
The implosion of the daily fantasy industry - golfstrom
http://www.espn.com/espn/feature/story/_/id/17374929/otl-investigates-implosion-daily-fantasy-sports-leaders-draftkings-fanduel
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z2
With user acquisition costs of "$190 per user for DraftKings and $110 for
FanDuel" [0], what, besides long term casino-style gambling addiction, can
hope to recover the costs? And unlike casino gamblers, don't 'bro-classic'
people tend to grow out of these things after a while?

[0] [http://www.usnews.com/news/articles/2015/10/30/draftkings-
fa...](http://www.usnews.com/news/articles/2015/10/30/draftkings-fanduel-and-
gambling-on-the-world-of-fantasy-sports)

~~~
ajamesm
Change $190 to $500k and I think you just described venture capitalism!

~~~
sverige
But without the instant feedback and athleticism, which is why millennials
aren't venture capitalists. That, and most don't have $500k.

~~~
gk1
"User acquisition cost" refers to the average amount a company spends on
marketing to acquire one new user. It does not mean the price a user pays to
sign up.

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exolymph
For what it's worth, Fortune writer Dan Primack said on Twitter, "There is an
amazing amount wrong with this ESPN piece on DraftKings/FanDuel. Awful."
[https://twitter.com/danprimack/status/768463010503467009](https://twitter.com/danprimack/status/768463010503467009)

Then followed up: "ESPN and @DVNJr write that daily fantasy has 'imploded.'
Really? Both leading players are still operating. [...] True neither FD nor DK
are profitable. But they are young tech startups. Lack of profitability
doesn't mean disaster at this stage"
[https://twitter.com/danprimack/status/768464361258098688](https://twitter.com/danprimack/status/768464361258098688)

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hackuser
Does anyone know what Primack's axe to grind is? Because it's such a strong,
emotional objection, I suspect there's more to it than a dispute over the
facts and analysis.

~~~
hsod
You think "There is an amazing amount wrong with this ESPN piece on
DraftKings/FanDuel. Awful." is a strong, emotional objection?

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bradwschiller
I think what's missing here is that the product is sticky for a number of
people and spending on user acquisition costs are likely to go down. Each
company essentially takes a 10% rake on every game and I'd imagine these
companies will be profitable in the long. I don't think legal issues will
destroy these companies as it's really only a matter of time before sports
gambling becomes legal across the US and New York is already letting these
companies continue to operate this year.

I don't believe the issue around small numbers of players making all of the
money is important. As someone who uses both platforms for fun, I find I'm
willing and many of my friends are willing to lose a bit of money each week as
it makes the games far more entertaining to watch when you have a rooting
interest. Many of the sports leagues and ESPN realize this which is why you
saw them invest in these companies. Fantasy leads to more engagement with the
sports and daily fantasy leads to even more engagement.

Daily fantasy is not for everyone, but it'll likely maintain a core number of
users, many of whom use both FanDuel and DraftKings. Acquisition costs will be
less important in the future and provided that fixed costs such as legal fees
decrease in the coming years, these companies will become stable and
profitable.

~~~
jlgaddis
> _... it 's really only a matter of time before sports gambling becomes legal
> across the US and New York is already letting these companies continue to
> operate this year._

According to the article we're discussing, NY passed a bill, the Governor
signed it into law, and both DraftKings and FanDuel started accepting NY
customers again the following Monday.

~~~
ee8aq3g5c6
The wheels of power seem to move more smoothly back east.

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atombath
I'm wondering why gambling(except for lotteries and casinos, etc.) was made
illegal? Was it a 'we must protect people from themselves' type of law? Or a
'casinos have lobbied for protection of their business' type of law? Or 'this
type of industry requires regulation but its too damn expensive to regulate'
type of law?

