Snake drafts and keeper leagues, rinky-dink payouts and dime-store trophies—that's all so yesterday. The way fantasy sports are increasingly being played, each new morning brings a new chance to cash in. Big-time
HIGH NOON at the Cosmo in Vegas, and the eight cinema-scale TVs wrapped around the room flicker like the video screens in Times Square. The bros lounging on the couches down beverages at a tailgater's pace, the sharks hold court at the bar, a Playboy bunny—it's never explained how she got the invite—sashays through the glittery, chandelier-lit ballroom. Men cheer and groan and clamor on about stacks, fades, FPPGs, Odell Beckham Jr.'s insane ROI and how any knucklehead who doesn't have Derek Anderson in his lineup—the best QB value play of the day—may as well hit the Bellagio tables next door because he's screwed, absolutely screwed. Occasional roaring eruptions drown out the game broadcast that's blaring over the speakers; in one pocket of the room a 45-yard Mason Crosby field goal is celebrated as if it's the first moon landing. Projected on a JumboTron-sized screen, refreshed every few seconds, come the live scoring and standings: The Super Bowl of daily fantasy sports (DFS) is in full swing, and the lineups to beat belong to Wanker14 and 3rd_and_Schlong.
"I was up all night," says the pro known as KillaB2482, his eyes fixed on the screen showing Giants-Redskins. (He's rolling with a Giants stack of Beckham and Eli Manning.) "I did the most research I've ever done." KillaB began playing daily fantasy sports six years ago, back when it was a niche hobby like taxidermy or genealogy. But over the last year, DFS—a faster, more addictive, potentially more lucrative iteration of traditional fantasy games—has experienced a boom that's bringing cash and new players to the industry in unprecedented numbers, as well as providing gainful employment to the sports-obsessed fan with a mathematical cast of mind. A pro like KillaB can pocket tens of thousands of dollars on a given day. Or, just as easily, lose it. A week earlier KillaB (Brett Hartfiel, 32, of Minneapolis, a top-five-ranked DFS player) lost $120,000. Every Sunday, though, is a new opportunity for a big score, and here he is, mid-December, in a room of 75 qualifiers—a testosterone-charged brew of pros, wannabe pros and amateurs, many of whom, until just a few months ago, were unaware that this world existed—at the FanDuel Fantasy Football Championship (FFFC). Each player gets one lineup, one shot at a share of the $10 million purse, with the winner's take at $2 million.
Another eruption: an Aaron Rodgers pick in Buffalo, where the big upset of Week 15 is brewing. The crowd cheers and groans, and the conversation at the bar turns to the rumor that professional bettor Billy Walters, godfather of Vegas sports gambling, put $5 million on the Bills a few days ago and single-handedly swung the Buffalo--Green Bay line from 6½ to 4. "When I heard that, I faded the Ravens and bought the Bills' D," says a thirtysomething holding a plate stacked with glistening slabs of prime rib. His Johnny Manziel jersey and pants that resemble pajama bottoms seem perfectly appropriate for this daylong bacchanalia of fantasy sports. "It's my birthday, but if I win the $2 million, I'll send Billy a gift."
February 2, 2015
BELIEVE IT or not, the fantasy sports universe continues to expand. There were 40.5 million fantasy players across all sports in 2014, a figure that's more than doubled over the last seven years. But the industry is changing: Fantasy sports of the traditional variety—draft a team, then manage your lineup through the slog of a full regular season—have become an old man's game. The generation of fans that became fantasy-obsessed with the rise of the Internet in the late 1990s, the dudes who fell in love with live snake drafts and five-hour auctions and the day-to-day micromanaging of a single team over a full season—all for the reward of bragging rights, a cheesy trophy, maybe a few hundred bucks—are now in their 40s. Their teenage children, meanwhile, live in a world of 140-character quips, six-second videos and instant gratification; theirs is a generation for which the idea of playing one game over several months seems as thrilling as Parcheesi.
