Share this on
The 12 Biggest Poker Stories of 2014: #10 The Rise of DFS

Well, hello there Daily Fantasy Sports, where did you come from?

The Daily Fantasy Sports or DFS industry has been around since 2006, when the industry sprang into being ostensibly to fill the void left by the passage of UIGEA, but the industry only started to gain attention outside of a small following in 2013.

The successes achieved in 2013 (spurred on mainly through the raising of investment capital) led to what can best be termed as a mini-explosion in 2014, as DFS sites turned that investment capital into a marketing campaign for the ages that brought a new level of exposure to the burgeoning industry.

Conventional print, online, radio, and TV ads were just the beginning of the push, as the two biggest DFS sites, FanDuel and DraftKings, played round after round of “anything you can do I can do better, I can do anything better than you,” inking partnership and sponsorship deals with sports leagues, teams, and professional athletes.

At the heart of their pro sports marketing integration were two specific deals: DraftKings inked a partnership deal with the National Hockey League (NHL), while FanDuel signed a similar agreement with the National Basketball Association (NBA). Both deals are believed to give the leagues equity shares in the DFS companies.

But this was just the tip of the iceberg in the two sites’ veritable arms race for pro sponsorships and partners.

Over the course of 2014, FanDuel signed sponsorship deals with multiple NBA teams (FanDuel’s NBA partnership does not extend to individual teams) including major market teams like the New York Knicks and Los Angeles Lakers, as well as the NFL’s Washington Redskins.

DraftKings kept pace with their chief rival, inking agreements with Major League Baseball (MLB); several NHL teams including the Boston Bruins, St. Louis Blues and New York Rangers; the Philadelphia 76ers of the NBA; and two prominent NFL franchises, the New England Patriots and the Denver Broncos.

DraftKings also partnered with entities outside of the four major sports, sponsoring the World Series of Poker (WSOP) and the World Poker Tour (WPT), as well as the Breeders Cup.

Another DFS site, DraftDay, has even joined forces with Vivid inc., which some (ok, most of you) will recognize as one of the largest porn companies in the world.

The partnerships noted above have led to:

· DFS advertisements at stadiums and at official online websites, touting the relationship between the franchise and DFS operator;

· Sports enthusiasts seeing their favorite athletes repping DFS sites in commercials;

· DFS branding all over the place, from the Breeders Cup to Fox Sports 1, to the WSOP telecasts on ESPN.

DFS = Yes: Sportsbetting = No

These partnerships are one of the key reasons for the growth of DFS over the course of 2014.

When these teams and sports leagues signed off on DFS it brought instant credibility to the industry. Furthermore, while giving DFS their seal of approval these same entities (sans the NBA) continued to espouse their long held position of opposing the legalization of sportsbetting – which was a big headline throughout the year thanks to New Jersey’s efforts at legalizing sportsbetting.

This drove a wedge between DFS and sportsbetting in the minds of potential customers, considering professional sports’ long held opposition to sportsbetting but embrasure of DFS.

Industry is still in the red

Despite the swathes of new players turning up at DFS sites for contests, and despite revenue growth of over 300% according to Eilers Research, DFS websites (including FanDuel and DraftKings) are still running massive budget deficits as they not only spend wildly to attract customers, but also compete against one another for market share.

In addition to the high player acquisition costs, DFS sites are also trying to find the sweet spot when it comes to enticing prize pool guarantees. Complicating this is the UIGEA’s strict stipulations that require Fantasy Sport contests to announce their prize pool beforehand – a prize pool that cannot be altered based on the number of participants – which often leads to huge overlays in DFS contests.

Several times in 2014 FanDuel and DraftKings have found themselves shelling out massive overlays. The restrictions imposed on DFS sites by UIGEA (which has a Fantasy Sports carveout) make it difficult to attract players with eye-catching guarantees and at the same time have a consistent turnout.

There is also growing concern from analysts and pundits as to the solvency of the industry’s current business model, which relies heavily on unlimited entries in order to meet the guarantees offered in their major contests. Analysts from the poker industry see this as unsustainable for a skill-based game, but the jury is still out on whether unlimited or even multiple entries is detrimental or beneficial.

You can read more about these issues in my two-part DFS series from November: Part 1 and Part 2.

Bottom line

2014 will go down as the year DFS landed on the map, but the industry’s fate could very well be decided in 2015, which I consider a make or break year for DFS companies.

Yes, DFS contests are growing in popularity and can no longer be cast aside as a mere niche subset of the Fantasy Sports industry, but the question now becomes: Can DFS providers turn a profit?

And of course there is the ever looming question of whether or not lawmakers will step in at some point and call for stronger regulations.

 

 

Related Articles

Steve Ruddock

Steve is veteran of the the poker industry, first as a player and now as a writer focusing mainly on the regulated U.S. markets and the politics of poker. Follow Steve on Twitter @SteveRuddock and at Google+.

Comments

comments