Fantasy Sports One Day Bigger Than Slots? As Big As Macau? Gaming Investor Ader Bullish on DFS

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Fantasy Sports Replacing Slots

A prominent gaming investor talked glowingly about the future of daily fantasy sports, saying on CNBC that the sector could rival revenue in Macau and entertained the idea that DFS could one day surpass slot machines in the gaming space.

Wait a minute. Slots? Macau?

Jason Ader is a former Wall Street gaming analyst, and the current CIO and CEO of SpringOwl Asset Management. He is also a board member for Las Vegas Sands Corp., which is run by casino magnate Sheldon Adelson.

He was on “Fast Money” on Wednesday mostly to talk about the gaming market in Macau, which has fallen precipitously in part thanks to a corruption crackdown. After that discussion, the CNBC hosts turned the conversation to fantasy sports.

Host: “Fantasy sports, you think that’s going to replace slots, for real?”

Ader: “That’s the hot area, right? So fantasy sports is the biggest and hottest area in the gaming industry right now, no doubt about it. …. The business has the potential to be as big as Macau over time.”

He mentioned FanDuel and DraftKings as “multi-billion dollar pre-IPO valuations.”

His statements about slots and Macau are pretty loaded. Let’s take them apart:

Slot machines vs. DFS

The question about slots, we’re guessing Ader approved it, otherwise he would have laughed it off as implausible. The idea that DFS could be bigger than slots likely has less to do with the idea that it could surpass current casino revenue on slots, and more with the idea that a DFS upswing could allow it to overtake slots on a downswing at some point in the future.

It’s also unclear what kind of scale the host and interviewee were talking about. Worldwide? Las Vegas only? Revenue from slots throughout Nevada in 2014 was $6.7 billion. For Las Vegas only it was $2.9 billion. A bullish prediction on the future of DFS puts revenue at $2.5 billion by 2020.

Macau vs. DFS

This is another one that’s hard to parse, given the short nature of the interview. If “as big as Macau over time,” means Macau as it currently sits, even that would be an amazing figure for DFS to hit in the future, based on current estimates. Last month, Macau casino revenue dipped to $2.4 billion, its 11th straight month of decline.

So was Ader saying that DFS could approach $30 billion in annual revenue? We suppose he was. At its height in 2013, Macau took in $45 billion in annual revenue.

Casinos and DFS?

The interview also provided a little more insight of the gaming industry’s stance on fantasy sports. Ader was asked if casinos would be buying DFS sites down the road. He didn’t really answer in definitive terms, but its clear he really likes the DFS industry:

“Well it’s hard not to watch what is going on there, the slot machine business has been in decline as that demographic has moved out. If you look at millennials take Las Vegas again, what are they doing, they are going to nightclubs, they are spending a lot of money on expensive alcohol. They don’t really like the traditional gaming experience, it’s harder to engage them. If you look at that demographic, they’re all playing daily fantasy sports and they’re figuring out with statistics how they can have fun in a new way, in a way that’s more mobile and more traditional with their own forms of media.”

Other recent examples of the casino/DFS intersection:

The Ader interview could be yet another indication that traditional gaming powerhouses are not prepared to let the current power structure in DFS go unchallenged.