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How bright is the future of daily fantasy sports?

Daily fantasy sports have opened up new revenue opportunities for not only startups and entrepreneurs but also media houses. How does DFS look like in future?

Fantasy sports have existed since the late 1980’s, but its popularity has shot up especially in over the last 10-years and it’s now a cultural phenomenon in North America & other countries. It has also helped drive record TV ratings and revenues for various sports. Daily Fantasy Sports (DFS) is a subset of the broader Fantasy sports industry and was formed largely due to a carve-out in the UIGEA of 2006. Essentially this carve-out ruled that DFS is a game of skill and therefore, not subject to Internet gambling laws.

DFS: The recent surge in popularity

Growing consumption of sports fueled by TV > web > print > social > fantasy = virtuous circle.
 / This provides instant gratification & engaging 2nd screen experience.
 / Serves as a viable alternative for some players who do not have access to sports.
 / Attracts a number of casual & professional poker players given similarities in underlying game mechanics and revenue model.
 / Increasingly large Guaranteed Prize Pools (GPPs) are also attracting new users & serving as a new alternative for some instant ticket / lottery players.
So is DFS a new disruptive online consumer technology industry? Perhaps, it shares many characteristics with other new popular online consumer tech verticals.
 / DFS is now a new way to watch / consume sports.
 / It encourages social/mobile engaged audience; provides a true 2nd screen experience.
 / Gives instant gratification / one-click transactions.
 / It’s a highly scalable business model with low CapEx requirements.

The Future of DFS : Bold prediction #1 : TV ratings would surge

 / TV ratings for DFS tournaments would begin to soar in CY17 & surpass “World Series of Poker” (WSOP) viewership. New ESPN reality TV series “The Real Men of Daily Fantasy Sports”.
 / NBA regular season TV ratings would begin to steadily increase and hit new highs in CY18 as DFS helps drive renewed interest (some parallels to what season long fantasy did for NFL).

The Future of DFS : Bold prediction #2 : Hey days are here

2013-2015 will likely be remembered as the hey-year for DFS from a player perspective due to large overlay opportunities and noticeable skill gap between “grinders” and “casual”. This will not last as the market becomes more efficient.

The Future of DFS : Bold prediction #3: Biggest media houses would kill for DFS

Well, they are already in the space:
 / ESPN, Fox, CBS, NBC are all major beneficiaries of the substantial ad spend by FanDuel & DraftKing. Comcast Ventures and NBC Sports Group are existing equity holders in FanDuel.
 / Sports Illustrated (owned by Time) launched Fan Nation (Baseball DFS) last year.
 / IAC/Interactive Corp owned DraftStreet before selling it to DraftKings (last year).
 / NBC Sports acquired RotoWorld last year.
 / Facebook (who is also here today!) is becoming increasingly involved via targeted advertising /mobile app downloads, while Google is benefiting from key word searches.

The Future of DFS: Bold prediction #4 : The business models would largely change

The underlying model for DFS is largely borrowed from the online poker world and ripe for innovation, which should lead to new successful entrants. DFS industry should begin experimenting with new revenue models and figuring out ways to monetize large & growing user base. Also, female DFS players is a whole new market waiting to be tapped.

The Future of DFS: Bold prediction #5: Other sports to follow after soccer

DFS begins to gain awareness in Europe as Fantasy Soccer begins to gain traction / mindshare and some DFS companies begin sponsoring major soccer clubs (MondoGoal has already begun doing this & recently partnered with FC Barcelona!). Also, expect other popular sports (outside of US) to gain traction including: Cricket, Rugby, and Formula 1 Racing.

So what does it say about the future of DFS?

DFS is still a niche industry, but growing rapidly and becoming an integral part of how we watch and consume sports. This industry has the potential to become a new disruptive online consumer entertainment industry.

Biggest risk for the future growth of DFS is not regulation but rather the ability to penetrate casual player market and avoid becoming too hardcore. Many lessons to be learned from the rise and fall of US online poker industry.

Expect business model to go through some transitions over the coming years, which could lead to the emergence of new companies and market share gainers. DFS industry should start thinking about new ways to monetize growing user base & website traffic.

Support from the major sports associations is a big endorsement for the DFS industry and reduces future regulatory risk. We believe it’s only a matter of time before the NFL makes a major investment into the DFS industry.

This is our analysis of the DFS industry and we’ll likely be wrong on a number of predictions, but it’s vital to keep an open mind about this fast growing & dynamic industry.

IN A NUTSHELL
  • DFS provides instant gratification through second screens
  • It’s a new way to watch and consume sports
  • TV ratings would surge further due to DFS
  • More media houses would join in
  • Business models are likely to change
  • After soccer, several other DFS games would open up for users

About Vinfotech

Vinfotech creates world’s best fantasy sports-based entertainment, marketing and rewards platforms for fantasy sports startups, sports leagues, casinos and media companies. We promise initial set of real engaged users to put turbo in your fantasy platform growth. Our award winning software vFantasy™ allows us to build stellar rewards platform faster and better. Our customers include Zee Digital, Picklive and Arabian Gulf League.

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