"This is going to be the thing," says emcee Bob Harris, who's standing at a table in the Cosmo ballroom, his eyes darting among 10 early games, the tweets on his smartphone and the iPad he's using to track today's live scoring. "I've been playing fantasy football since 1983," adds the bald, bantering fantasy sports pundit, a sort of James Carville for the DFS world. "I'm in 26 leagues now. I've seen the evolution of fantasy. I see all the weaknesses that piss people off. Daily fantasy fixes it all. It's not just a fad. It's the future."
The rules for DFS—for NFL games, as well as NBA, NHL, MLB, MMA, NASCAR, college basketball and football, golf and soccer—are simple: Every real-life athlete is assigned a salary, and every lineup is subjected to a salary cap. Once you've assembled a lineup, you win or lose based on the performances of your players that day. You cash out the next morning, then start all over again. Participants compete in head-to-head cash games for anywhere from $1 to $5,000 or in tournaments, where only a top percentage of finishers win money but take higher payouts—up to $1 million off a single entry on an NFL regular-season Sunday.
"If the NFL is looking for its [most ardent] audience, this is where they find it," says Harris. "There's not a more passionate group." The DFS demographic is young (the median age is 15 years younger than that of the traditional player), male (more than 90%), mobile (over 70% play on their phones) and college-educated with disposable income. Four years ago 12 finalists squeezed into a Las Vegas hotel suite for the inaugural FFFC, and "the winner ran around the room pumping his fist after winning $25,000," says Cal Spears (aka Braskey), a finals qualifier in 2010 and '14. "Now $25,000 is an afterthought." Last year's FFFC, with a $3 million prize pool, was a watershed moment in the evolution of DFS from time-sucking diversion to viable profession. Pros (many of them transplants from the poker world) make up a small subset of the DFS player pool, but with their high volume of entries, they provide DFS companies with a large portion of their revenues. Given today's rising prize pools, pros can now routinely compete in high-stakes weekly tournaments and win up to $1 million—what players call "life-changing money."
"There's never been a bigger change in our industry than what's happened with daily fantasy," says Paul Charchian, president of the Fantasy Sports Trade Association. "We've had more investment in the fantasy industry over the last year than we've had in the entire history of the industry."
FanDuel, the industry leader in DFS with more than one million paying players, a market share of 75% and $57 million in total revenue in 2014, raised $70 million in venture capital last year; DraftKings, which entered the space in '12 and represents FanDuel's biggest competition, raised $41 million. Rival sites are cropping up like weeds (SPORTS ILLUSTRATED owns the DFS provider FanNation), but FanDuel and DraftKings make up 95% of the market and have such loyal followings that it may be too late for even a media behemoth to become a serious player without acquiring either of the mainstays. That lead was built with an all-out advertising assault (the two have spent upwards of $70 million combined on marketing; see chart, page 39) and shrewd alliances with teams and leagues, each deal a further validation and endorsement of a fledgling sector.
Last year MLB announced a sponsorship deal with DraftKings and the creation of "official mini fantasy games" like the ones for the NFL, in which players set a daily lineup. (MLB's version is free; prizes include tickets and memorabilia.) DraftKings has since added partnerships with the NHL, three NBA teams and the Patriots, marking the first involvement of an NFL team. And FanDuel recently struck deals with the Redskins, Jets, seven NBA teams and, in the most significant industry accord to date, a four-year partnership with the NBA itself, including an equity stake in the fantasy company. "For those of us that have been in the industry since the beginning, this was the tipping point," says Dan Back, the lead analyst at RotoGrinders, which offers DFS players oceans of statistically driven analysis. "The NBA is saying, Not only do we support daily fantasy games, but we believe in it so much that we want a piece of the endgame."
ON THE eve of the FFFC, a 33-year-old personal fitness trainer from Pasadena named Scott Hanson sat awake in his hotel room with his wife, Danielle, fast asleep while he scanned a color-coded spreadsheet on his laptop. At 3:30 a.m. he was assessing the return on investment (ROI) of Bengals rookie running back Jeremy Hill.
