During the fall of 2014, the burgeoning business of daily fantasy sports has been zooming along in the fast lane, raising venture capital, forging marketing partnerships and growing revenues. But the main players in the business have hit a few potholes, too.
The DFS concept has now become familiar. Fans create fantasy sports teams on the Internet, wager from 25 cents to thousands of dollars, and compete against each other for cash prizes that can reach seven-figures on most NFL Sundays. It's also available for baseball, basketball, hockey, soccer and golf. And, yes, it is legal in at least 45 states, including Maryland.
By now, many sports fans also are aware of the DFS industry's two heavyweights -- FanDuel and DraftKings. After all, the two websites combined for more than 5,500 TV commercials through early October, according to an Eilers Research analysis prepared by Adam Krejcik. Eilers Research is a California-based firm focused on gaming-associated business and activity.
Armed with tens of millions of dollars in venture capital, FanDuel and DraftKings haven't been content to get the word out just through conventional advertising. They've also been latching onto established sports partners, such as MLB.com, the NBA, the NHL, and individual NFL teams and players.
The four-year NBA deal with FanDuel, announced in mid-November, raised quite a few eyebrows. In that case, it wasn't just a matter of FanDuel handing a pile of cash to the NBA for banner ads. The deal is truly a partnership that involves the NBA acquiring an equity stake in FanDuel and offering a free daily fantasy game on the league's website.
While the agreement between FanDuel and the NBA may be among the more ambitious between a fantasy sports website and the sports establishment, it's far from the only one.
DraftKings has its own marketing agreement with the NHL, adding onto a deal struck earlier this year with MLB.com.
"Recognizing the direct correlation between fantasy sports and fan engagement, we look forward to providing our fans with a new opportunity to extend and enhance their NHL experience each and every day of the season," an NHL official said in a statement explaining the appeal of DFS to a sports league.
The appeal of daily fantasy sports to sports leagues isn't hard to understand.
Nigel Eccles, CEO of FanDuel, told ESPN.com that his company's research showed that fans' weekly TV sports viewing jumped from 17.5 hours to 24 hours when they start playing DFS.
Consider what that means for TV ratings, and TV ratings translate to more money for rights fees, cable subscription fees and advertising rates.
Granted, Eccles' numbers hardly qualify as independent research, but there is a common-sense presumption that involvement with DFS certainly increases fan engagement. And not just in increased TV viewing. When fans are engaged with DFS, they are more likely to consume sports with multiple devices, say watching the NFL's Red Zone on TV while simultaneously following ESPN.com or NFL.com for stats updates, and checking the DFS websites on a laptop or mobile device to track their contests.
The big enchilada for DFS is getting the stamp of approval, via a marketing deal, from the big guys -- the NFL.
Edging toward that end, FanDuel announced in mid-November a marketing deal with the Washington Redskins.
"The agreement includes FanDuel being displayed at FedEx Field during Redskins home games, along with being showcased on the team's various social and digital media platforms," FanDuel said.
Not to be outdone, DraftKings has landed the New England Patriots and Denver Broncos with similar agreements.
Some smaller DFS websites have nabbed individual players. For instance, DailyMVP, a more modest DFS operator, is featuring the Los Angeles Lakers' Steve Nash and the Patriots' Tom Brady in comical commercials. FantasyDraft, a new website, announced endorsement deals with Green Bay Packer Jordy Nelson and Indianapolis Colt T.Y. Hilton.
Amid the exuberance of marketing money being spread among sports leagues and star players, the two major websites in DFS have had some serious technological hiccups during the current NFL season. Both FanDuel, in September, and DraftKings, in November, saw their websites freeze just before the 1 p.m. ET kickoff for NFL games.
With fantasy customers tinkering with their lineups right up to kickoff, to say that each instance of a website meltdown creates a disturbance for fantasy participants with cash on the line would be an understatement. Fans screamed bloody murder on the Internet forums devoted to DFS social engagement.
In both cases, the daily fantasy sports websites made refunds to customers with varying conditions. Not everyone may have been completely satisfied, but it helped the two websites from a public relations standpoint.
Regardless of the inconveniences suffered by some customers, those mishaps haven't much slowed the rush of fans to daily fantasy sports.
In one quarter this year, FanDuel reported 650,000 new customers, according to ESPN.com. That tripled the website's best quarter ever.
Last year, revenues for FanDuel were more than $14 million, and for DraftKings, it was nearly $5 million, according to Eilers Research. For 2014, the conservative projection is that those figures are expected to jump to more than $50 million for FanDuel and more than $14 million for DraftKings, Krejcik wrote in an Eilers Research white paper on the DFS industry.
Eilers Research has made several estimates of future revenues for DFS peering as far as six years into the future. The projections for total industry revenues in 2020 range from $470 million on the conservative side to $2.6 billion on the bullish end of the spectrum. Considering DFS didn't even exist until five years ago, and few hardcore sports fans had even heard of it 24 months ago, it's reasonable to conclude that daily fantasy is rolling along with the throttle wide open.