Microsoft’s (MSFT) proposed acquisition of Yahoo (YHOO) has Google (GOOG) worried, but it might worry fantasy sports fans as well. If Yahoo is split up, it is likely that Yahoo Sports would draw intense bidding. ESPN and CBSSports, together with Yahoo the clear leaders in fantasy sports, would be interested in taking a commanding share of the marketplace. Unfortunately, if Yahoo were acquired by CBS or ESPN, its free fantasy sports would be eliminated. Stay tuned to sportswrap for continuing coverage of this development.

Currently, nearly all fantasy sports contestants use one of the three well-established web hosts—Yahoo Sports, CBS Sports (formerly Sportsline.com), or ESPN. Yahoo Sports and CBS Sports are generally perceived as the market leaders in terms of customer volume. ESPN is not far behind, and may actually lead in total revenue according to one informal estimate.

In terms of pricing strategy, each of these three web hosts implements a different approach. Yahoo Sports has always offered free hosting as a way to attract more viewers to their revenue-generating advertisements. CBS Sports, by contrast, charges a small fee, which is now up to $129.95 per league, or approximately $13 per customer. ESPN, meanwhile, has varied its pricing strategy over the years. Initially ESPN used its strong brand recognition to justify the industry’s highest fees of $25 per customer. However, more recently, ESPN has attempted to compete on price point more directly against Yahoo.

Based on these three disparate pricing strategies, Yahoo Sports plays a very important role in limiting price increases in the fantasy-sports hosting market. Presumably, if Yahoo were to leave the market, not only might free fantasy hosting disappear, but ESPN and CBS Sports might feel less constrained against increasing their own customer fees.

from abovethelaw.