Until September, Hanson was like most Americans: He'd never heard of daily fantasy. He and Danielle saw a FanDuel commercial during an NFL game ("Hey, you're pretty good at that; why don't you try it out and make some money for us?" Danielle suggested to him), and the following week Scott deposited $15 into a tournament. He finished out of the money. He tried again the week after and failed again. But in Week 5 he turned a single $5 entry into a first-place finish among 57,000 lineups and won $15,000.
Having tasted success, Hanson began treating his new hobby as a second job. He built a system to identify undervalued players based on their salary, past performance (as measured by fantasy points per game, FPPG) and projected output. He began listening to RotoGrinders podcasts in his spare time. He started investing $1,000 every week into multiple lineups on various sites, and by finishing first at a qualifying tournament in Week 8 ("the week Ben Roethlisberger went off"), he won a seat at the Vegas finals. "You learn pretty quickly that if you're good at it, yeah, you can make quite a bit of money," Hanson says.
Some dismiss daily fantasy as nothing more than a dice game, but that analogy doesn't hold up. DFS is strategic, and it can be unforgiving to the casual participant who chooses players based on emotion, media narratives and hometown favoritism. Often that participant is facing analytically inclined opponents who rely on game theory and probability to calculate their likelihood of winning from an assortment of variables: injuries, coaching tendencies, weather. Smart risk-taking and attentiveness are rewarded. And advantage can be gained by tracking updates from beat reporters, who are the first to know if a player had bad sushi the night before, leading to the promotion of a rookie no one has heard of.
Johnny Manziel's being named midweek as the Browns' starting quarterback is the big news leading up to the Week 15 Sunday games that play out at the FFFC. Player salaries are established at the beginning of the week. By rule, no calibrations are made to reflect injuries or late-breaking news; as a result, many of the pros view Johnny Football, who's priced like a backup, as a value pick compared with, say, Andrew Luck or Aaron Rodgers at premium dollars. Earlier in the week, while he was scavenging the Web, Hanson had come across a far less obvious lead, a story in which Bengals offensive coordinator Hue Jackson told reporters that he might use one feature back instead of his typical committee of rushers against the Browns. Taking this as a tacit endorsement of Hill, Hanson decided to roll with the rising star.
The decision pays off, big: Hill scores two first-half touchdowns in Cleveland, and Escot4 (Hanson), the only player with Hill in his lineup, rockets to the top of the standings during the day's early games. Meanwhile, it takes about two ugly incompletions for everyone to see that this will be a very long day for Manziel and the pros who believed in his upside.
Later, with the second slate of games in full swing, KillaB is the only remaining pro with a shot at big money (Beckham is having a monster outing against Washington), but it's Escot4 in the lead, with Beez1973 breathing down his neck. "I had eight weeks to prepare for this, and it's great to see the hard work pay off," says Beez, a self-employed utilities trader from outside Toronto. "I'm analytical, a total stats guy. In my profession, you hit a big utility, you make a ton of money." It's early, but for the moment he's in second place, his name slotted next to the $1 million second-place prize. "You've got to remember, it's all about value. You've got to stay focused," he says with great conviction, though, admittedly, it's not exactly clear if he's talking energy futures or undervalued tight ends.
YOU MIGHT expect to find a group of sports-obsessed brogrammers behind the fantasy world's party of the year, but the five founders of FanDuel are entrepreneurs from the United Kingdom, a mix of consultants and academics who got bitten by the startup bug. "We weren't sports fans—not even soccer," jokes FanDuel's marketing director, Lesley Eccles, about herself and her husband, Nigel, the company's CEO. Seven years ago Lesley urged Nigel to leave his job at McKinsey and pursue his entrepreneurial dreams, and the Eccleses teamed with three business acquaintances to launch a website that offered news-prediction games. The site, Hubdub, attracted nearly 100,000 users, but a small problem remained: It didn't make money. Looking to pivot into a more profitable venture, the team considered the sports-prediction business. At Hubdub they'd found that even though politics and celebrity gossip were their more heavily promoted verticals, sports was always their most popular. They studied American fantasy sports and were amazed to see the industry was losing its younger demographic. For such a robust industry, there was a surprising "lack of disruption and innovation that we thought needed to be addressed," says Tom Griffiths, now FanDuel's chief product officer.
