks, fantasy sports have spread in both acceptance and participation.

"When I was in college if I asked somebody to join a league, they looked at me like I was inviting them to a Star Trek convention," Schoenke says. "Now when people ask what I do for a living, I ask them if they know anybody who plays fantasy football and they say, 'Yeah, my uncle plays ... he's really into it.' Even people who don't follow sports know what fantasy sports are. That's been a huge advance for us."

The Fantasy Sports Trade Association estimates that 19.4 million people play fantasy sports, and 34.5 million people have played fantasy sports at some time. Of the people who play fantasy sports, 85 percent play football and 40 percent play baseball.

But it doesn't stop there. RotoWire covers pro basketball, hockey, auto racing, golf, college basketball and football, as well as international soccer. "If you want the latest news on who's going to go from one English soccer team to some team in Spain, we cover all that," Schoenke says.

It all adds up to big business. Fantasy sports have an estimated annual economic impact of $3 billion to $4 billion.

Online impact

Much of that growth can be attributed to Internet.

"The Web just lowered the barrier to entry," Schoenke says. "Before, you had to be a really hard-core sports nut like myself, who was willing to sit down at the computer every two weeks and type in the baseball stats. The Internet made it so the average fan could play because the statistical work was eliminated."

That's where RotoNews/RotoWire came in. RotoNews provided two basic services: Commissioner services -- the software used to manage rosters and compile statistics and standings; and insider information -- the innovative and oft-imitated player news/analysis format.

Originally, the company offered its services free, relying on advertisers to provide the revenue. After its reincarnation following the bankruptcy, it switched to a pay format. While its commissioner services business has shrunk in the face of competition from giants like ESPN.com, CBS Sports.com and Yahoo, the information side of the business continues to thrive.

In addition to selling subscriptions ($59.99 annually for a basic subscription), RotoWire provides content for ESPN.com, Yahoo, Fox Sports.com, NBA.com and NFL.com. That's a measure of the respect those media giants have for the quality of RotoWire's information, compiled by its staff of 10 full-time employees with the help of a network of between 80 and 100 contributors scattered around he country.

"It's a 24/7 news operation, and we cover every team religiously," Schoenke says. "The guy who covers a team usually lives in that city and knows the team backward and forward. If there's an injury in tonight's game, he knows what that means. We have our eyes and ears out there so that if any scrap of information on a player shows up, the fantasy consumer gets it right away.

"There are a lot of free resources out there, but they have their limits. It's just a lot of work to keep everything updated 365 days a year. We're the only ones who still charge for player notes, but the reason we do is we're better than the competition."

Matthew Berry, aka "The Talented Mr. Roto" and ESPN's senior director of fantasy, says RotoWire's credibility in the industry is one of the reasons ESPN uses it to provide its player news content.

"They are well respected within the industry and I'm a fan of those guys both personally and professionally. Peter Schoenke and his crew are true innovators," Berry says.

Branching out

Roto Sports, Inc., the company's legal name, has several other lines of business:

• Annual fantasy baseball and football magazines.
• Databasesports.com -- a historical statistics site (free and ad-driven).
• Fantasysportsadnetwork.com -- an advertising network for leading fantasy sports sites.

RotoWire also has daily fantasy shows on XM satellite radio, with Erickson, who remained behind in Los Angeles, hosting the baseball show and Chris Liss doing a football show.

The biggest challenge going forward, Schoenke says, is keeping up with the ever-changing technology and methods of delivering the information. That's where Ilk, the technology chief, comes in.

"The big thing right now are the community sites like MySpace and Facebook," says Ilk, an Oshkosh native and chemical engineering major at Northwestern who has learned computer technology on the job. "There's a lot out there that keeps changing and we want to get our foot in the door."

Schoenke sees the growing technological demands as a sign that fantasy sports will not be just a passing fad, a remnant of the baby boomer generation.

"People wonder if fantasy sports might be the CB radio of our era, where the younger people might not be that into it," says Schoenke, 38. "But every study I've seen is that people 25 and under are playing at the same rate or greater than people in their 30s or 40s or 50s."

Making Madison home

So how did a company born in suburban Chicago that came of age in Los Angeles end up in Madison, occupying a four-room suite just upstairs from the Wisconsin Democracy Campaign since 2005? Chalk one up to the power of Money Magazine and the like.

"After a few years in Los Angeles we just started wondering, 'Why are we here?' " recalls Schoenke, a Minnesota native. "Every survey you read ranks Madison right at the top. We decided to move the headquarters of the business and Madison looked like a great place. Rents were cheap, transportation was cheap, especially coming from L.A.

"We don't really have a high profile here in Madison because all of our customers are national and international. We don't have a need for local advertising or a big sign outside. So we're kind of hidden from the local sports world.

"But there's a culture of sports here that there wasn't in Los Angeles. It was very hard to find interns out there because nobody wanted to get in the car and drive for an hour from Pepperdine or USC to work for little or no money. Here, the culture of sports is something people live and die for. It's been a great pipeline for talent."

It's a pipeline he plans to keep tapping for as long as possible.

"I don't really know what the future is for the business," Schoenke said. "I would've never thought it would get this big. ...

"We kind of went for it one time and tried to go public and make a million dollars. We kind of learned our lesson the hard way -- that if you just focus in on the business and keep growing it and making it better, it will grow in value and things will be good."

For some, a fantasy come true.

Dennis Punzel  —  8/11/2008 4:04 pm