Daily fantasy sports
Daily fantasy sports are a subset of fantasy sport games. As with traditional fantasy sports games, players compete against others by building a team of professional athletes from a particular league or competition while remaining under a salary cap, and earn points based on the actual statistical performance of the players in real-world competitions. Daily fantasy sports are an accelerated variant of traditional fantasy sports that are conducted over short-term periods, such as a week or single day of competition, as opposed to those that are played across an entire season. Daily fantasy sports are typically structured in the form of paid competitions typically referred to as a "contest"; winners receive a share of a pre-determined pot funded by their entry fees. A portion of entry fee payments go to the provider as rake revenue.
In the United States, the daily fantasy sports industry was dominated by two competing services: the New York-based FanDuel, and the Boston-based DraftKings. Both companies were established as venture capital-backed startup companies, received funding from investment firms, sports broadcasters, leagues, and team owners, and became known for the aggressive marketing of their services. As of September 2015, both companies had an estimated value of at least $1 billion and controlled 95% of the U.S. DFS market. The two primarily compete against smaller DFS services, such as Fantasy Aces and Yahoo! Sports. The popularity of the daily fantasy format has been credited to its convenience in comparison to season-length games, as well as the focus on major cash prizes in the promotion of these services. Daily fantasy was also credited with helping to improve television viewership and engagement with sports.
DFS faced criticism over its semblance to sports betting; multiple U.S. states ruled that DFS contests constituted gambling and sports betting—which, at the time, was effectively illegal in most states under the Professional and Amateur Sports Protection Act of 1992—arguing that their elements of chance were predominant over those of skill, or how much control the player has over the outcome of the game. A New York State lawsuit, spawned from an investigation of allegations that DraftKings and FanDuel employees had used inside information to win cash prizes from each other, spawned retaliatory lawsuits from the companies. They argued that the rulings were the result of a misinterpretation of the nature of their services. By December 2017, 18 states, including Massachusetts and Virginia, had ruled that DFS was a legal game of skill.
In the U.S., these issues became largely moot in 2018, when the Professional and Amateur Sports Protection Act of 1992 was struck down in the Supreme Court lawsuit Murphy v. National Collegiate Athletic Association. With states free to legalize sports betting, DraftKings and FanDuel subsequently expanded into bookmakers to leverage their existing customer base and legal expertise, while FanDuel agreed to be acquired by Irish company Paddy Power Betfair to become its main U.S. subsidiary.
Gameplay
There are several main disciplines of daily fantasy sports competitions, divided into two categories: cash games, and guaranteed prize pool. DFS contests typically utilize a salary cap format, in which players are allotted a maximum budget to spend on athletes for their team, represented as either play money or points. Each athlete has their own cost, with elite athletes having the highest costs.In "Double-up" or "50/50" cash game competitions, players win a prize equal to double their entry fee if they finish with a score within the top 50% of all participants. Head-to-head competitions are similar, except that the player must win against another user of their choice. Guaranteed prize pool contests have higher stakes, using tiered payouts based on finishing in different percentiles or positions of the field of contestants. Further variations of double-up games, including Triple-up, Quadruple-up, and Quintuple-up, may also be offered. Leagues are smaller versions of GPP contests, with tiered payouts and a smaller number of contestants.
Daily fantasy games exist in a variety of major and minor sports, depending on service, including but not limited to American football, association football, auto racing, baseball, basketball, cricket, golf, ice hockey, rugby, horse racing and sumo wrestling. Daily fantasy contests have also been held in professional-level e-sports events.
History
Early examples
In the late 1980s and early 1990s, the company Phoneworks created nationwide fantasy games for a variety of sports, launching them in a variety of newspapers across the United States. Players chose their teams by calling a toll-free phone number and entering four-digit codes for each of their player selections. The games served as an early version of today's daily fantasy sports by rewarding each week's highest-scoring participants with prizes.Among the first websites to specialize in the format of daily fantasy was Instant Fantasy Sports, established in 2007; the service's co-founder Chris Fargis explained that the service was inspired by the format of online poker, and that his goal was to "take the time frame of season-long fantasy sports leagues and shrink it." The site was later acquired by NBC Universal and re-branded as SnapDraft; NBC had also acquired the fantasy sports-focused website Rotoworld in 2006. SnapDraft was later shut down.