The FanDuel group was not the first to imagine fantasy games that compressed the traditional seasonlong model into a single day, but it was the first dedicated startup to pump significant resources into developing a daily fantasy site. The company's light-bulb moment, according to Griffiths, came during a marketing session with a "gruff gentleman from the Bronx" who had been shown FanDuel's simple interface listing players and their salaries. "He said it looked like something his 12-year-old nephew would do," says Griffiths, "and I was like, Damn, another one who doesn't like it. Then we asked him if he would pay $5 to play this game if he could win some money. He said, 'Well, that's an entirely different question.'" The group found that people were more than happy to pay to enhance their sports consumption experience. "People see the cash that people are winning [on FanDuel] and they say, 'These are gamblers; these guys are out to find a loophole,' " says Griffiths. "But it's really not that at all. It's simple: They play because it makes watching games more exciting."
While DraftKings holds strong ties to the poker industry (it sponsors the World Poker Tour), it's clear that FanDuel wants to distance itself from gambling, having recently capped daily deposits at $10,000. Instead, it's focused on attracting casual fans who don't mind losing, say, $25 for the entertainment value—fans who will ultimately determine whether the industry reaches a mass market. That goal remains a considerable challenge: Still only one out of every 40 traditional fantasy players participates in DFS. There also remain lingering legal questions, compelling FanDuel to carefully toe the line: They issue 1099s to players who win more than $600 and exclude residents of five states from cash games because of local legislation. (Washington, for example, prohibits all Internet gaming.) Some also believe that daily fantasy benefits from the ban on legal sports betting outside of Nevada, and that if that ban is ever lifted, daily fantasy will face a downturn.
"We're still in the early days of a relatively new sector, with a lot of variables yet in play," says Adam Krejcik, an industry analyst with Eilers Research. "It's obvious that fantasy is a cultural phenomenon, but whether daily fantasy can penetrate is the million-dollar question. You could argue that it has the upside to almost become a media of its own—a disruptive consumer-technology industry that changes how we watch and consume sports."
The upside is higher than anyone imagined just a year ago. Eilers now estimates that the number of active daily players could reach seven million by 2020, with participants spending as much as $17 billion per year. While participation in daily NFL games is highest, the bigger growth opportunities lie in the NBA and the NHL, leagues without strong traditional fantasy games and with younger fan demographics. Even MLB, with its older-skewing audience, is a potential gold mine, given its 162-game season. "Daily is going to continue to grow, but I'd be surprised if, in the next few years, it overtakes seasonlong fantasy football, which has a huge social component where you have husbands and wives and coworkers playing," says Back. "But in basketball and baseball, I'd be surprised if it didn't overtake [seasonlong games]."
For the home offices of the NBA and MLB, the appeal of DFS is clear: more eyeballs, plus an opportunity to reach younger fans and close the gap with the NFL. "What's been perhaps most eye-opening," says Griffiths, "is that 15% of our users have never played fantasy of any kind; daily fantasy is bringing in a new audience. We always talk about the 40 million [total] fantasy players as the market opportunity—but we can go outside of that, to the 200 million sports fans just in North America."
The mainstreaming of fantasy sports is FanDuel's focus. Ultimately, the company (whose staff has doubled to 120 in the past six months) sees itself at the center of an ecosystem of fans, advertisers, broadcasters and teams, all helping to create a "virtuous circle," providing a product that, in making the games we watch more interactive and more exciting, makes everyone happier. They envision giving fans the ultimate second-screen experience from their couch and at live games. "ESPN changed sports consumption by giving local news a national platform," says Matt King, FanDuel's CFO. "I think you can analogize us to that—this generation's ESPN—in the sense that we have tailored a product that allows people to consume sports [the way] they want to today, which is different than the way they've always consumed sports. If we can do our job, we will make the market far bigger than everyone thought it would be."
