A recent report from New York gaming regulators reveals that the daily fantasy sports industry isn’t exactly a cash cow, especially compared to regulated US online gambling.
Is it high time that state lawmakers divert their attention away from DFS, and toward enacting legislation that will legalize online casino and poker games?
Top-line numbers
The report covers the period from September 2016, or the month after New York officially legalized and regulated fantasy sports, through January 2017.
During that five-month span, DFS operators generated $18,621,700 in gross gaming revenue from New Yorkers, an average of $3,724,340 per month. The industry’s best month to date came in November, when revenue clocked in at $4,446,317. (You can see the raw data here.)
A total of $2,796,182, or 15 percent, was paid by DFS operators in tax revenue, representing less than a slither of the state’s projected $150 billion budget.
Still, these figures are not totally insignificant, especially in the context that without legislation, DFS operators would have generated exactly zero revenue in a key market.
Yet compared to figures put up by online gambling operators in New Jersey, they come up decidedly short.
Daily fantasy vs. online gambling
It’s still something of an incomplete picture. But we can now glean some idea of how daily fantasy sports stacks up against other US online gaming verticals. That’s particularly true of NJ online casino and poker.
The big picture: The NJ online poker industry moderately outperformed NY DFS. The Garden State’s online casino industry eviscerated DFS.
Over the past five months, New York DFS has generated an average of $0.189 per resident population. By the same metric, NJ online poker has taken in $0.2444, or approximately 30 percent more.
The performance of the surging NJ online casino industry blows both of these verticals out of the water. It generated $1.707 per New Jersey resident — or just over nine times what DFS does in New York.
In reality, the chasm is even wider
There are a number of variables that suggest the gulf between DFS and regulated US online gambling is even wider than the data above show. Most notably, DFS numbers are inflated throughout the NFL season.
Eilers & Krejcik Gaming estimate that the entire DFS industry handled approximately $3.2 billion in 2016. The NY report shows industry handle of $1.834 billion in the US and Canada from September through January.
If we take Eilers estimates at face value, is means that 57 percent of annual entry fees were accounted for during a five-month span. Five months represents less than 42 percent of the calendar year.
Other factors that lead us to believe the on-paper disparity is underrepresented:
- Daily fantasy sports, like online poker, relies heavily on mass liquidity. NJ online poker industry growth has been stunted primarily because operators only reach a population of nine million. DFS has access to a market numbering in the hundreds of millions.
- DFS is more popular in New York relative to the average market. The report shows that during an average month New York accounts for 9.8 percent of all industry revenue. Yet its population of 19.74 million is less than 9.8 percent of the serviced market.
So why did DFS get all the legislative attention?
There were eight states that passed fantasy sports legislation in 2016. More are likely on the way.
Why? There are a few likely reasons:
- Strong lobbying efforts on the part of operators.
- DFS won the argument that it’s a skill game, or at least it did so better than online poker.
- Daily fantasy moved to the forefront of the legislative conversation because lawmakers saw it as more of an urgency issue than online casino and poker. Whether that argument is based in reality or not is an open question. Offshore online gambling operators are still abundant in the US.
All this said, it’s time for states looking to fulfill their budgetary shortfalls — Pennsylvania we’re looking at you — to consider gaming verticals that have more of a tax revenue generating upside than DFS.
And those verticals appear to be online casino, and to a lesser extent, online poker.
