The news emanating from the daily fantasy industry, and in particular its two titans DraftKings and FanDuel, is almost all bad these days. We know all about the class action lawsuits and entanglements with state regulators. Whether or not these ultimately dole a deathblow, the billable hours are piling up, and liquidity is a factor. FanDuel payouts are processing slower than normal, and this is also happening:
Again, while there’s the possibility that this will all blow over for the two firms, and the industry at-large, there’s also the chance that New York successfully bars them. If other states then followed suit, those ads which were obnoxious and unavoidable this year will go bye-bye. Presumably, nearly everybody reading that past sentence jumped for joy.
We were BLITZED. Nobody will ever be able to convince me that these legal troubles did not arise from our collective distaste with the volume, as well as the transparent insincerity of selling us on the dream of becoming a millionaire while touting the silly notion that this isn’t gambling. (Friend of the program Kyle Scott made the apt point that these commercials were no more annoying or misleading than ones for insurance and beer, to which we’ve just become desensitized.)
But the byproduct of that omnipresence was a money faucet. Via WSJ:
"DraftKings was the top spender on TV advertising in the U.S. in September, while FanDuel was the seventh largest spender, according to ad tracker iSpot. DraftKings has spent an estimated $153.8 million on TV ads that aired 45,784 times since the start of the year. FanDuel has shelled out an estimated $108.2 million on TV ads during the same period—airing ads 26,539 times, according to estimates from iSpot."
And this doesn’t include advertising online and on radio or podcasts, or relationships with leagues and franchises, where they’ve also been ubiquitous. Sports Business Journal passed along these estimates of total ad spending this past September:
"One network source pegged the two daily fantasy companies’ total advertising investment across sports on all networks at a massive $500 million so far this year."
Now, it’s not as though this would be the case of receiving a half-billion dollars or nothing. While they may not come at the same price and volume, other brands in different industries would bid for the commercial spots and myriad studio sponsorships. However, there’s the potential for seismic impact across the board here.
Even if the legal problems do go away, it’s hard to see DraftKings and FanDuel spending as ambitiously next year as was previously planned. From the aforementioned SBJ story:
"“It’s a new category and the industry keeps getting bigger,” said FanDuel CEO Nigel Eccles. “There will still be plenty of market share available next year, so I expect this to continue into the 2016 football season and get even bigger.”"
While there’s no way of knowing how much of this money actually trickled down to talent, what happens during layoff season a year from now if this all goes away — or even gets cut in half?
While we’re here, it’s worth noting that the nominal beginning of the struggles for DraftKings and FanDuel came from the purported insider trading scandal in October. While this has been discussed ad nauseum and is not worth a full rehashing, on Tuesday New York Attorney General Eric Schneiderman’s filings included an internal memo from FanDuel that seemed to indicate the company was more concerned with optics than ethics when it came to employees competing on other sites.
For example, this was a guideline:
"Never be among the top five players by volume on any one site (based on site leaderboards). Never be among the top ten overall on the RotoGrinders leaderboard. Top players frequently become targets for accusations by other users."
The full document is below.
[Disclosure: The Big Lead is owned by USA Today Sports, which operates the daily fantasy site FantasyScore.]