GPWA Times Magazine - Issue 33 - October 2015

Daily fantasy sports’ catch-22 Multi-entry tournaments generate big prize pools and aid in customer acquisition, but may ultimately spell doom for the booming daily fantasy sports industry. By Aaron Todd If you live in the United States, you can’t escape the buzz around daily fantasy sports (DFS). Market leaders DraftKings and FanDuel spent all summer ramping up for the NFL season and are spending millions of dollars to acquire new deposit- ing customers. Both sites have been making individual deals with professional sports franchis- es, though DraftKings has been making the biggest waves, with $250 million in funding from investors and an exclusive marketing deal with sports broadcasting giant ESPN. DFS operators are now looking to ex- pand beyond the shores of the U.S. In mid-August, DraftKings received a U.K. gambling license, and now Amaya is get- ting in on the action after acquiring DFS operator Victiv. The marketing behind these sites is sim- ple: Pick your players, win huge prizes. And no doubt, there have been some av- erage Joes who have come out on top and won some serious cash in massive multi- player guaranteed prize pool (GPP) tour- naments. But the reality for the vast ma- jority of players is that the average sports fan has less of a chance to win in DFS than a home game hero has at a poker table with Phil Ivey. Never has this been clearer than in a $3 MLB Moonshot event hosted by DraftKings on Aug. 20, 2015. Brandon Anderson, playing under the username banders234, claimed 13 out of the top 14 spots in the event, including first through fifth, and sucked up $45,667.67, or more than 31% of the prize pool. There were 55,485 entries in the tournament. “Full disclosure, I used fantasycruncher’s import feature to put in my lineups, so yes I used a script (probably obvious),” Anderson wrote on the popular DFS fo- rum RotoGrinders. “I had 480 lineups with 4 stacks. WAS, MIN, NYY and CHC (120 each). Normally what happened to- night would never work out like that.” Except that it has. The massive score wasn’t the first forAnderson, who finished second through fifth in the same tourna- ment on June 20, a night that featured a $60,000 guarantee with 22,988 entries. Anderson, however, is not alone in load- ing up on lineups in the huge multi-entry GPP events. Twenty-four players had 100 or more entries in the Aug. 20 tournament, totaling 4,270 entries, while 14,719 players entered just once. Make no mistake, professional DFS bet- tors are using advanced software to help them decide which players to pick, and in many cases, automatically enter hun- dreds of lineups in DFS contests. None of the major DFS operators ban the practice, and some in fact make it easier by mak- ing salary information (the price you must pay against your “salary cap” to pick a player) available for download in spread- sheet form. Why would they want to ban the practice when Anderson’s entries in this tournament alone resulted in more than $185 in rake? So how did the players with the most en- tries in this tournament do overall? The ROI of the players who entered 100 or more lineups on Aug. 20 was a whopping 322%. Of course, Anderson’s haul makes a comparison of high-volume grinders with the folks who entered just one lineup a bit unfair; removing him from the equation results in a -22.2% ROI for the rest of the group. That’s not great, but compare it to the bankroll-busting -57.1% generated by those who entered just one lineup. In theory, you’d expect a number of $3 players to bink a result and post an ROI much higher than someone who paid $1,440 in entries. But just two players who entered only one lineup (out of 14,719) managed to do that, with one winning $233.33 and the other winning $100. DFS often draws comparisons to poker, in large part because many of the top players are current or former online poker pros. The difference, however, is that poker pros stay away from low-stakes tables and tournaments because they’re not worth their time. But in multi-entry GPP tournaments, while one person might be playing a $3 tournament, there are others playing a $1,000 tournament. They’re all playing for the same prizes, but they’re not on an equal footing. It’s a catch-22 for operators. The Aug. 20 MLB Moonshot on DraftKings drew 23,028 unique players, thanks in large part to the $145,000 guaranteed prize pool, which included a $12,000 first-place prize. The idea of winning a five-figure prize with a $3 entry is a bit intoxicating. But that prize pool doesn’t happen with- out the players who use software to enter dozens, if not hundreds, of lineups. More than 16.7% (9,301) of the entries in the tournament came from the 149 individu- als who submitted 25 or more entries. It just doesn’t feel right to have 16.7% of the entries come from 0.65% of the players. 72 Daily fantasy sports’ catch-22