If there are lingering questions about the legality of daily fantasy sports, you wouldn’t know it given the meteoric rise in popularity of FanDuel and Draft Kings with game players, major sports leagues, and television networks.
While the conversation about the legalization of sports gambling moves forward at a tortoise-like pace, regardless of the effects NBA Commissioner Adam Silver thinks it may have on business, daily fantasy sports (DFS) continue their remarkable surge as a viable and potentially more compelling alternative.
DFS games are a hit with investors as well as sports fans, with Draft Kings getting a $250 million investment earlier this month from Disney, the parent company of the popular sports network ESPN. The infusion and the backing from the world’s leading sports television network will help Draft Kings even the playing field with FanDuel, which claims to have an 80 percent market share. Not to be outdone, FanDuel is reportedly on the verge of securing financing that would raise its total valuation to $1.5 billion.
Not long ago, DFS was a nascent industry. It has quickly become a two-horse race. Both firms are competing fiercely for new customers and to get endorsements and partnerships with teams and leagues – relationships that have become deeply integrated and symbiotic at an astonishing pace.
The NBA took an equity stake in FanDuel last year and adopted the brand as its official daily fantasy sports game. Even though the regular NBA season – and traditional fantasy season – is finished, NBA fantasy gamers can still wager on daily sites throughout the playoffs – a period that extends well into summer, and one where fan interest is often minimal.
Because it’s common knowledge, even before the season begins, as to which teams will be competing at the end for the championship (San Antonio, the LA Lakers, and/or LeBron James’s team du jour), the drama and excitement is minimal in most of the NBA’s stultifying 16-team tournament. DFS is proving to be a game changer, keeping fans interested in watching endless rounds of bad teams getting clobbered by good ones and mediocre teams dueling with one another.
Major League Baseball, which just two years ago expressed hesitation over the legality of DFS, has jumped all-in and is heavily promoting Draft Kings on its website and even its email newsletters. Both MLB and ESPN have dedicated daily fantasy sports vignettes featuring pundit predictions on the best plays of the day.
Plain and simple, these games keep fans engaged and thirsting for more, and the leagues and television networks are doing everything they can to fuel the fire. The growth of the industry is truly remarkable. FanDuel reported $36.8 million in revenues in the fourth quarter of 2014 – four times higher than the third quarter – and $57.2 million for the entire year, up from just under $15 million in 2013. The growth has stunned even FanDuel staff, who knew their product would be popular but never imagined this extent.
Remarkably, despite their ubiquitous advertising schemes – ads promoting the websites of Draft Kings and FanDuel now pepper sports fans from all angles on television, radio, web pages, and even podcasts, both companies have been able to keep customer acquisition costs remarkably low, adding customers at an astonishing rate over the past year.
With its legitimacy growing by the day, DFS is rapidly expanding its turf and influence on the regulatory as well as the consumer front. FanDuel, the largest DFS provider, last week officially joined the Internet Association, a trade group representing the interests of powerful tech companies, including Google, Amazon, Facebook, and Pandora, in Washington D.C.
The move sends a powerful signal that the firm is ready to support and defend its interests. “As FanDuel continues to grow and redefine how sports fans play fantasy sports on the Internet, it was critical that we joined the Internet Association to participate and engage on important policy issues affecting Internet companies,” said Nigel Eccles, the company’s CEO.
The Fantasy Sports Trade Association, an umbrella group that has traditionally represented the entire industry of ham and egger fantasy providers, has evolved into a group whose raison d’etre is now promoting DFS while protecting the so-called fantasy sports exemption in the 2006 Unlawful Internet Gaming Enforcement Act – an exemption which laid the legal groundwork for DFS’s existence.
The group has shown it will fight against actors who push the envelope too far and raise the risk of scrutiny by authorities. Last year, it booted Tradesports – a sports prediction market that arose from the ashes of Intrade – from the group after concerns that its website could cause reputational damage.
With an effective self-regulator and the institutional backing of the major sports leagues and TV networks, DFS will not be going away anytime soon. Even the Indian tribes are looking for a piece of the action – Draft Kings CEO Jason Robins will deliver the keynote address at the Indian Country Online Congress in June.
As they say in the investment world, the trend is your friend. DFS is on a remarkable upswing as an alternative to online gaming and sports wagering. The gaming world should take particular notice of how DFS appeals to young people who are abandoning slots and other traditional casino games by the droves.
