The forecasts for the daily fantasy sports industry were off the charts a little more than a year ago. The estimates of the potential growth of the industry have been greatly reined in 2016, however.
The latest for DFS: $5 billion-plus
A new report out from Juniper Research takes a stab at predicting what the DFS market will look like in four years. Its prediction? The total amount of entry fees annually will reach $5.3 billion by 2020. (The firm’s projection for fees taken this year worldwide is $2.6 billion. Revenue in the industry is somewhere between 10 and 20 percent of total entry fees, currently.)
Even in the current environment, that would be a fairly bearish — although not unlikely — estimate for the market. For 2015, research firm Eilers & Krejcik Gaming put the total number of entry fees taken by DraftKings, FanDuel and the rest of the industry in excess of $3 billion.
Some of that predicted growth by Juniper comes not from an expansion of the US market, but from elsewhere as “key players seek to develop new markets including the UK, Australia and Latin America”:
Nonetheless, with several smaller players in operation globally, and an initial foray into the UK by the industry leaders, West Europe will become the next major market over the coming 5 years.
Past estimates for DFS
The $5 billion estimate is a lot lower than previous predictions for the market. Once upon a time — in a vastly different climate — Eilers said worldwide handle could eclipse $18 billion annually by 2020.
Earlier this year, Eilers revised those estimates back, with a base case of $8 billion.
Eilers presented a wide range of possibilities, however. In its “worst-case” scenario, revenue would stay flat at about $3 billion a year.
Tough to predict the DFS market
Making a prediction like this is a tricky game for an industry that has been in flux and has seen a lot of upheaval:
- Legal concerns and regulatory issues in the US cropped up with increasing frequency in the past year, and will continue to provide uncertainty moving forward.
- DraftKings and FanDuel are planning to merge. This could create initial contraction in the industry, as there is a great deal of overlap between DraftKings and FanDuel users.
- The entrance of DFS into the UK market has been underwhelming to date and has not been accompanied with the type of marketing spend needed to grow the industry across the pond. Operators believe the future there and in other regulated markets could be through a business-to-business model.
Any estimate for the DFS market, given those variables, is just that: An educated guess for an industry that is constantly changing and having to adapt.