No, We’re Not Close To Witnessing The Death Of Daily Fantasy Sports

Written By

Updated on

DFS future vs. sports betting

Pundits and writers have been trying to forecast the death of daily fantasy sports dating back to 2015.

That’s when the industry got turned on its head in the wake of a bombardment of TV commercials from DraftKings and FanDuel, the infamous data leak and legal action from New York’s attorney general.

Nearly two years later, the industry is still here. And the possibility of legal sports betting in the US is on the horizon, if New Jersey prevails in its US Supreme Court case.

The future of DFS as currently situated is still uncertain — that’s especially so with the planned DraftKings-FanDuel merger being scrapped.

The possible emergence of sports betting is the latest reason being bandied about to forecast the end of the DFS industry.

But it’s doubtful the industry is just going away, silently into the night. Why?

The pro sports leagues like fantasy

It’s difficult to nail down exactly what the major pro sports leagues in the US want when it comes to sports betting.

What we do know is they love fantasy and the engagement it provides. The NBA, Major League Baseball and the NHL all have equity in either DraftKings and FanDuel. The NBA recently partnered with a fantasy operator called PlayON to work in overseas markets.

The leagues aren’t going to suddenly call it quits on fantasy. Finding ways to leverage both season-long fantasy and DFS for their own gains will continue until there’s a reason not to.

People like to play fantasy

If you’re reading this, you probably know this: Fantasy sports are popular. Estimates put the universe of any type of fantasy sports player in North America at almost 60 million.

Yes, DFS is but a fraction of that. While DraftKings CEO Jason Robins has thrown a figure of eight million for his platform alone, the number of people actively and regularly engaged in DFS is much smaller than that.

Still, those millions of users are rabid consumers of sports programming, which is something the aforementioned leagues also love.

The DFS industry still hasn’t found the magic formula to convert the vast majority of season-long fantasy users to its product. That remains the hope and the dream of DFS operators, and another reason the ship won’t be abandoned in the short term.

Will people leave DFS in droves to bet on sports — should it become legal in the US — and will sports betting cannibalize a huge chunk of the current DFS market? Despite the fact they are both forms of gaming and related to sports, they remain different products.

There is plenty of cross-over, to be sure, but clearly there are people who would rather play a form of fantasy than just place a straight bet on a game.

There are a lot of new laws on the books

DraftKings and FanDuel spent a lot of time and effort to put laws on the books that legalize and regulate fantasy sports. The current number of states now stands at 13.

Someone will be around to try to leverage these laws, even if either DraftKings or FanDuel disappears. The laws provide what is generally a low barrier to entry — at least compared to the rest of the gaming sector. Getting into sports betting does and will require a gaming license and generally a lot of money; getting into fantasy is a far easier endeavor.

We’ve already seen one way the language of those laws will be used to create a product more like sports betting, called FastPick in New Jersey.

If NJ doesn’t win its sports betting case, more eyes will turn to these laws and the opportunities they present.

Venture capital has put a lot of money into it

More than a billion dollars has been sunk into the DFS industry, almost all of it going to DraftKings and FanDuel.

The mere presence of venture capital money, of course, is no guarantee of success. But some smart people with a lot of money think the idea still has legs.

The industry likes to say DFS is still young. The idea of accelerating season-long contests to the daily format is less than a decade old. There are also signs that the industry could change, with the entry of Paddy Power Betfair via its acquisition of Draft and products like FastPick.

Is there room for both FanDuel and DraftKings in the market, moving forward? Maybe not. There might not even be meaningful growth in the short term. But certainly there is room for one of them, for DFS, and for other ideas in the space.

There are still variables that could hurt DraftKings and FanDuel, like the outcome of an active class-action case.

In any event, I wouldn’t bet on the demise of DFS just yet.