DFS Industry: Upcoming NFL Season Could Define the Future

The busy season for Daily Fantasy Sports is fast approaching, and when the first weekend of the upcoming NFL season commences in early September it could help answer a lot of the questions that still loom over the DFS industry like foreboding storm clouds.

Among the questions we could get answers to before the first snowflakes start to fall are:

• Will Daily Fantasy Sports continue to be a two horse race between DraftKings and FanDuel, or will another player emerge from the trail pack to challenge the two titans?
• Will the launch of Yahoo’s DFS contests change the DFS landscape?
• Will other mega-corporations (Amaya, Disney, someone else) launch a DFS site of their own?
• Will anyone take DFS offline or integrate their online DFS site with offline offerings?
• Will DraftKings or FanDuel turn a profit, or will marketing costs continue to keep these operators in the red?

Let’s take a look at each of these things one by one.

Will anyone join DraftKings and FanDuel?

Considering they collectively have 95%+ market share, and they’re spending like sailors on shore leave, DK and FD have made it very difficult for a rival DFS site to gain any traction in the market. The biggest barrier to entry is that DK and FD are spending eight and nine figures per year on marketing, and thus far the only new players in the market are copycats.

The only way a new site can grab a piece of the pie will be through inimitable innovation; something that just doesn’t seem likely given DFS’s simplicity.

Additionally, if DraftKings and FanDuel are allowed to continue to solidify their positions (by grabbing every major team sponsorship and dominating the marketing airwaves) it will be even harder to unseat them down the road. It appears launching (or making a renewed marketing push) prior to the start of the 2015 NFL season could be the last legitimate chance for a lot of DFS companies to make some headway.

Will mega-corporations upset the apple cart?

That being said, if a major corporation enters the market (Yahoo, ESPN, Amaya) and they’re willing to spend, they could give the two entrenched powers a run for the money thanks to their brand recognition and of course their already sizable databases.

Since the bulk of DFS play occurs during the NFL season the start of the season is a good bellwether point to see who will be in, and who will be sitting on the sidelines of the DFS industry. This is particularly true of the big corporations who might be exploring DFS as they would likely want to go all out with marketing prior to the start of the season.

We know Yahoo is in, which could be a game changer in and of itself, but the rest of the landscape has yet to come into focus, and ESPN has been linked to DFS rumors for quite some time, and Amaya has been overtly indicating they are looking at entering the nascent market.

Will anyone take DFS offline?

Another possibility would be for some to come along and literally shake things up, such as the recently announced deal between PlayMLF.com and Latitude 360 that will give PlayMLF’s DFS contests an offline presence in addition to its online.

Taking DFS offline seems counterproductive, but Latitude’s vision is a pretty good one, and there are certainly other potential paths for offline DFS to thrive, whether at race tracks or state-run lottery locations, or perhaps at sportsbooks in Las Vegas or some other restaurant chain.

The possibilities to bolster your online traffic through focused offline partnerships might be the best way for smaller sites to make inroads against DraftKings and FanDuel.

Can someone prove DFS is profitable?

This is the million-dollar question (or billion-dollar question if you consider the valuations of DraftKings and FanDuel) that MIGHT be answered this year.

According to DFS guru Adam Krejcik of Eilers Research, these sites could be profitable right now if they cut down on their marketing, but there’s no telling what that might do to DFS’s ceiling and/or player acquisition rates.

Whether these sites (and their founders and key stakeholders) are in it for the long run and are looking to turn a profit, or if they are simply boosting their valuation for a potential IPO offering (leaving the questions of profitability up to the new public stockholders and board of directors to sort out) is one of the more intriguing aspects of the industry.

Upshot

Hopefully, we’ll have answers to several of these questions when the Steelers and Patriots kick off the season on September 10th.