Fees Charged By DraftKings And FanDuel Are A Big Part Of DFS
Legal Sports Report

View: The Real Problems Facing Daily Fantasy Sports Have Nothing To Do With High-Volume Players

Daily Fantasy Sports problems
Editor’s note: The writer is a high-volume professional daily fantasy sports player.

There’s a fundamental lack of understanding of the major issues facing the daily fantasy sports industry by reporters, players and other stakeholders alike.

I’m a high-volume player. I frequently enter the maximum number of lineups into various contests. And I lose. A lot.

Returns in DFS are lumpy. Generally, profit comes all at once. There are countless stories of high-volume players winning large amounts of money in a single day. What you aren’t aware of are the tremendous losses sustained in the weeks or months leading to the win in guaranteed prize pool contests (GPPs).

It’s not easy to profit, even if you’re good at DFS

FanDuel, DraftKings, et al command large fees for what are already high-variance contests. Everyone loses a lot. This is the true reason why one percent of players generate all of the returns.

Let’s take a look at GPPs:

  • Contest payouts are usually top heavy and come with high fees (~13 percent).
  • If you aren’t placing in the top 5 percent, it is incredibly hard to profit.
  • The minimum payout on DraftKings is not even 2-to-1.

Simply put, GPPs are simply a losing proposition for most players.

Site fees are the problem in DFS

Cash games are just as tough.

The average fee is 10 percent, meaning a player needs to win a tick over 55 percent of the time to break even.

I would estimate most players win 50 percent of the time, further explaining why there are so many losers.

Unfortunately, fees are not likely to be lowered in the near future. Lobbying costs and other legal fees will be passed onto consumers for years to come. If the fees were lower, there would be more winning players.

Variance hits everyone, DFS pros included

In short, high-volume players are not slaughtering the average player as the press would like you to believe. Most of us are losing as regularly as everyone else.

Successful players, while skillful, merely manage their bankroll to sustain the extreme variance that is daily fantasy sports.

That said, we are not immune to going broke. I expect the industry will experience a steep decline in high-volume players over the next 18 months. Most millionaires in DFS are players who withdraw immediately after that big Sunday win.

Those who are not fully immersed in DFS will harp on the fact that playing the maximum number of entries or exploiting inexperienced players means we are constantly winning.

Playing max entries means we are taking more risk on a raw dollar basis. Anyone who claims playing 150 entries in a 100,000 entry contest gives a significant edge is ill-informed. To address the “exploiting inexperienced players” concept — most of our action is against other high-volume players.

What are the real problems for the DFS industry?

It’s time everyone stops attacking high-volume players and focus on the real problems facing DFS: Contest structures and legislation

I don’t believe that FanDuel, DraftKings and lawmakers have taken appropriate measures to put the right protections in place.

First and foremost, it is not easy for most players to understand what the product costs. Operators should be forced to display the fees charged per game.

Secondly, beginner and intermediate contests, as well as entry limits at each buy-in level, won’t solve anything. The fees are still high and the contest structure is unchanged. While you won’t encounter experienced players, the loss rate will remain.

The sizing of beginner contests varies from 10 to 100+ player double ups. The more players in a contest, the higher the average cash line — it is harder to cash in larger double ups. If operators are going the beginner route, player pools should be limited to 10.

Lastly, the only thing operators should be touting is bankroll management.

FanDuel, perhaps, has the largest structural problem in the industry. It is not a complex game relative to other offerings because it features no late swap (a functionality DraftKings has), a lack of flex positions, and soft player pricing. For these reasons, FanDuel is becoming increasingly harder to beat in the long run.

What needs to happen in DFS

The greatest threat to the industry is its most celebrated component: legislation. Today’s winning players are currently exploiting a legal grey area. As more bills pass, the quantitative power that will flow into the industry will reduce edge. We are already witnessing reasonably good public tools for lineup construction, funded largely by venture capital.

If the industry is to prosper long term, fees and contests need to be restructured to create more winners. If this does not happen, FanDuel and DraftKings risk succumbing to their own legislation.

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Staff
- Various members of our writing staff contributed to this article.