PokerStars / Amaya To Launch Daily Fantasy Sports Product By “Start Of NFL Season”

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Amaya's plans for DFS

[colored_box color=”yellow”]UPDATE AUGUST 13: Amaya has acquired DFS site Victiv. Details here. Amaya is rebranding the site as StarsDraft.[/colored_box]

DraftKings and FanDuel could soon face the most credible test to their market dominance to date, as PokerStars and Full Tilt are aiming squarely for a quick entrance into the DFS market.

That’s per comments from Amaya CEO David Baazov on today’s earnings call.

We have also taken the strategic decision to enter the daily fantasy sports category and are pursuing parallel tracks of internal development and strategic acquisition.

We expect to provide more details on this strategy in the second half of 2015 but see a clear crossover from poker and daily fantasy sports.

Amaya acquired PokerStars and FTP in August 2014.

While DFS had certainly been in the strategic conversation for Amaya prior to today’s call, Baazov’s comments mark the first definitive signal of Amaya’s intentions.

Timeline for launch: 2015 NFL season

Amaya will waste no time pursuing the segment.

“The goal is to be up before the NFL season starts,” said Baazov, appearing to refer to the 2015 NFL season.

“We clearly see a strong demand for it … a lot of the U.S. players that were formerly PokerStars players would like to see us launch fantasy sports,” Baazov added.

Amaya’s entry could reshape the way DFS is viewed by regulators

The entry of PokerStars has obvious implications for the competitive landscape in the daily fantasy sports industry.

But the more significant ramifications could appear on the regulatory landscape.

The presence of the PokerStars brand will impact the way that policymakers perceive daily fantasy sports, most significantly on the matter of how close the activity is – or isn’t – to a state’s definition of gambling.

More directly, Amaya’s entrance would mark a first in the North American DFS market: a DFS operator that is also licensed by a U.S. gaming regulator.

Amaya is licensed by the New Jersey Division of Gaming Enforcement as a platform and content supplier in that state’s regulated online gambling market. The company also holds licenses from various other U.S. jurisdictions as a result of its land-based business, although that business is quickly being wound down in the wake of the PokerStars acquisition.

And Amaya holds a broad portfolio of international licenses, including a recently-granted license from the UK Gambling Commission.

What DFS acquisition makes sense – if any?

The question most likely to be asked most often in the wake of the call: who are the likely targets for acquisition?

Both FanDuel and DraftKings are thought to be working with billion-dollar-plus valuations, a price tag that might prove a bit steep for Amaya – especially given the debt that the company is still working off following its acquisition of PokerStars.

And one of the primary assets of both companies – their existing liquidity – would not be worth the same premium to Amaya (with some 91mm total registrations across their products) that it might be worth to others valuing DraftKings or FanDuel.

Nor would the leading platforms necessarily hold much appeal for Amaya, as Baazov noted: “Nobody’s software that we’ve seen can currently support our volume that we would have if we launched fantasy sports.”

Of course, he may have some ulterior motives for comments like that.

Even still, I suspect Amaya would likely acquire for specific technology and / or talent, and not brand or user base, making DraftKings and FanDuel unlikely targets.

But that prediction comes with a big caveat.

If either FanDuel or DraftKings recognize the potential to (i) turbocharge the global growth of DFS and (ii) effectively catapult to the position of undisputed leader of that expanded market via a partnership with PokerStars, then a price could emerge that make sense on both sides.

How competitive would PokerStars be if they went it alone?

I have little doubt that PokerStars could establish itself as the leading DFS operator within two NFL seasons.

The DFS market is littered with platforms that have tried – and failed – to grab a toehold in the incredibly competitive space.

But I’d submit that Amaya is fundamentally superior to any company that has entered the space to date in terms of financial resources, technological know-how and acquisition acumen.

And the global scale and deposit base of PokerStars – not to mention the lingering strength of its brand in the U.S. – gives Amaya a potentially explosive launchpad for daily fantasy sports.

Given the relatively small size of the DFS industry at this stage – likely shy of 2 million unique customers industry-wide in 2014 – it wouldn’t take much of a number in absolute terms for Amaya to leapfrog to the lead.

DFS a natural fit for PokerStars

The ability to expand a user base in the United States outside of the barriers of regulation via DFS – in advance of the rollout of state-regulated poker and casino – is no doubt extremely appealing to Amaya.

But the inherent similarities between DFS and poker makes DFS an uniquely attractive product for PokerStars. Like online poker, DFS:

And the list goes on.

That’s not to say PokerStars can simply move a few buttons around and transform their poker client into a daily fantasy sports client.

But on a spectrum spanning from (i) starting from scratch to (ii) the FanDuel platform as it stands today, I’d argue that PokerStars is sitting far closer to the latter than the former.

Sports betting now in beta at PokerStars

Baazov also announced that PokerStars had taken the first sports bet in the history of company that morning, marking the poker titan’s entry into another vertical with significant overlap with DFS.

The sports product is still in limited release in select markets, with a broader rollout scheduled for the next two quarters to come.

But simply moving into sports will benefit any foray into DFS, as many of the same challenges – market making and risk management, to name but two – that PokerStars will staff and develop to meet on the sports side will also naturally serve as a DFS resource.