Predicting the future of DFS...

I have said that the only certain way to make money at DFS is to start your own Daily Fantasy Sports Baseballholics Anonymous podcast whether or not I thought the future might be for DFS as an investment.  If you don't have a few million lying around to start your own website, maybe you could by a few shares of one of the companies that own one of the sites.
website.  This idea rattled around in my brain without much consequence until I had a email conversation with one of the hosts of the

Draft Kings is it's own independent company, but there's a significant stake held by the Raine Group, a private equity investor.

FanDuel is also it's own independent company, but the biggest outside investor is Comcast (well an arm of Comcast used for venture capital),

Yahoo just launched it's foray into the DFS world and I think everyone in the world knows Yahoo is publicly traded.   They are the biggest player in terms of ownership and money now on the DFS scene.  They really aren't the first big company to enter this field.  Besides, Comcast's interest in FanDuel, last year the Gannett Company, owner of The USA Today, launched FantasyScore.  I've kind of always been rooting for them, because of The USA Today's relationship with the early years of fantasy sports.  In my first year as commissioner of a league back in 1988 (I joined this league in 86), there were many a fevered Monday morning hand cranking out calculations so we would know what we needed to have happen in the Monday Night Football game to win our week.

Sorry for the digression...All of the other sites are privately owned and venture capital funded (Victiv, Fantasy Aces, Draft Day...).

So would I invest in one of these companies because I believe in the future of DFS?

The short answer is No.  But there is a longer answer..

Not that there isn't going to be a bunch of money made in the near future off the growth in DFS, but it will primarily be with the venture capital groups and the owners of the sites themselves.  If Yahoo's experiment with DFS proves successful, the battle over the Fantasy Sports space will force ESPN and CBS into making a move into the area.  Rather than inventing their own game from scratch, I'd be willing to bet that the two big DFS companies get bought up: somewhere down the line ESPN buys Draft Kings & CBS buys FanDuel.  And the Venture Capital Groups do what they are good at: raking in the cash.

But the real reason why I don't think there a future in DFS is because I don't see there ever being enough market to go around.  Fantasy Sports are a billion dollar business but most of the money is made on the periphery with things like Advertising, Media shows, Magazines, etc.  There might be 40 million Fantasy Players in the world, myself proudly among them, but the bulk of them aren't the types to spend lots of money on the game.  Even if you're the type to join a $100 Fantasy Football league, you are really only talking about forking over about $7 bucks a week counting a small fee for a trophy or pay service for your league.  The dreams of true conversion of a sizable chunk of this population I believe to be rose colored.

Not that there isn't going to be a place for DFS, I find it to be an interesting and fruitful adjunct to my Fantasy Sports play, but it will never supplant it.  But here are a few of my key reasons:

• DFS is missing any semblance of "bragging rights"

One of the key components of regular Fantasy is bragging rights.  It's often not so important how much you win, rather that you win.  I know literally dozens of leagues that play fiercely competitive leagues for no money.  Most of my leagues have very modest entry fees.  The fleeting nature of DFS, as highlighted by their own marketing with the "There's a new league every day" puts no shame in losing.  There's no opportunity to berate your coworkers/co-team owners with smack about your relative brilliance.  When a day ends in DFS it's forgotten no later than two days after.  I run a year long H2H fantasy baseball league where we play a 10 man DFS league game every Sunday for a buck.  It works not because anyone really cheers about the $5.40 for first place, but because it keeps the 12 of us talking on the last day of the game week, which is good for trades, league activity, and all-around health of the league.  The same team has won the last three weeks in a row, and he has yet to even attempt to brag about it.  It takes real skill to guide a team through the twists and turns of a 26 week season, and every body knows any one can have an off day on a single outing.  You, me, Mike Trout, Clayton Kershaw, everyone.  If somehow they could make putting money into a Fantasy Football or Baseball league illegal and enforced it thoroughly, I'd bet that well over half of the 40 million folks playing would continue to play for no money at all.  This is how important bragging rights are.  

• The way the DFS games is setup has virtually ignored the second step in a company's growth process: retaining customers.

They spend boatloads of money in the attempt to get new customers to their DFS sites, but once they get them there, they do nothing.  They are ignored and often eaten by the wolves.  The way the game is structured currently, there is no long term future in the game because player retention is difficult and pretty much ignored.  They have two natural markets they can draw from and what is offered to them is less than ideal for either of them:

1. The "Gambler" Market -Any gambler worth a grain of salt will take a look at other avenues of gaming possibilities  And if a gambler analyzed the DFS game, they would probably muck it as fast as a 2-7 offsuit.  The game is comparatively difficult to understand, has some of the most spectacular random possible occurrences of any thing wagered upon, and has the absolute worst payout structure there is.  It is so much easier just to bet on the winner of a single game, where the payouts for winning are actually double your money. There was a bit of a hubbub about a screencap earlier this year placed under a ESPN DFS "expert" where it said that she wins 80% of the time.  Now, there was no way this was true, but even if it were, it would mean about a 50% return on her money.  If you were winning at this same ratio at the card table, an 80% victory on hands played would mean you could quit your day job.
2. The "Fantasy Sports" Market - The DFS universe is just as inhospitable for these types too.  The complex game with wild fluctuations in outcomes with a perversely difficult to overcome payout structure makes it difficult for the typical guy to stay at this for very long.  I was one of the newbies brought in at the beginning of this baseball season,  and there used to be a lot of names I knew playing there on Draft Kings alongside me.  But they are virtually all gone now; all that left is rows and rows of veteran players.  Most people like myself decided before the year, "What the heck I'll toss in 50 bucks and see where it takes me?"  Because you need to win such a high percent of your games to have positive growth on your bankroll, nearly no one accomplishes this.  You could win 60% of your games and find yourself bleeding 5-10% of your cash weekly.  All it takes is a day where you lose it all because of a -6 point outing  from a Felix Hernandez or Michael Pineda or David Price.  And because a clean sweep victory only gives you 80% in return on a depleted bankroll, your odds of making it back are really not too good.

I don't see a long term future for the game, unless they can figure this part out.  I don't know the answer, but then it's really not my problem.  The fact that none of the companies involved seem to know what to do to retain customers is the troublesome part.  Just like I'm rooting for USA Today's Fantasy Source, I'm rooting for Yahoo.  I've been using their site for my Fantasy play for better than a decade.  And they have always figured out the right thing to do next to keep me there.  Maybe not as fast as I would have hoped, but they always figured it out.  If there is a future for DFS as anything other that a nice little thing some of us to on top of our other fantasy sports, it's in their hands.