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A forecast for the size of the daily fantasy sports market has been revised back by Eilers & Krejcik Gaming in its 2016 report, with a wide range of possible outcomes for the industry in the next five years.
The report from Eilers (preview here; full version $) takes a look at nearly every aspect of the DFS industry, but it also takes a stab at projecting the DFS market. That’s certainly a difficult task given the legal and regulatory uncertainty that will be the major storyline for the industry in 2016.
Eilers admitted as much in trying to forecast where the market was headed:
The trajectory for 2015 viewed from 2014 was clear – growth ahead, with the only question being how much and how fast. But viewing the year ahead today, it is easy to imagine a number of wildly divergent trajectories for DFS based on political, legal, economic, business model, consumer, and market pressures.
Nonetheless, a graph takes a look at possible outcomes for the next five years, with even the “best-case scenario” falling well short of bullish forecast just a year ago:
The three models on the chart depend on different assumptions on how the DFS industry proceeds moving forward, mostly based on legal and regulatory issues and how they are resolved. (See the full report for details.)
The old forecast — of about $18 billion in entry fees across the industry by 2020 — is now out the window. That forecast is replaced by three divergent possibilities:
How the market will evolve largely depends on how the states continue to react to the industry from a legislative standpoint, and the outcome of legal concerns in the biggest states in the country, like New York, Illinois and Texas.
The industry has succeeded in getting regulatory/legalization bills introduced, although none has become law, yet.
Should those bills continue to make progress, it would bode well for the forecast for DFS; the industry could hit or exceed the base-case scenario. Bad outcomes would make the base-case scenario look ideal.
But the fundraising market is vastly different today than it was just six months ago; an IPO would not seem to be in the cards at present. And user acquisition budgets at the “big two” are likely to be far lower than they were in CY 15.
The only certain for now? It’s clear that forecasting what will happen with the DFS market will be a moving target for the immediate future.