Will Daily Fantasy Sports Become a Daily Staple?

The rise of daily fantasy sports (DFS) betting seems inexorable at the moment but to a large extent the book has yet to be written, in Europe and the US, about a vertical that is only just starting out.

By Jake Pollard 

The rise of the fantasy sports betting (FSB) vertical has been unavoidable in the past few months and if at times it feels like it is impossible to turn one’s head but for FSB or more specifically daily fantasy sport (DFS), that is because operators and providers are all jockeying for position, trying to grab market share and signing sponsorship deals to ensure they are best placed to dominate the market.

The hype and press write-ups are legion at the moment but nonetheless some key features form part of the narrative around the vertical.

The first and obvious one is geography, or to put it more succinctly, the North American focus of the product (US and Canada) versus the rest of the world. The fact that sports betting is forbidden in all US states bar Nevada goes some way towards explaining the popularity of FSB, along with the statistical bias of a sport such as baseball, the original mainstream sport to capture the imagination of US fantasy fans.

In Europe, the UK market is the exception with regard to FSB where it has history (since the early 1990s) and is a well-known gaming concept; although season-long fantasy leagues based around the English Premier League is a more accurate reflection of the sector in the UK.

Media outlets in markets such as Holland and Germany have launched their own fantasy leagues, which are proving popular with their readers, but generally the UK is considered the leading European market for FSB with around 3 million registered players.

The second obvious feature of the vertical is time. The product in its most popular form is still a season-long entertainment proposition with players able to swap, replace and move their teams around according to performance, injuries and stats.

Companies working in the space such as DraftKings, Fanduel, GFM Clever Games or smaller entrants such as Mondogoal and Oulala Games are all working hard to familiarise the public with the product and hoping to introduce them to daily play; a higher frequency model where players can pick their players for individual events rather than the one-off picking of a set team for a season with players moved in and of the team according to form, injury or suspension.

The reasons for those companies wanting to increase the frequency of the offers are obvious: more betting opportunities mean more volume which mean more marketing opportunities, revenues and margins.

Other major players looking to join the space include PokerStars and Yahoo, who will be competing alongside other gorillas such CBS, CNN and US sports leagues such as the NFL and NBA.

DFS Stateside
As Jason Robins, chief executive of DraftKings, told delegates at the iGaming North America conference in Las Vegas at the end of April, DFS basically enables operators to monetise their customers in a more meaningful way.

“DFS is different to season-long (fantasy leagues) as it can be set up over the course of a weekend, but really it has transformed the fantasy sports customer. Before (DFS) he had never been monetised to a significant degree, but for a web or mobile site like ours, what we’re doing is taking those customers, who in our view have been under-monetised and under-engaged by a product that hasn’t really evolved since it came onto the internet, which is when it started booming. There hasn’t been lots of evolution and nobody has really disrupted the set up,” Robins explained.

Practicalities also come into play, the season-long fantasy variant is time-consuming and players are locked into a team; while teams can be drafted on a game for the daily version and it offers players the opportunity to learn and change their line ups from one game to the next and most importantly, earn immediate prizes rather than having to wait until the end of a season for a pay-out.

There is no doubt the numbers are there in the US. According to the Fantasy Sports Trade Association and Eilers Research, nearly 41 million Americas, or more than 10% of the entire US population, play fantasy sports.

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Back in November 2013 the FSTA said these players spent an average “US$111 on league-related costs, single player challenge games, and league related materials over a 12 month period”.

In terms of forecasts, Forbes magazine extrapolated those numbers and showed that average spend is actually closer to US$467 per person when all expenditure is accounted for, amounting to around US$15bn in total playing, withgross win amounts of around US$470m.

The US magazine said: “Added to actual expenditures and ad revenues, the industry amounts to at anywhere from $40 something-billion to over $70 billion per year in tangible and intangible activity.”

If such volumes are indeed true and just 1% of those players are playing DFS, then the room for growth is easy to identify and it’s no wonder so many companies are trying to make headway in the DFS vertical.

Meanwhile the rise of FSB/DFS also means that consumption levels of sports content on TV, print or web have risen correspondingly. This is what West Coast start-up Win View Games hopes to tap into as it gears up for launching its in-play betting app for the start of the American football season in September.

