4% growth for £2.65bn DFS industry in 2016

4% growth for £2.65bn DFS industry in 2016

Friday, January 13, 2017 Posted by Sam Cooke
The industry grew despite extensive challenges according to Eilers & Krejcik

It’s no secret that the daily fantasy sports industry endured a tough year in 2016, but a new report by Eilers and Krejcik suggests that it coped far better than many may have thought.

The latest report by Eilers estimates that the DFS industry managed to grow +4% year on year to the tune of $3.26bn (£2.65bn). This is despite the numerous legal challenges in the States which saw major revenue drivers such as New York (second largest state in revenues and entry fees) close for much of the year, the closure of college DFS and second and third tier operators being forced to close. 

Chris Grove, Senior Consultant at Eilers and Krejcik Research, told Totally Gaming: "2016 was, to say the least, a challenging year for the daily fantasy sports industry. But it was also a year where the industry found new footing and a clearer path forward both on the economic and regulatory fronts.

“We believe 2017 will represent a continuation of those positive trends and a further solidifying of the new normal for DFS."

Eilers also assesses that the industry grew 15% year on year to  $350m (£285m) in terms of new revenue (entry fees less prizes). Of course, the report is not all rainbows and butterflies. It opines that whilst the merger of DraftKings and FanDuel should be a positive change for the entire industry, this depends on which form the merger takes. It lists potential problems as a culture clash and an inevitable reduction in liquidity. It also recommends a ‘two brands, mostly shared platform’ as the ideal route to go down in terms of the future for both DraftKings and FanDuel. We're some months off knowing if this is the choise they've made anyway as it’s unlikely the merger will be fully done and dusted until the second half of 2017.

In terms of potential scenarios that could play out over the coming few years Eilers came up with three. The worst case scenario is that the industry value will drop slightly to $2.9bn (£2.32bn) by 2018. This assumes that adverse DFS regulation will take place in one or more key states, that there’ll be attrition amongst high volume players and little to no impact from new social features and ad-based revenue models when it comes to attracting and retaining casual players.

The best case scenario is incredibly positive. In this one the industry will be worth $5.3bn (£4.31bn) by 2018 and for this to occur DFS operators must be able to operate freely in the top ten US states, the merger must quickly prove successful with minimal impact to liquidity and player experience, and new social features will help drive casual player adoption.

Totally Gaming says: Which route the DFS industry takes over in Europe is as yet unclear but it seems to be edging toward integration with igaming operators, whilst over in the State a new influx of state attorneys mean the future is as yet equally unclear. Ultimately, Eilers & Krejcik’s thorough analysis is of the opinion that the future looks bright, that the worst has been and gone but that much depends on how this mega merger plays out.

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