The Recent Daily Fantasy Sports Controversy Was Inevitable, And The Next One Will Be Just As Public

Posted on October 18, 2015

[toc]Mainstream media’s obsession with daily fantasy sports was pretty obvious in the past two weeks.

Recent controversy surrounding DraftKings and FanDuel shoved DFS into the spotlight, and major news outlets responded with a chorus of stories, interviews, and hot takes that introduced this fast-moving industry to millions of people previously unaware of its existence.

In all likelihood, this is just the first of many controversies that DFS companies will endure in the coming months and years.

That’s not intended to single out DFS — every young industry goes through growing pains as it matures, and every industry makes its fair share of mistakes. However, controversies in daily fantasy sports stand to be more public and more heavily scrutinized than other industries.

Here are four reasons why this controversy was inevitable, why it went so viral so quickly, and why that cycle could repeat itself going forward.

DFS employees are also the industry’s power users

If you were going to start a 3D-printing company tomorrow, you would seek out other 3D printing enthusiasts to join as your first employees. If you launched a drone company next week, the smart thing to do would be to recruit experienced drone pilots and drone enthusiasts to help with marketing, content, sales, software development and operations.

Daily fantasy is no different. It shouldn’t surprise anyone that DraftKings and FanDuel are staffed by employees who love playing fantasy sports and see it as a way to earn additional money. With such a high level of interest and personal investment by employees, the signs were there that something like this could inevitably occur. 

DFS is buoyed by a highly engaged community of customers who support and scrutinize the industry

Every technology startup strives to build and retain a network of engaged users. The venture capital firm that led investments in Twitter, Tumblr, Zynga, and Kickstarter has gone so far as to make this a key part of their investment thesis.

DFS has cleared this benchmark easily. There are thousands of registered users and hundreds of thousands of posts on venues like Rotogrinders and the Subreddit /r/DFSports. There’s also an active DFS conversation on Twitter that has been buzzing since this story was unearthed.

This hyperactive community has helped launch the careers of DFS analysts and content providers, birthed statistical tools to help players set lineups, and spawned discussion forums to share strategies and vent about the games. All of this is hugely valuable to FanDuel and DraftKings because it drives deeper engagement for daily fantasy.

Therefore, it is to be expected that this same community would find this story and run with it. Podcasts, discussion threads, conversations among friends — whether DFS companies like it or not, there is a large, vocal, active, and highly distributed network of users that follow this industry and isn’t going anywhere. These users are watching every move that each site makes, making it impossible for mistakes to slip through the cracks.

The NFL advertising blitz raised too many eyebrows

DraftKings and FanDuel advertised so excessively during the opening weeks of the NFL season that it branded both companies unlikable. Each company behaved like a wealthy, annoying classmate desperate for your attention.   

It worked all too well. Practically overnight, a deluge of advertising transformed these companies from relatively low-awareness websites into mainstream conversation topics on talk radio, in newspapers, at your local bar, and in the halls of Congress. All of this advertising put DraftKings and FanDuel on the map. Is that a good thing?

Yes, the industry had its largest ever week of payouts last week. Yes, advertising and user acquisition campaigns contributed to that success. Of course, the industry was also going to grow organically regardless of whether FanDuel and DraftKings spent wildly on advertising. 

But common sense, along with modern advertising theory, states that nobody likes seeing the same commercial ad nauseam. Nobody likes that classmate who interrupts every conversation to boast about how wealthy he/she is or how great a deal they can get you on a new car. These tactics were pedestrian and transparent, and the public took notice.

With so much money at stake, nobody wants to be left holding the bag

If King.com confessed to a gameplay flaw in the free-to-play version of Candy Crush, the New York Times wouldn’t spill a drop of ink because nobody stands to lose a dime.

The opposite is true for DFS. FanDuel and DraftKings are paying out tens of millions every week. Comcast, NewsCorp and several other colossal investors have plowed close to a billion dollars into this industry. Individuals have the potential to win life-changing amounts of money if they can set the right lineup on the right day. Media companies are raking in millions in advertising revenue. 

This controversy has ramifications for everyone involved. Investors are seeing one of their prized portfolio assets vilified in the mainstream media. Individual players are beginning to wonder whether the odds are stacked against them and that the house is in on the joke (even if it’s not true). Casual players find themselves losing money and wonder whether they’re being taken advantage of. 

When there’s this much money on the line, everything becomes a story. In the words of Detective Lester Freeman from Season 1 of The Wire, “if you start to follow the money, you don’t know where the [expletive] it’s gonna take you.”

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Dan Chaparian

Dan Chaparian is a contributor to Legal Sports Report. Dan is a media and technology professional who lives in New York City.

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