Across sports, everyone’s trying to gauge the effect that paid fantasy gaming will have on the industry. Affiliations with teams and leagues have attracted considerable attention, since they constitute a Good Housekeeping seal of sorts.
The industry is young and still relatively small enough that there’s still a lot of guessing and not a surfeit of reliable statistics. Two data points from Eilers Research struck as the most significant.
One defines the U.S. daily sports fantasy market as growing from $21.9 million in 2013 to $85.6 million last year to a forecast of $1.18 billion in 2020. That sort of geometric growth is bound to attract the attention of those in sports still assessing whether daily paid fantasy is just gambling by another name.
Another factoid is even more remarkable than that aggressive growth prediction. Eilers says that this year, entry fees on daily fantasy sports sites will exceed the total amount wagered annually on legal sports bets in Las Vegas and in all of Nevada by next year. Is that enough to get your attention?
In selling themselves to sports properties, paid fantasy sites are pounding home the point that they increase viewership by making fans stick around after the game’s outcome is no longer in doubt.
“Browns versus Jags in Week 4 — that’s our bread and butter,” said FanDuel CEO and co-founder Nigel Eccles. “We can drive a lot of viewership and, anecdotally, we’re seeing a positive impact on the purchase of out-of-market TV packages by our players.” FanDuel’s own data shows a 40 percent increase in sports consumption (from 17 to 24 hours weekly, including TV and other media sources) once fans start playing daily paid fantasy games.
So while 16 NBA teams have or are in the process of signing sponsorship deals with FanDuel or rival DraftKings, Eccles, a former McKinsey consultant, says it should not be considered a gold rush for every team or league. “We’re not a new automotive, insurance or beer category for them … we’re something that can drive value back to them because we are driving ticket sales and TV viewership,” he said.
There are 41 million fantasy sports players in America. How many can be converted into paying paid fantasy? With acquisition costs about $70 per and the long-term retention value of a registered player still uncertain, that’s an interesting question. However, Eccles thinks that view is incorrect, noting that half of his players don’t play traditional fantasy games. “The 200 million people in the U.S. who call themselves sports fans — that’s our target, not the 41 million fantasy players,” he said.
There are some impediments to paid fantasy becoming a habit for any hard-core sports fan. Eilers noted in its research the dichotomy between hard-core users and casual players. “An increasing number of high-volume players (pros) are already having an adverse impact on casual user growth — the perceived ‘hard-core’ nature of [daily fantasy sports] could preclude the industry from ever reaching critical mass,” it noted.
The question no one knows the answer to is whether widespread legalized betting on pro sports will eventually destroy the growing paid sports fantasy market. “I don’t see any impact,” Eccles insisted. “The vast majority of our players tell us they do not bet.”
Having survived the first Internet bubble and seen various startups sacrifice profit for scale, the question of black ink is one we’ve learned to pursue. Eccles says FanDuel will be looking at profitability sometime in 2017. Until then, the share game will continue.
“Like any company growing 4X a year or more, it is a trade-off … do you want us to grow fast or do you want us slower and more profitable?” Eccles said.
FanDuel’s players and investors will help decide that.
Terry Lefton can be reached at tlefton@sportsbusinessjournal.com.
