Money The Quick Rise and Quick Fall of DraftKings Fanduel

**notorious** · 08-27-2016, 10:03 AM

WHAT COULD POSSIBLY GO WRONG?!

The inside story of the quick rise and quicker fall of DraftKings and FanDuel
08/24/16 | Outside The Lines and ESPN the Magazine

At its peak last summer, a daily fantasy get-rich-now commercial aired every 90 seconds on television. Combined, industry leaders FanDuel and DraftKings plunged more than $750 million into TV commercials, radio spots, digital ads and other promotions. In the weeks leading up to the 2015 NFL season, the two startup companies spent more on advertising than the entire American beer industry.

Daily fantasy's meteoric rise -- breathtaking for its breakneck speed, avalanche of investors' cash and ever-spiraling valuations -- spurred the two companies' endlessly annoying, record-shattering arms race for new customers and industry dominance. In only three years, DraftKings zoomed from an idea hatched by three buddies in a Boston barroom into a nearly $2 billion company, replete with comparisons to overnight Silicon Valley unicorns like Uber and Snapchat. FanDuel was right there too. The two companies processed a combined $3 billion in player-entry fees in 2015.

The companies were everywhere: logos emblazoned in ballparks, on NBA floors, on NHL boards and in ESPN studios. They became the darlings of the major American sports leagues, media companies, dozens of professional teams and a deep bench of investors -- from Comcast and Google to private equity firms and a pair of the NFL's most influential owners, Jerry Jones and Robert Kraft.

But as quickly as it boomed, the industry bottomed. One year after their headiest moments, FanDuel and DraftKings are still not profitable. Both privately held companies' valuations have been sliced -- by more than half, according to some estimates. The companies have hemorrhaged tens of millions of dollars in legal and lobbying expenses. (DraftKings' attorneys fees once ran as high as $1 million per week.) And the fog bank of the industry's uncertain future has made it nearly impossible for either company to raise new money. (FanDuel's auditors have raised "significant doubts" about the company's future if more states do not declare daily fantasy sports legal.) Three federal grand juries -- in Boston, New York and Tampa, Florida -- have alerted one or both companies that they are under criminal investigation. A merger -- once unthinkable to many -- is on the table.

Read the rest here: http://www.espn.com/espn/feature/sto...tkings-fanduel

KChiefs1 · 08-27-2016, 10:13 AM

Don't tell Hootie.

Sent from my iPhone using Tapatalk

BlackHelicopters · 08-27-2016, 02:40 PM

It was a get rich scheme for someone. Certainly not the players.

**Rain Man** · 08-27-2016, 03:34 PM

Good. Get rid of these parasites on the sport.

TLO · 08-27-2016, 03:37 PM

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underEJ · 08-27-2016, 03:46 PM

Anybody getting hit up by friends about United Games? I really wish them all well, but it just seems like another pyramid scheme. At least it seems the pay in is minimal cash wise, but pretty significant time investment like Amway or something.

**BigRedChief** · 08-27-2016, 03:53 PM

Doesn't say why, but I suspect a loss of confidence that the sites are fair.

suzzer99 · 08-27-2016, 03:56 PM

Thank you Republicans/UIGEA for killing online poker and at the same time making a ridiculous carve-out for fantasy sports that helped launch these guys.

sedated · 08-27-2016, 04:15 PM

Quote:

Originally Posted by BigRedChief

Doesn't say why, but I suspect a loss of confidence that the sites are fair.

Article blames legal issues, but I agree its probably just as much if not more the fact that their model needs more and more people to feed the sharks, and that they've had numerous reports of "insider trading" making the employees rich.

tk13 · 08-27-2016, 04:23 PM

It mentions those things if you read the whole article. It does argue at length that they have allowed the best players to feast on newbies. The writer of the piece signed up himself and within short order was chewed up by a top tier player.

**Rain Man** · 08-27-2016, 04:25 PM

Quote:

Originally Posted by sedated

Article blames legal issues, but I agree its probably just as much if not more the fact that their model needs more and more people to feed the sharks, and that they've had numerous reports of "insider trading" making the employees rich.

The insider stuff eliminated any remote possibility that I might every consider it. I assume I'm not the only one.

Prison Bitch · 08-27-2016, 04:49 PM

Quote:

Originally Posted by KChiefs1

Don't tell Hootie.

Sent from my iPhone using Tapatalk

That's the lesson: there are only so many Hooties in the world who are dumb enough to play, and they don't have much money so they can't sustain losses for long

Chiefshrink · 08-28-2016, 06:25 PM

All Draftk

ings and Fanduel have to do is let some of the big boys have some of the cut and the lawyers go away.

BWillie · 08-28-2016, 11:18 PM

Amazon wasnt profitable in the early stages either. My guess is they both wanted & needed to take advantage of the buzz of the hit new thing & get entrenched in the minds of consumers. Now, I would imagine they can gradually reduce their advertising revenue to a more sustainable amount.

Also, some of this may be because (I heard this anyway, may not be 100% accurate) that the NJ DOJ being the pieces of shit that they are basically did a shakedown of DraftKings/FanDuel required them to pay back entry fees to those who played on those sites. So those ppl essentially got a free roll, and the winners still got paid. Sounds like a disastrous overlay.