I say this as the guy who consistently makes fun of the lottery while also
buying video game 'this is totally not gambling either' loot chests.

~~~
bluedevil2k
It's a religion thing here in the US. Large Christian churches (Methodist for
example) are against gambling on moral grounds, fight addictions, personal
weakness, avarice, etc. Since money and an ability to get members to turn out
to vote run everything in American politics, you end up with many states
banning gambling on "moral grounds".

About 8 years ago where I live they wanted to built a horse racing track and
we regularly got flyers from the anti-horse-racing group(local giant church)
that claimed gambling brings crime, alcoholism, and prostitution to any
community that allows it.

[http://www.gambleonline.co/religious-views-of-
gambling/](http://www.gambleonline.co/religious-views-of-gambling/)

[http://www.gotquestions.org/gambling-
sin.html](http://www.gotquestions.org/gambling-sin.html)

~~~
jerf
Gambling is also strictly regulated in China, Japan, Muslim countries, Russia,
and good chunks of Europe, and that's just the countries/regions I checked,
I'm sure there are others. A local religion-based explanation is at best an
incomplete picture of why people object to gambling. Like many aspects of
civilization where the code happens to live in religion, it probably _is_
corrosive to civilized behavior, because it seems like all successful
civilizations put substantial regulations on it. (As cause and effect is hard
to tease apart that's about all I can establish in an HN post.) Given the high
frequency with which gambling is deregulated and then often very quickly
reregulated (by the standards of government regulation motion, anyhow), it is
hard to believe all of those cultures are reacting to irrational, unrealistic
concerns.

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Animats
It really is a game of skill. And that's killing the industry. The good
players, with a big bankroll and computer support, can win. Everybody else is
a sucker. Like the stock market. So the suckers are bailing.

~~~
quaffapint
> The good players, with a big bankroll and computer support, can win.

That's pretty much the key to winning on these. Whenever they interview a 'big
winner' they all seem to do the same thing - play a bunch of picks for each
bet to spread out their chances. This of course is not what the little guy
does or can do. There's so much 'luck' involved that you have to spread it out
to have any hope of any sort of consistent winning.

That's also why there are more multi picks vs single-only picks available. The
big guys can then buy bunches of entries in multi-pick contests.

~~~
gohrt
It's the same as the stock market, but with the guarantee that the Bata is
always negative.

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univalent
Good. I probably saw/heard their ads thousands of times (no exagg.) over a few
month period. They annoyed me so much I wouldn't give them any business even
if I found their product fun (which I didn't).

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swang
i don't know how accurate the article is but arguable the dfs industry is
shrinking. almost no one other than fanduel/draftkings exists on a scale to
possibly make a profit. and then you have state governments trying to ban them
or charge them with crimes.

the biggest long term problem i see (and the article partially addresses) is
all these pros bumhunting the low-stakes games because there's no reason not
to. it doesn't take any additional time nor mental focus to join some
microstakes games like it would if you were playing online poker.

anyone who play dfs, how are money withdrawals from the site? is it relatively
quick/easy to get money out of your accounts? otherwise i definitely see that
as a huge risk just like it was towards the end of the online poker boom.

~~~
jarrettch
I've played both, and it's much easier to withdraw from DraftKings than it was
from PokerStars/Full Tilt/Party Poker.

In the dark days of online poker after they shut down a lot of the payment
vendors, I'd get shady looking checks from some middle man that I had to wait
weeks for at times(never played/won enough to need wire transfers or fancier
methods). That was horrible.

I've had withdrawals from DraftKings that take a day or two and go straight to
my credit card or PayPal account. FWIW I play in California.

Edit: To be fair, paper check withdrawals did get faster as time wore on. Not
sure how it is now. I live in SoCal and always preferred the card rooms than
online poker anyway, so it's not worth the trouble for me.

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jackschultz
I write my own golf blog, with weekly previews of the tournaments, and as a
way to get traffic, I'd post a weekly DFS picks post, and then link to both
articles in a reddit comment on the DFS subreddit[1]. The idea being that
people would look at the pics, but also read the more interesting preview I'd
write.

I eventually stopped doing that after seeing weekly posts on that subreddit
about how people were losing too much money and had to stop playing for a
while. Didn't want to keep messing around helping people lose money. Always
that side to an industry based on gambling.

[1] [https://www.reddit.com/r/dfsports/](https://www.reddit.com/r/dfsports/)

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robinhowlett
I haven't read this (long) article in its entirety yet but I did make this
presentation[1] last year to satisfy my interest in the space and help me
understand where it stood.

I borrowed a lot from Adam Krejcik's tweets, who is quoted in this article.
See slide 21 for notes about player attrition

[1] [http://www.slideshare.net/robinhowlett/daily-fantasy-
sports-...](http://www.slideshare.net/robinhowlett/daily-fantasy-sports-dfs-
notes)

