These 10 Words Could Signal The Future Of Daily Fantasy Sports

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DFS Fortune Cookie

Much of the attention surrounding daily fantasy sports is driven by the eye-popping revenue growth of the last two years, and the heady projections of where that growth will lead in the next few years.

But I’d argue that the true potential of the product – and therefore, its likely development trajectory – was captured in an comment from FanDuel CEO Nigel Eccles buried at the end of a recent feature at Entrepreneur:

It’s not about the playoffs or the Super Bowl. We’re driving people to watch the day-to-day, regular in-season games. We’re driving attention when fan interest is at its lowest.

It’s those last 10 words (emphasis mine) that, to me, tell the story of the future of DFS.

The power of DFS to drive engagement

In the relatively brief history of DFS, the two major players (DraftKings and FanDuel) have unveiled some impressive numbers concerning the power of DFS to boost engagement with sports and sports media:

The above becomes even more powerful when you consider that a disproportionate amount of said attention is likely, as Eccles claimed, distributed to dead zones (e.g. the end of blowouts, small market regular season games and late season games with no playoff consequences) that are of little interest to the average fan, but of potentially great import to fantasy players.

And more powerful still within the context of the massive, arguably existential, bets leagues like MLB are placing on digital media.

Financial viability in a vacuum

It’s early in the game for DFS. But what we know at this point is that both DraftKings and FanDuel are running through tens of millions of dollars in marketing spend with no profit to show for it.

That may be a temporary state of affairs, or it may reflect some stubborn realities of the daily fantasy sports market:

  1. The event velocity (i.e., the number of wagerable occurrences) is low compared to poker, casino and traditional sports betting.
  2. Acquisition costs are high and show no signs of having hit a peak.
  3. Ecosystems that cater to high-volume players complicate the ability of sites to attract and retain casual players in significant numbers.

Reasonable people can disagree here, but I believe there’s a sound argument that the DFS model as executed in the status quo isn’t viable from a simple profit perspective.

The value of engagement

Here’s the out: certain types of companies would be more than happy to operate DFS anywhere from break-even through a substantial loss in exchange for generating increased engagement.

Sports leagues come first to mind. The loss on DFS would be a rounding error compared to the larger revenue they’d be protecting from broadcast deals and sponsorships.

Large media companies could also swallow a loss in exchange for the added time on site and other ancillary benefits a successful DFS site could generate.

The list of companies and verticals that could risk a financial loss for the hope of realizing more value via engagement goes on: commercial gambling companies, sports-focused consumer goods manufacturers and basically any brand with a significant demographic overlap with the typical DFS player.

But to my mind, it’s the major sports leagues that have the most to gain from a well-executed, healthy DFS product, making them the entity most likely to underwrite the DFS industry should the basic model continue to produce more red ink than black.