Does DFS have a future in regulated US sports wagering?

Make no mistake, daily fantasy sports was a phenomenon in the pre-PASPA era. The 2015 run up to the NFL season saw each of FanDuel and DraftKings spend more money on television advertising than Coca-Cola, Nike and McDonald’s combined as they battled to accumulate monstrous player numbers.

That was the only key metric with a crystal ball pointing towards the PASPA ruling. Fast forward four years, and with 15 months of a post-PASPA world under our belt, surely it’s the end for DFS as more states open up to fully regulated sports wagering?

We understand the value in the DFS brands, and player numbers associated with those businesses, but is the Grim Reaper lurking over the industry?

Reviewing DFS’s attempts to enter other markets, where sports wagering is already established, the answer would be an undeniable ‘yes.’ It simply can’t compete with the range of wagering opportunities that sports betting offers.

FanDuel and Draft- Kings both made legitimate attempts to enter the UK, and both found out fast they were not going to change an online sports betting culture spanning over 20 years.

The key here, though, is the order of events. Sports betting in the UK had established itself and DFS was attempting to disrupt. This is not the case in the US. Here, offshore sports wagering aside, DFS is the resident with sports wagering operators looking to get in on the action.

The fact that both FanDuel and DraftKings have so quickly embraced fixedodds sports wagering demonstrates how difficult they believe it would be to retain their position as purely DFS operators.

FanDuel was sold to Paddy Power Betfair (Flutter Entertainment) and DraftKings partnered with Kambi, with strong rumors of them soon acquiring another major sportsbook software provider.

Many predict that the DFS product will be marginalized as mainstream sports wagering evolves and expands across states through all distribution channels, from bricks and mortar to mobile.

DFS was never profitable anyway with operational costs, including extreme marketing budgets, far outweighing net profits. This was a numbers game and it was time to cash in and monetize through the opportunities fixed-odds sports wagering presented.

Before we get ahead of ourselves… and even if we agree DFS can’t compete with sports wagering as a revenue generating product, there are a number of other factors to consider before we start eulogizing:

• Legally, customers can play DFS in more than 40 states today. Sports wagering is at 13, at the time of writing, and not all of those are mobile. Brands can be established through use of DFS on a far more widespread basis.
• DFS is a ‘softer’ form of sports wagering and so a very useful acquisition tool for mainstream operators looking to appeal to the recreational segment.
• History favors DFS in the US, unlike other countries where DFS tried to compete with established regulated sports wagering. It’s always harder to change something than to retain a stable position.
• Sports wagering may well be the bigger revenue earner that sports fans gravitate to but DFS offers community, bragging rights and a softer entertainment- based experience at low stakes, that can still have its place.

It’s likely that providers from the next tier of DFS businesses will be acquired by sportsbook operators wanting to use it as a key part of their marketing mix as they battle to acquire and retain customers.

The outlook for DFS has changed a lot over the past few years in the US, but it still has an important role to play as part of a much larger opportunity.

[Bio] Now based in the US and building on almost 20 years of online gambling experience, including 11 at three major international operators, Keith McDonnell founded kmigaming. com in 2011 to provide services for the regulated international online gambling sector. Services include helping start-ups launch, fully established businesses grow internationally and traditional land-based operators move to online/ mobile.