ANY DONKEY can win a tournament," says KillaB. "There's a ton of variance in the short run, particularly in a one-day tournament. But like any skill, in the long run the cream will always rise to the top."
At the Cosmo, the final slate of afternoon games is coming to a close, and it's becoming clear that KillaB will finish out of the big money—blame Jamaal Charles's dud of an afternoon—though he'll still end up pocketing $40,000 for his 23rd-place finish, the best showing among the pros. There's a hint of disappointment in his voice, but overall 2014 was a very good year for KillaB. "For a long time I was a poker player that enjoyed playing daily fantasy [on the side]," he says, "but next year I'm thinking of doing only the World Series of Poker. I've done well enough to make [DFS] a full-time job." As proof, he says he's in the process of hiring two workers who are ready to leave behind six-figure jobs to work as analysts.
A final eruption in the ballroom: ear-numbing, beer-fueled chants of DE-LANE-EE! DE-LANE-EE! All eyes are on the Titans-Jets game, as the most meaningless Week 15 matchup has become the most meaningful of the FFFC. Tennessee's Delanie Walker, it turns out, was a popular pick at tight end and, after the refs have added two seconds to the clock in this dreadful game between 2--11 teams, Walker picks up 33 junk-time yards on a lateral as time expires. With that lone play, one contestant jumps from eighth to third place—a $400,000 difference. "This is so ridiculous," says Tirella12, the head of IT at a nonprofit in Boston who made an extra $10,000 on the Walker catch. "People ask me if this is luck, and I say, 'Well, I spend 30 to 40 hours on it a week.... But yeah, sometimes it's luck.'"
First place, however, has long been decided: As the Jets celebrate reaching 3--11, Scott Hanson stands on the stage holding a $2 million prop check, thanks largely to Hill's breakout game for Cincy. FanDuel has its Madison Avenue moment: Personal trainer turns $5 into $2,000,000 with fantasy games. You can too!
Soon, perhaps, it will be upon us, the day when fans everywhere follow sporting events with one eye on their smartphone as they root for their team—not the local team they grew up idolizing or the one they hand-picked in August, but the one they drafted two minutes before kickoff. It was easy to visualize that kind of future after a day at the Cosmo, especially if you'd just won the largest prize in fantasy sports history. Just a few days after his big score, Hanson was already talking like a seasoned pro as he explained his strategy, going forward, of putting "$35,000 as a baseline, and whatever I make on top of that, I'd cash out 80% and add to my bankroll." One week after the FFFC, Hanson submitted $10,000 worth of NFL lineups to FanDuel.
"I have a goal of making at least $200,000 in the next calendar year," he said. "Stay-at-home dads do this for a living. I could see that as a possibility for me down the road. That sounds like living the dream, doesn't it?"
First-place prize for winning the 2014 FanDuel Fantasy Football Championship.
Prize paid to each FFFC finisher between 72nd and 100th (last) place.
Cheapest entry fee for an FFFC qualifier event, at which one winner earned an invite to the final event.
Average daily winnings by DFS players
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Less than $250 55%
More than $2,500 5%
Source: Fantasy Sports Trade Association
Total revenue for 2014: $57.3M
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DraftKings does not disclose its earnings
Total fantasy sports participants in 1988, when the Fantasy Sports Trade Association began keeping data.
Total fantasy sports participants (daily and traditional) in 2014.
Papa John's, Nationwide ... FanDuel? In a quest for name recognition, the top two daily fantasy sites have their TV commercials in heavy rotation
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Buffalo Wild Wings
Predicted daily fantasy spending in 2015—roughly matching the amount to be wagered then on sports in Las Vegas—according to a report by Eilers Research.
Percent of traditional fantasy players who participate in daily games.