For David Lockton, founder and chief executive of Win View Games, this chimes with the beliefs expressed by FSB Tech founder Dave McDowell that “the season-long format has to be kicked into touch and replaced by daily games and in-play opportunities. A live, single game, real-time product would hold great appeal to customers who are accustomed to watching sport while monitoring statistics and social media on a second screen”.

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DFS in Europe
On the other side of Atlantic, DFS doesn’t have the history or culture of its US counterpart but is gathering momentum as new entrants and start-ups sign agreements with football clubs to market and monetise the game through their fanbase.

But while smaller outfits such as Mondogoal and Oulala Games have been using football club partnerships to reach out to mainstream audiences, others such as London-based GFM Clever Games (GFMCG) have been working in the space since its very early days and provide their games and technology to major media outlets and betting operators such as Sky Bet.

GFM Clever Games came about as a result of the merger of GFM Online Games and cleverTV in 2014; managing director Andrew Deeks has been in the industry since 1999 and has seen it go from an analogue environment where players would send in results, team sheets and data by post to a digital world where everything is done online.

The dichotomy between the US and EU markets is hard to pin down but it also might not be a totally accurate reflection of what is happening on the ground. For if the UK is the leading market in Europe for FSB, Deeks points out that the fantasy product his company supplies to UEFA has just recorded its 50 millionth prediction.

GFMCG has also been supplying Germany’s biggest selling tabloid Bild since 2010 and launched the first pay-to-enter digital FSB-skill game in the country. Deeks explains: “Needless to say the doom-mongers were out in force (at the time of launch), even among Bild’s editorial team; they believed readers would not pay to take part. The upshot was that on day 1 of launch, we had more than 10,000 sign ups and three weeks later there were 120,000 player signups.”

The company also has partnerships with the Telegraaf Media Group in Holland and other press groups in Denmark and Norway. So there clearly is some enthusiasm for the product on the Continent, where the combination of newspaper groups being able to reach out to the mainstream (as shown in the UK by The Sun, Daily Mirror and Daily Telegraph) for little to no cost is a potent weapon in generating exposure and sign ups.

For all that, Deeks recognises that the UK is still the leading EU market for DFS. “It’s hard to tell whether it is down to marketing or culture,” he says, “it is a season-long competition so maybe it is too long for audiences that are not used to it. The regulatory and legal environment is very different on the Continent and the resulting attitudes of rights holders reflect that.

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“They tend to be much more protective of allowing the use of player names, pictures and the like. The English Premier League has already had its battles with the UK media and those issues are largely resolved.”

Holland is an interesting case for Deeks, where forthcoming regulation of real-money igaming provides a good environment. “The language of (real money) betting and gaming (applied to FSB) builds up the appetite and enables our media partners to build up strong databases. When regulation is activated, they will be in a strong bargaining position (with regard to operators wanting to reach to their readerships).”

Clearly the fact that most fantasy leagues are season-long can be restrictive when it comes to renewing offers with original content and promotions. This of course is where the DFS format comes in, aided and abetted by big data, which allows people to delve into stats, form and historical performances and can help punters and operators in a major way.

Says Deeks: “It enhances the user experience, players can take advantage of the data and take more calculated risks as they extract insights from the reams of data published by the operator and millions of football fans exchanging on forums and social media.”

Deeks adds that it is all part of the gamification process of the product: from leader-boards to punters backing their judgements, firms like GFMCG are trying to put all the information at users’ disposal.

Mention of big data also brings up the issue of DFS and fixed-odds betting and whether the former is a threat to the latter. Surely there must be a risk that sportsbooks will view it as such or at least taking away some action from their business?

“Absolutely not,” says Deeks categorically, “it’s a complement to betting and acts as a funnel. Imagine if just 5% of those players go on to deposit into a sports betting account, this gives you an idea of how FSB can act in a complimentary way to betting. FSB is different in that it offers more value than traditional betting and is friendlier in terms of the relations between punters.”

Contextual offers and content also have a major part to play. “If you have a certain player in your team and you are looking at placing a (fixed odds) bet on a game, there is a pre-filled betting slip where you can back yourself, the ad is contextual and fits into users’ content,” added Deeks.