08-27-2016, 10:03 AM
notorious Supporter Join Date: May 2005 Location: Who knows? Casino cash: $-974116	The Quick Rise and Quick Fall of DraftKings Fanduel WHAT COULD POSSIBLY GO WRONG?! The inside story of the quick rise and quicker fall of DraftKings and FanDuel 08/24/16 \| Outside The Lines and ESPN the Magazine At its peak last summer, a daily fantasy get-rich-now commercial aired every 90 seconds on television. Combined, industry leaders FanDuel and DraftKings plunged more than $750 million into TV commercials, radio spots, digital ads and other promotions. In the weeks leading up to the 2015 NFL season, the two startup companies spent more on advertising than the entire American beer industry. Daily fantasy's meteoric rise -- breathtaking for its breakneck speed, avalanche of investors' cash and ever-spiraling valuations -- spurred the two companies' endlessly annoying, record-shattering arms race for new customers and industry dominance. In only three years, DraftKings zoomed from an idea hatched by three buddies in a Boston barroom into a nearly $2 billion company, replete with comparisons to overnight Silicon Valley unicorns like Uber and Snapchat. FanDuel was right there too. The two companies processed a combined $3 billion in player-entry fees in 2015. The companies were everywhere: logos emblazoned in ballparks, on NBA floors, on NHL boards and in ESPN studios. They became the darlings of the major American sports leagues, media companies, dozens of professional teams and a deep bench of investors -- from Comcast and Google to private equity firms and a pair of the NFL's most influential owners, Jerry Jones and Robert Kraft. But as quickly as it boomed, the industry bottomed. One year after their headiest moments, FanDuel and DraftKings are still not profitable. Both privately held companies' valuations have been sliced -- by more than half, according to some estimates. The companies have hemorrhaged tens of millions of dollars in legal and lobbying expenses. (DraftKings' attorneys fees once ran as high as $1 million per week.) And the fog bank of the industry's uncertain future has made it nearly impossible for either company to raise new money. (FanDuel's auditors have raised "significant doubts" about the company's future if more states do not declare daily fantasy sports legal.) Three federal grand juries -- in Boston, New York and Tampa, Florida -- have alerted one or both companies that they are under criminal investigation. A merger -- once unthinkable to many -- is on the table. Read the rest here: http://www.espn.com/espn/feature/sto...tkings-fanduel
Posts: 88,588

08-27-2016, 10:13 AM	#2
KChiefs1 I’m a Mahomo! Join Date: Aug 2004 Location: Mid-Missouri Casino cash: $6771021	Don't tell Hootie. Sent from my iPhone using Tapatalk __________________
Posts: 54,038

08-27-2016, 02:40 PM	#3
BlackHelicopters Spiraling down the Drain Join Date: Oct 2012 Location: Dante's Ninth Circle Casino cash: $-909412	It was a get rich scheme for someone. Certainly not the players. __________________ "We're both part of the same hypocrisy, Senator, but never think it applies to my family." "Fredo. You are my brother, and I love you. But never take sides against the Family again. Ever." 2019 Adopt a Chief - Travis Kelce #87
Posts: 33,361

08-27-2016, 03:34 PM	#4
Rain Man Seize life. Be an ermine. Join Date: Jul 2001 Location: My house Casino cash: $-682449 VARSITY	Good. Get rid of these parasites on the sport. __________________ Active fan of the greatest team in NFL history.
Posts: 145,512

08-27-2016, 03:37 PM	#5
TLO Life is changing.. Join Date: Jul 2012 Location: NW Missouri Casino cash: $-2590000	ENTER PROMO CODE GIRAFFE FOR A FREE ENTRY INTO THE 250K DOLLAR BLOWOUT EVENT THIS WEEKEND!!!
Posts: 43,116

08-27-2016, 03:46 PM	#6
underEJ Veteran Join Date: Oct 2006 Location: Los Angeles Casino cash: $6183141	Anybody getting hit up by friends about United Games? I really wish them all well, but it just seems like another pyramid scheme. At least it seems the pay in is minimal cash wise, but pretty significant time investment like Amway or something.
Posts: 1,240

08-27-2016, 03:53 PM	#7
BigRedChief Has a particular set of skills Join Date: Dec 2003 Location: On the water Casino cash: $-791038 VARSITY	Doesn't say why, but I suspect a loss of confidence that the sites are fair. __________________ Mahomes is not a game manager. Release the Kraken.
Posts: 81,343

08-27-2016, 03:56 PM	#8
suzzer99 In Search of a Life Join Date: Jan 2010 Location: L.A. Casino cash: $-795716	Thank you Republicans/UIGEA for killing online poker and at the same time making a ridiculous carve-out for fantasy sports that helped launch these guys.
Posts: 28,366

08-27-2016, 04:23 PM	#10
tk13 ... Join Date: Nov 2001 Casino cash: $-1897500	It mentions those things if you read the whole article. It does argue at length that they have allowed the best players to feast on newbies. The writer of the piece signed up himself and within short order was chewed up by a top tier player.
Posts: 56,717

08-28-2016, 11:18 PM	#14
BWillie Are you ready to Rumble? Join Date: Apr 2006 Casino cash: $-1468759	Amazon wasnt profitable in the early stages either. My guess is they both wanted & needed to take advantage of the buzz of the hit new thing & get entrenched in the minds of consumers. Now, I would imagine they can gradually reduce their advertising revenue to a more sustainable amount. Also, some of this may be because (I heard this anyway, may not be 100% accurate) that the NJ DOJ being the pieces of shit that they are basically did a shakedown of DraftKings/FanDuel required them to pay back entry fees to those who played on those sites. So those ppl essentially got a free roll, and the winners still got paid. Sounds like a disastrous overlay.
Posts: 52,881