Does Daily Fantasy Sports Have the Same Future as Poker

The Daily Fantasy Sports industry is on fire with DraftKings taking the lead, and FanDuel close behind. Additionally, the massive amount of investment pouring to the industry showcases the corporate interest. In 2014, more than 1.5 million US citizens paid over $1 billion to enter into tournaments. FanDuel increased its customer base by 300 percent, with such investors as Comcast and Kohlberg Kravis Roberts & Company. These investments have skyrocketed FanDuel’s valuation to over $1 billion. Additionally, DraftKings’ sponsorships with every United States major league has also catapulted its popularity.

The Other Industry Players

There are plenty of other Daily Fantasy Sports startups that are vying for the third spot and are also receiving generous funding. Such new players as Amaya and Yahoo have entered the arena, as well as Beckett Media. Many experts think that Daily Fantasy Sports is on a perpetual upswing. One DFS expert, Adam Krejcik at Eilers Research, projected that the industry would blow up anywhere from $500 million to $2.5 billion in revenue by 2020. However, others do not think that the Daily Fantasy Sports Industry has such a bright future ahead of it. In fact, some speculate that the industry could take a massive fall when the same fate as online poker is bestowed on it.

Daily Fantasy Sport’s Potential Online Poker Fate

Some experts point out that online poker had a bright future ahead of it as well, and that many experts speculated the same stellar industry increases for online poker that they are now for DFS.

During online poker's prime, the United States was on the brink of legalizing the industry, and so there was a stream of online poker companies who wanted in on the potentially endless action. However, one key difference between online poker and daily fantasy sports is that the online poker industry only would have benefited a few Titan operators.

Additionally, the fundamental game of poker is much more self-defeating than that of fantasy sports, as it suffers from a significant skill gap problem.

What Online Poker and Daily Fantasy Sports Have in Common

When looking at the two games in a broad sense, they both have the same hallmarks. For one, both games have no barriers to entry, as well as incredibly high marketing expenditures, which in the end may cut out the smaller competitors of DFS.

Moreover, both games do suffer from a skill gap problem, which may eventually turn away a high volume of customers, when they eventually are unable to beat the rake. That being said, Daily Fantasy Sports has much less potential to fizzle out then did poker.

The Market Structure

The similarity between daily fantasy sports and online poker comes down to three key factors:

• Liquidity and scale
• Key partnerships
• Brand

DFS’ liquidity and scale are the most important factor and mean that Titan DFS companies dominate the industry. However, that is not to say that the smaller DFS operators have no chance at success.

On the other hand, online poker’s dynamic makes it so that players breed more players, and that an increase in popularity creates more popularity. For instance, PokeStars offers the largest prize pool in the industry, as well as the most extensive game options, which results in product differentiation and a drive in brand value. This is why in the end PokerStars succeeded in dominating the entire online poker market.

Daily Fantasy Sports has the same problem, except that their market can easily be divided up between two companies, which is what FanDuel and DraftKings have done.

The Skill Gap Problem For Poker

Online poker dealt with a significant skill gap problem in that most bad players do not continue to find joy in losing money consistently. However, good players do not earn money, as much as they are directly rewarded by bad players' mistakes. This means that when bad players eventually give up and stop playing, a major issue arises since professional players must consistently have an edge over their opposition, which must be larger than the rake.

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Over an extended period of time, the skill levels of regular players increase along with players who attain professional poker skills. As bad players exit out of the game, the poker games start to get harder, and the professional player threshold increases. Once this happens even the marginal professionals stop playing, as they are not able to beat the rake.

The Skill Gap Problem For Daily Fantasy Sports

Daily Fantasy Sports has the same skill gap problem as poker, but with none of the intricacies. DFS is a data-drive game, which means that there are no check-raising procedures, floating, continuation betting, or 3-bet pre-flop frequencies like there is with poker. Even with software that helps new players, people still need to know how to play the game properly.

This is not entirely the case for daily fantasy sports, as many websites give their users lineup optimizers. Additionally, players can use one lineup that they’ve optimized and play it in countless amounts of contests on any site of their choosing.

However, this does mean that novice players that have not developed an optimal lineup can easily be defeated. However, it also means that bad players who are unable to muster enough skill to play better lineups will likely quit playing, which will leave the people who can optimize their lineup to compete.

What is Daily Fantasy Sports' Outlook?

Despite the similarities to online poker, DFS has a potentially bright outlook. This is especially the case as DFS provides a legal way to sports bet in many US markets in which traditional sports betting is still considered widely illegal.

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Although, the explosive growth of DFS may mask any skill gap problems associated with the industry in the short term. There is the chance that when the volume of players joining the game starts to diminish, the skill gap problem will begin to immerge. However, knowing the innovative mindsets of the DFS industry leaders, it is likely the case that they’ll find their way around it.

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