GFM’s partnership with Sky Bet bears this out. Deeks says the operator has around 700,000 players signed up the fantasy betting product it supplies to Sky Bet and that success comes down to execution as much as “getting buy-in from the key people working on the product. The client contacts and how much they understand the product, editorial buy-in, marketing, ad sales and operations”.

Unfortunately Sky Bet was not willing to take part in this feature but Deeks’s point about getting buy-in from key staff was vividly illustrated by UK Guardian Media Group’s decision to terminate the GoWager site it had set up with FSB Tech because of reader complaints. According to sources close to both companies, the Guardian’s commercial teams were keen to see the project succeed while the editorial staff opposed it because they felt it undermined their editorial integrity.

Big data, educating audiences
For Valéry Bollier, chief executive of Oulala Games, “the answer can be found in the impact that big data will have, in the mid to long-term, on these two industries (and more specifically on sports betting). In the short term, the development of big data seems to be beneficial for sports betting as clients’ demand for more statistics is growing quickly, since they rightfully think that it increases their odds of making money.

“However, there is no doubt that clients will eventually realize that big data is actually helping bookmakers to optimise the offered odds. Simply put: if big data allows bookmakers to predict sports event’s outcomes, clients will start losing interest.

“If you think this scenario would never happen, have a look at the statistics’ competition that took place during the last football World Cup in June 2014, between Baidu, Google, and Microsoft. The results were astonishing: Google lost the contest by correctly predicting the outcomes of 14 matches out of…15. Meanwhile, both Baidu and Microsoft had a perfect 100% accuracy score. For these big data giants, there is no doubt that the future will be read through statistics.”

Big data is a hugely useful tool to both punter and operator and has boosted the growth of FSB as a true skill game entirely based on the football players’ live statistics, while the peer-to-peer format means the operator doesn‘t have to worry about risk management.

Bollier says big data “is revolutionising our industry and this is just the beginning. One can therefore predict that, in the long run, sports betting clients will massively become FSB players. To reduce this risk, it seems logical that sports betting operators start offering the FS experience to their clients as soon as possible, to anticipate this potential shift.”

We will have to wait and see if the leap from betting punter to keen FSB player happens in the future, but for Oulala Games and the EU markets it targets, a different effort to what has happened in the UK or North America has to be made to evangelise clients who are not familiar with the concept of DFS.

“For example, we are focusing on making strategic partnerships with high profile professional football clubs and sports media. Both have large and faithful communities and they can therefore be the perfect evangelists,” says Bollier. “On AS Monaco’s official website, you will find a white-label version of our game. This deal is a win-win situation: their fans spend more time on their website while playing our game, and it encourages more and more people to play Fantasy Football. You can find the same white-label deployment on a media’s website, Football365. Overall, and although it is a truism, marketing strategies have to evolve based on the maturity level of each targeted country.”

For Bollier there is no doubt that FSB is the next big thing, similar to the arrival of poker a decade ago and he is keen to promote the idea that FSB and sports betting can mix together.

Going back over the pond to North America, there is increasing talk of how DFS can attract poker players thanks to the similarities between the verticals: risk and data-based analysis of a gambling proposition.

However the sector’s two major players, Fanduel and DraftKings, disagree on the issue. The former has little interest in targeting poker players while DraftKings says it has been good to its fortunes and explains why PokerStars is keen to enter the space.

Seth Young, chief operating officer of Fanduel, told LegalSportsReport: “FanDuel doesn’t have to do what DraftKings is doing, because FanDuel has a bigger market share” and DraftKings “is looking for more unique ways to market that FanDuel isn’t pursuing, so they can capture a segment of the market that FanDuel won’t touch”.

This might be true but the prize money on offer nowadays is much more attractive than in the early days of FSB when Fanduel used to target the poker-playing community, while promotions like overlays and other poker-related themes are geared specifically at that audience.

There is all to play in the fantasy sports betting/daily fantasy sports arena and the US is priming itself for a major push. In Europe much will depend on whether sportsbooks are willing to branch out meaningfully into a new vertical or if they decide to hunker down and ensure regulatory costs such as point of consumption in the UK are covered.

Link to full article: http://www.igamingbusiness.com/will-daily-fantasy-sports-become-daily-staple