Growth
On July 21, 2009, the Edinburgh, Scotland-based prediction market game Hubdub launched a spin-off known as FanDuel; the service attempted to market itself as a modern alternative to the fantasy sports services provided by other media properties, such as Yahoo! Sports and CBSSports.com, with the daily fantasy format and integration with popular social networks. Its founder, Nigel Eccles, was inspired to create the site when he realized that the carve-out for fantasy sports in the U.S. Unlawful Internet Gambling Enforcement Act of 2006 did not state that a legal, paid fantasy sports competition had to last for an entire season. In February 2012, the Boston-based DraftKings was established by former VistaPrint executives Jason Robins, Matthew Kalish, and Paul Liberman. DraftKings gained a local, Somerville-based competitor in StarStreet, when it introduced a daily fantasy game of its own.DraftKings and FanDuel in particular became the subjects of venture capital investments by various parties; in April 2013, Major League Baseball invested an undisclosed amount in DraftKings, becoming the first U.S. professional sports organization to invest in daily fantasy sports. In 2014, DraftKings acquired DraftStreet, as well as StarStreet, and raised another $41 million in investment led by The Raine Group, bringing the company to a total of $75 million in outside funding. FanDuel pursued investments as well, with an $11 million Series C funding round that included Comcast Ventures, a $70 million Series D round in September 2014 led by Shamrock Capital Advisors with participation from NBC Sports Ventures and KKR among others, and a Series E funding round of $275 million in July 2015, valuing the company at over $1 billion. In October 2014, NBC Sports entered into a content sharing partnership with the DFS information website Rotogrinders, in which it would provide daily fantasy-oriented content for Rotoworld.
DraftKings and FanDuel began to pursue advertising and endorsement deals with sports franchises and leagues; in November 2014, DraftKings entered into a multi-year sponsorship deal with the National Hockey League, complementing team-level sponsorship deals it had previously reached with seven NHL franchises. Also in November, the National Basketball Association acquired an equity stake in FanDuel and entered into a four-year sponsorship deal with the company. In April 2015, after the National Football League began to allow daily fantasy providers to sign multi-year team sponsorship deals, with caveats, FanDuel reached deals with sixteen NFL teams for placements on team-oriented digital properties, radio, and in-stadium. DraftKings had also received an investment by Robert Kraft—a local businessman whose holdings include the New England Patriots.
Mainstream popularity
By 2015, the daily fantasy sports industry had experienced a major growth in mainstream popularity. The rise was credited to several factors, including the convenience of the format, the ability to access the services on mobile devices, and aggressive marketing campaigns which promoted the prospective cash prizes of their largest contests. The structure and payouts of daily fantasy games have been described as providing a feeling of "instant gratification" to its players, similar to that of online gambling.Writing for The New York Times Magazine, Jay Caspian Kang noted that despite its similarities to gambling, DFS appealed to mainstream sports fans because it evoked the feelings of community commonly associated with traditional fantasy sports, rather than the "shady underground games" of poker. The popularity of daily fantasy has also influenced fan engagement with sports; Fox Sports president Erik Shanks felt that daily fantasy sports help improve television viewership of sporting events, while FanDuel stated that players became more engaged with sports content after joining the service.
In July 2015, Yahoo!, a historic provider of season-length fantasy sports, announced that it would begin to offer paid daily and weekly fantasy games as part of its Yahoo! Sports website. Moneyball, one of the first Australian DFS services, was also established by former Fairfax Media employees James Fitzgerald and Rax Huq; the company secured $1.8 million in series A funding. Fitzgerald noted that the sports betting industry in Australia had brought in $900 million in yearly revenue and that DFS was "a more ethically and morally preferred means of partnership with a bookmaker."
In September 2015, DraftKings and FanDuel expanded their offerings into competitive video gaming; FanDuel acquired the e-sports focused DFS service AlphaDraft, while DraftKings added contests for the 2015 League of Legends World Championship.