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FanDuel, one-day leagues and the business of fantasy sports

FanDuel is a daily fantasy sports business that’s currently enjoying the top position in terms of market share.

Their main competitor, Draft Kings, is close behind, however, nipping at their heels and keeping them sharp.

And with their affiliate program (see MLM??) people are joining by the masses.

What’s the story behind FanDuel, and where are they headed?

Hint: it’s getting interesting, fellas.

#1 in high stakes industry

Ten years ago, Fantasy Sports hardly mattered to anyone but a few stats-obsessed geeks…in 2005 there were an estimated 12.6 million players.  Now, ten years later, that number has more than quadrupled to where there are almost 57 million players (1).  By 2020, it’s expected to grow even more, to where player entry fees top $31 billion (2).

The media has come to love fantasy sports, too.  USA Today has, among its traditional news sections, a Fantasy Sports section.  Here, fans can read the latest news and analysis on fantasy sports, complete with who’s making the “biggest fantasy impact” or whose performance last weekend should prompt you to switch things up in your fantasy picks.

There’s now Fantasy Sports Insurance, meant to protect players from financial devastation should a player on his or her team become injured.  League entry fees, transaction fees, and even fantasy sports magazine subscriptions can be covered and policies are underwritten by Lloyd’s of London.

There are also fantasy judges, who for a small fee will step in and resolve disputes managers are having with other managers.

Also sprouting up is a financial niche designed solely to hold entry fees and manage payouts.

One-day leagues

FanDuel covers all the sports and hosts the one-day leagues that are currently all the rage (as opposed to week-long or season-long leagues which have been typical until recent years).  They were the first to offer one-day leagues, which offer players more action at a faster pace.

The one-day leagues are attributed with dramatically increasing the appeal of fantasy sports to the level they are at now.

It also just so happens that history has favored FanDuel in particular and fantasy sports in general.  The development of the internet made daily and weekly games possible, whereas in the past only the league-long games were feasible with the technology available at the time.  Now, data is transferred at a pace that makes quicker games and quicker payouts totally possible.

And considered a game of skill, fantasy sports is not affected by the rash of US unlawful gaming laws that sprung up in 2006.

FanDuel specializes in fantasy football, which of course is more popular than fantasy basketball or even baseball.  According to the Fantasy Sports Trade Association, Football is the favorite fantasy sport of 73% of fantasy sports players¹.

In part due to these innovations and developments, FanDuel had cornered 60% of the market share by 2013, which was also the year they secured $11 million in funding (3).  That was just four years after startup, and two years after they reported whopping payouts to players, to the tune of $10 million.  Two years later, that payout figure had grown to $50 million.  This sort of growth attracts attention and it hasn’t even begun to slow down.

FanDuel now reports on their investors page that they currently have $88 million in equity and over 1 million paying users.  In 2014 alone, they awarded more than $560 million.  Announcements like the one from last September (2014) that they’d secured $70 from investors make the 2013 numbers look humble indeed.

Current issues

It’s tough at the top: last November, Fan Duel was sued over its “Double Your Deposit” scheme, but so far nothing has moved forward on that.

Back in 2013 a man tried twice to sue FanDuel, stating it was an illegal gambling operation but he did not win.  FanDuel is decidedly a game of skill, as it involves massive amounts of data, careful forecasting, and a complex variety of decisions in order to strategically assemble a winning team and get higher payouts.

On a more positive note, the company negotiated a deal with the National Basketball Association (NBA) to be the only fantasy sports company featured on the official NBA website (4). What’s in it for the NBA?  FanDuel CEO noted that people who start playing fantasy sports begin to watch more sports TV as a result.

They also partnered with the Washington Redskins, a football team in the National Football League, last November.

FanDuel will be featured in ads at the team’s home field, FedExField in Landover, Maryland.  FanDuel will also feature on the team’s social media sites, according to Bloomberg Business (5).

This deal in particular has brought more national recognition than almost anything else. Google searches on the keyword “FanDuel” surged after the announcement in November 2014:

But the real surge that Fall of 2014 in searches was due to CBS sports.  Sports senior analyst Larry Hartstein covered Week 1 on FanDuel and as he did, introduced thousands of readers to the concept of fantasy sports and where to play it (FanDuel).  Mentioned first and foremost was the enticing bit of news that the one-week long $100000 Fantasy Football contest was only $10 to join and first prize was $10,000, and he also encouraged readers to “Enter now” (6).

Fast forward to April of 2015, this past Spring, and FanDuel has 15 NFL teams which means they’re sponsoring about half the NFL (7).

Outlook

Investors are optimistic about their investments.  They’ve seen management at FanDuel step up to performance and response levels that equal what’s expected of a company with over $70 million in venture capital poured into it within the past year.

Paul Martino is the managing director of Bullpen Capital, one of those investors in FanDuel.  In an interview with Forbes Magazine (8), he indicated that he sees year-to-year growth in the future of FanDuel.  The rise of DraftKings does not worry him, as FanDuel is clearly still out in front as far as market share goes.  And that’s precisely where he prefers them to be.  With a strong belief in the power of FanDuel’s fan base to keep the company solid for years to come, the future looks bright indeed.

In case you just scrolled to the bottom, I decided to pass on FanDuel even though I’m a savage sports gambler.

Seriously.

But I’m not gonna leave my luck in the hands of strong dudes. Too alpha for that.

In other words, you might like our training because it teaches the “good life” without throwing money at other dudes athletic performances.

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