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DFS Industry vs. Sports Betting: Expectations and Forecasts

8 August 2019, 13:58
Votes: 2

The daily fantasy sports (DFS) industry is going to face the influence of sports betting legalization in the USA. That was the main topic considered by Tim Poole in his study on both markets interrelation.

DFS Industry vs. Sports Betting: Expectations and Forecasts

Imagine that you have bought a supercar. You feel like a king of the road, driving along the highway at the highest allowed speed. But after seeing the ad promoting another kind of luxury car with catching design, you will definitely think about the opportunity of buying this one too.

This is an analogous situation with what is currently happening in the US after the Professional and Amateur Sports Protection Act’s repealing. With sports betting legalization, DFS players will have another opportunity to make a bet on the event they are interested in.

More than half of US fantasy sports players (there are more than 59 million of them all over the country) gamble at casinos and use bookmaker services. After sports betting legalization, this proportion will definitely change. Bookmakers hope that they will be able to increase the number of customers by involving DFS players. The study shows the stability in the fantasy industry’s popularity, but who knows how this is going to change after sports betting legalization in every state.

Therefore, major operators are currently increasing their popularity by signing partnership agreements with different sports leagues. For example, FanDuel fantasy sports provider has become the NHL sponsor. In order to cover both industries (DFS and sports betting), the Fantasy Sports Trade Association (FSTA)   even got rebranded into the Fantasy Sports & Gaming Association (FSGA).

Despite the attempts of taking over the sports betting market, RotoQL CEO Justin Park believes in a happy co-existence of these two industries. According to him, DFS and sportsbook have their own features, as well as different types of customers.

sport betting

Chris Grove, Managing Director at Eilers & Krejcik Gaming, shares the same opinion. However, he considers DFS to have a privileged status due to a wider range of services provided to clients. His position is that DFS and sports betting attract different people, so the first one’s popularity in the USA will remain larger at least for the next couple of years.

But sports betting legalization outside Nevada will undoubtedly have its influence on the DFS industry composition. According to the forecasts, from four to eight states are going to allow sports bets on their territory in the near future. Therefore, DraftKings and FanDuel, as the two main DFS operators, have already taken steps on strengthening their positions on the betting market. The consequences of such actions will be seen soon.

Park indicates that DFS business will remain profitable even though operators’ investments into the sports betting sector will rise significantly. He doesn’t expect the industry’s quick growth but believes that the number of customers will increase. That is how DFS companies will have money for the expansion of their business.

FSGA CEO Adam Wexler thinks that FanDuel and DraftKings do not plan to neglect their main business in any way – they will manage two separate businesses. This means that daily fantasy sports will remain as it was, but the sports betting activity will be added. Despite the fact that these are different businesses, their operation involves the audience common for both of them.   

DFS

He admits that the DFS market’s main problem is lack of investments, and this has not changed much after the PASPA repeal. In 2015, when there was no regulation for this industry, that was clear, but Wexler does not understand why this trend has been continuing after eSports legislation’s implementation.

As there are more than 50 million fantasy sports players, DraftKings and FanDuel won’t dare to ruin their reputation as the best DFS companies. Users appreciate the level of services provided by the operators, so they will never leave for no reason. To date, the DFS industry in the US consists of 40 states, half of which have no regulation for this business. Therefore, the operators have a very good chance to increase their revenues and the customer base.

The next year will provide answers to all the questions concerning DFS and sports betting industries. We are going to see how the market will respond to the situation, how many states will allow bookmakers’ operation and what priority fantasy games operators will have.  

Analysts have different thoughts on what is going to happen, but the main question remains open: what will be the sports betting industry growth comparing with the DFS decrease in three years? Justin Park’s opinion is that due to the industry’s underinvestment many players, as well as investors will join betting companies right after their legalization. Betting business is actively introducing new technologies, therefore, its growing popularity seems logical. That is why RotoQL CEO is expecting the DFS industry’s natural decay for a period of approximately 10 years.

Analysts

Chris Grove gives a more positive forecast for the DFS industry mainly because of the single-game introduction. He believes that the number of companies shifting to sports betting will increase, but due to its more rigid regulation (as it is considered a type of gambling) daily fantasy sports industry will survive and continue developing.

Wexler’s position is quite different. He expects that the DFS’s salary cap format is going to be canceled, which will help the industry to expand the number of formats. This will make it more attractive for the investment community.

It is safe to say that the eSports industry moves towards gambling in general and sports betting in particular. The interrelation between these businesses is inevitable but that doesn’t mean it will have a negative impact on any of them.  

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