DraftKings is a fantasy sports business currently ranked in second position after industry leader, FanDuel.
In just a few short years, the leaders at DraftKings have extended extraordinary efforts to distinguish themselves from a pack of dozens fantasy sports businesses, all vying for the number two position in hopes of knocking FanDuel from their rank at the top of the game.
How has DraftKings risen so fast and come so far ahead of its competitors, in one of the fastest-growing industries in the US and Canada? And are they poised to remain at number two, or will they slip and fall lower…or will they make it to the top in the high-stakes world of fantasy sports?
Initiating their startup in 2011, just two years after rival FanDuel entered the scene, DraftKings is based in Boston, Mass. Like FanDuel, they run daily as well as weekly leagues and cover all major sports.
The business is based on draft picks which players choose and make dream teams from. They base their choices on stats…endless stats which have now been made available for all sports thanks to the internet. Before the modern era of data and technology, only baseball fans kept rigorous stats and only they cared about them, as well.
That’s all changed, with the explosion of fantasy sports- the pastime has certainly gone mainstream as it’s passed from the hands of geeky underworld players to the cubicles and boardrooms across the US and Canada. Every office has its league nowadays- in fact, the players aren’t the only people who love fantasy sports.
Money attracts money
Business people have taken notice of the money changing hands and have become very serious about investing in fantasy sports. According to the Fantasy Sports Trade Association (yes, it seems there’s a trade association for everything), the typical player is college educated, male, and makes at least $75,000 per year (1). Oh, and most importantly: he spends an average of $465 per year on his fantasy sports hobby. Cha-ching!
The media takes note, as well: TV stations, newspapers, blogs…all are now well aware that 60% of fantasy sports players report they now read more about sports since taking up the fantasy hobby. Likewise, 61% report they watch more live sports just because of fantasy, the FSTA discloses in that same report.
These are crossover numbers sports managers and media execs drool over. No wonder DraftKings is winning partnerships and scoring premium sports sponsorships left and right these days.
DraftKings and friends
One of those sponsorships is none other than Madison Square Garden Company. This past June, Bloomberg Business reported (2) that DraftKings entered a long-term partnership with the famous arena, giving them year-round exposure.
Millions of viewers will see the DraftKings brand when they tune in (or attend in person) to watch sports, entertainment, and media events in New York City’s famous arena in Manhattan. The deal also includes exposure on social media accounts of the New York Knicks, Rangers, New York Liberty, and for what it’s worth, the Westchester Knicks.
As of June 2015, the company had over 2 million users across 10 sports and 200 employees, according to data assembled by PrivCo. CEO Jason Robins told CNBC they’ve hauled in over $100 million in revenue in the three short years they’ve been in business. According to CNBC they have so far this year awarded over $1 billion in prizes (3). They are also valued at $1 billion, which makes them a Wall Street Unicorn. CNBC also reported that DraftKings’ investors include the following, after a late-July deal worth $300 million was closed:
- the National Hockey League
- Major League Soccer
- Major League Baseball
- Fox Sports
Wondering where the NBA might be on that list? Sorry DraftKings, they’re spoken for…by FanDuel. So’s NBC Sports, which is owned by Comcast.
The money just keeps pouring in for DraftKings. According to Sports Business Daily (4), their investors include:
- Atlas Venture
- Legends Hospitality (New York Yankees & Dallas Cowboys)
- The Kraft Group (New England Patriots)
- The Raine Group
- GGV Capital
- Wellington Management Co.
- DST Global
They were all set to accept funding from ESPN and The Walt Disney Company (WD owns ESPN) but that has transformed into a marketing relationship but not a venture deal.
For the future, DraftKings has its eye set on Europe, Golf, beating FanDuel for #1 position, and even more cash
Having released their financials this past winter (which, as a privately held company they do not have to do), DraftKings are looking pretty good.
DraftKings expects to get close to $150 million in revenue this year, which would be a quintupling of their 2014 revenue and so much higher than their 2013 revenue ($4 million) it doesn’t even make sense to calculate the percentages. Suffice it to say, it’s exponential growth. These figures come from the Sports Business Daily article cited in the previous paragraph.
Right now, in spite of all these dizzying numbers and sunny outlook for DraftKings, it’s not yet profitable. They spend heavily on marketing and on their attempts at snatching up the market share before FanDuel takes even more of it.
And now they have something else to worry about: Yahoo Fantasy Sports is making a play for a top position in the game.
DraftKings execs are looking across the pond at Europe, where they hope to expand very soon. Their first foray will be into the United Kingdom. They also hope to expand even more, into other sports like soccer and golf.
They see their company as having been flawlessly executed in its first two years of existence and predict they will pull it off again for the next two.
But its still not my gig.
But I’m not gonna leave my luck in the hands of strong dudes. Too alpha for that.
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