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In 2015, all eyes were on the two DFS operators as they completed massive funding rounds and spent tens of millions on advertising. Last year, the first week featured a massive amount of overlay as the industry was more focused on legal issues and regulatory concerns earlier in 2016.
In 2017, it can be argued that Week 1 should be the start of the new normal for the two sites as their focus has shifted away from a failed merger and the need for legality clarity and day-to-say survival.
So where does the industry stand with the first week of daily fantasy football in the books?
According to a sampling of the publicly viewable NFL Sunday Week 1 contests, both companies were in the black in terms of revenue for Week 1. The sample included guaranteed prize pools (GPP) and non-guaranteed contests, but not head-to-head contests.
At DraftKings the revenue for that sample clocked in at about $1.3 million. At FanDuel, revenue for a similar sample was about $700,000.
Given that NFL week 1 often means overlay (where guaranteed prizes exceed entry fees) in DFS-land, those are encouraging figures as far as getting contest sizing correct and general liquidity. Last year, the two sites were usually putting up anywhere from $1.5 million to $2.5 million in revenue for similar samples each NFL Sunday, after Week 1.
The biggest contests at both sites did not fill, and neither made money for the sites individually. In the DraftKings $5.5 million Millionaire Maker, there were more than 273,000 entries (about 50,000 short of filling) at a $20 buy-in. In FanDuel’s $4 million Sunday Million, there were 560,000 entries (more than 100,000 short of filling) at a $7 entry fee.
The biggest DraftKings contest ($1.4 million guaranteed) based on the Monday night NFL games fell well short of filling and resulted in more than $100,000 of overlay, so it wasn’t all unicorns and rainbows.
The first week also brought with it an interesting look into the DFS ecosystem.
The success or failure the DraftKings’ Perfect Lineup promotion — with a potential prize of a billion dollars — depends on how you look at it.
The contest featured a prize pool of $100,000 — with no entry fee. But it also promised a $1 billion payout if anyone picked the highest-scoring player at every position. This task verges on the impossible.
The contest allowed for five million entries, but it received less than 800,000. (Each user could enter only once.) Logic would dictate that every user at DraftKings should enter the contest, since it requires almost no effort and a potentially huge payout.
However, according to communications for DraftKings, the promotion was not a good measure of active players at the site:
Billion Dollar Lineup was built, designed and marketed to attract new customers. It's not a bed check for our current players.
— Jason Alderman (@JBAlderman) September 6, 2017
That assertion was backed up by an admittedly unscientific Twitter poll, in which only two out of three users said they would enter the contest:
If you are playing at DraftKings for Week 1 of the NFL season, will you enter a roster in the $1 billion Perfect Lineup promotion?
— Dustin Gouker (@DustinGouker) September 7, 2017
The lack of interest from existing players would seem to indicate the perceived unlikelihood that anyone could possibly hit the “perfect lineup.” Indeed, it’s believed no one has ever hit on a perfect lineup at either DraftKings and FanDuel in the history of DFS. Otherwise, the barrier to enter the billion-dollar contest was extremely low.
Still, DraftKings claims 8 million total users and more than 4 million of what it calls “active” users. The 800,000 entries would seem to be a low figure given that the promotion was supposed to bring in new users and likely still attracted a substantial number of the so-called actives.
Not shockingly, the two sites are scaling back a bit for their biggest contests. DraftKings is guaranteeing $5 million, and FanDuel $3 million. DraftKings still has two other contests that guarantee $1.6 million, while FanDuel’s second-biggest contest is $750,000.
In the current environment for daily fantasy, the two sites are trying to prove they have the ability to generate meaningful revenue and still have the ability to scale. How successful they are at those two things over the course of the final quarter of 2017 will provide insight into the path forward for DFS.