Thursday, November 5, 2015

Fanduel is Bigger than you Think

Fanduel is Bigger Than You Think

Andrew Likeric
Economics A3
Mr. Reuter
1 November 2015

Fantasy sports have been around since the 1980s and have been growing in popularity ever since. Fantasy sports is where an individual creates and manages a sports team, and plays their team against others. Choosing your own team makes it easy for people who know a lot about the sport they are in a fantasy league for to win, others that just play because it’s “fun” are more than likely going to lose, due to not knowing much. There is approximately 57 million people participating in fantasy sports. The number of people playing fantasy sports has been growing majorly over the last 10 years. Fantasy sports exist in football, basketball, baseball and less popular sports such as golf and car racing. Most sports fans are either in or have been in a fantasy league for any one of the sports offered. Yahoo Inc. has estimated that users spend on average of 30 billion minutes on their fantasy leagues a year or 2 hours each week just to manage their fantasy team(s). On average each user spends $465 a year, create around a $15 billion annual revenue.

Even though people are spending so much money on fantasy sports, they can also win money by winning contests or competitions within the fantasy sport. Some people have won millions just on a online sports team building past time.  People also choose who and how many people they want to play each week. Instead of playing the 10 friends you have from work, you could play hundreds of people around the state or even the US. Whoever has the team that racked up the most points takes the cash prize for that contest. Daily games are predicted to earn $2.6 billion in annual entry fees in 2015 and $14.4 billion in 2020.

Fanduel is the fastest growing fantasy sports system, which also just received a $275 million funding from Series E, making Fanduel worth a little over $1 billion. Fanduel generates most of its revenue from collecting a percentage of the user's entry fees. Fanduel was able to collect $620 million in just entry fees. From 1.1 million users Fanduel had accumulated $57 million in revenue. In the 2015 football season Fanduel is expecting to have a $2 billion prize, which anyone could enter from $7 to $5000. You have the choice of paying as much as you would like for a chance to win $2 billion for just playing fantasy football and having your team gain you points.

Let’s say you’re on break and work, you go out to get a sandwich. Eating the sandwich takes about 15 minutes out of your day. Now if you take that sandwich away, what else do you have to do for those 15 minutes? You have your phone and you unlock it and see the fanduel app, you have found an alternative than just sitting there and doing nothing. Fanduel is an opportunity cost/ something to do when you have free time.

19 comments:

  1. I don't really understand the whole idea behind fantasy sports, but it says on average the user spends $465 yearly. It is very unlikely that you'll win, that's just statistics. You could do so much more with an extra $465 every year. The eating the sandwich analogy doesn't really make sense. I guess fanduel is more important than eating lunch everyday.

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  2. Fandual found a way to monetize fantasy sports better than other companies. How it got to be worth about 1 billion dollars is crazy. I would never put money into something where I knew I would lose. But fandual has convinced lots of people to still put their money into it. A lot like gambling, only your gambling on your team and your skills to move people around and make trades for other players.

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  3. Sports has always been a cultural significance in any society, from table tennis to full contact sports, it's a no-brainer for how FanDuel got so popular. In the past, having a fantasy team was just a simple past-time where you apply your knowledge of the game, now that you can make money from doing something fun that takes a portion of your time a day? Well hell, who wouldn't participate?

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  4. The reason people play fantasy sports is because its fun and it can be pretty cheap. Most people play with their friends as just friendly competition to show who knows more about the sport. A lot of the time people are in free fantasy leagues with their friends so it costs them no money. People have the option to pay that's whats so good about it, you can choose to be really competitive and spend hundreds of dollars or you could just play for free. The sandwich analogy did not make sense, that was a bad example of opportunity cost.

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  5. The interesting thing about this online fantasy sport site/app is how people pay to enter and can earn money for winning. Not only has the Fanduel company made money, but the people who participate in competitions with their teams can also win money. If you’re good at the game and win the games, you have an easy opportunity to play a game and gain money. It’s amazing how many people put money into this knowing that they will most likely lose. This is a growing site and will probably continue to grow because of all the target audiences it reaches: people who like football, basketball, baseball, golf, and/or car racing can participate in this. Fantasy sports have been around for a long time, but it seems to be gaining more of a momentum with sports fans, and people all around the world can play as well, helping grow this site.

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  6. I knew that fantasy football was a big thing, but I did not know that it was actually a thing for money. With that said I have seen commercials for sites that will pay if you win. It is cool that something fun can actually make you money. I think it is crazy something that everyone talks about so simply can win you a billion dollars!

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  7. Its very interesting how such a simple thing like a fantasy football league can get so popular. It seems like such a simple business, yet it makes a ton of money. But even if people are so into fantasy leagues, who would honestly want to spend $5000 to have a chance to win in a fantasy league? That is a large amount for someone to lose, especially if you only have a chance to get it back plus some, which is a huge Opportunity Cost to the people who want to participate. Although, I don't understand your analogy with the sandwich and fanduel. Fanduel is more of a substitute product to the sandwich as apposed to an actual opportunity cost.

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  8. This is a very interesting topic for me because I don't know much about it because I never got into the Fantasy sports. The reason I never got into the whole fantasy sports is because i don't have the time to sit around im always doing something. I think that it is a waste of time and money because there is somebody out there who is always better than you and I would never spend money on anything that I know im going to loose at. But fan duel has convinced many of people around the states to spend money and be okay with loosing since the odds of winning are very slim. That 465 dollars that the average person spends on fantasy team is a complete waste of money because you could find a substitute which could give you more enjoyment than becoming obsessed with your fantasy team and spending so much money in the procces.

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  9. One thing about FanDuel that most people don't know is that they have been found guilty of insider trading

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  10. People get addicted to media. The media has found out how to make people feel like they are accomplishing something by spending money to get players that may spark conversation and give people something to do in life if they are lonely. Throughout all technology companies have been using a gambling technique to lure in all sorts of crowds of different ages, gender and interests.

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  11. I know many people who are involved in fantasy football. They seem to check their team's stats and points a lot; especially the days after a game. I have never gotten into it myself but I can definitely see this sport growing. It's possible that one day everyone will play some sort of fantasy sport; especially since there may be prizes involved.

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  12. I think fantasy sports are a great idea that adds to the revenue of the NFL, because from personal experience usually I would just watch the Packers game and nothing else but when I'm involved in fantasy football I also like the games that have players in because now I have someone to root for and it makes the game a lot more interesting and I think this concept can help new consumers become more interested in the NFL as a whole. Also I agree that people tend to do better if they know a lot about the sport, but there is also a lot of luck that goes into it so that the people that don't know much can still have a chance. For example I had someone in my league last year that auto drafted every player and then never changed anything on their line up yet they still made it to the playoffs. I am interested in looking into Fanduel because I not sure how it works, if its weekly prizes or season long but I'd be interested in a week long competition that if you do bad, you're not done for the season.

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  13. This is a subject I am interested in, especially due to the recent controversy over the classification of sites like Fan Duel as illegal gambling websites in certain states. It would have been interesting to hear what some of the costs these websites have are, as well as the profitability (either accounting or economic) of such sites. Although I have a relatively limited knowledge of the online fantasy sports market, it would seem to me that sites like Fan Duel are in an Oligopolistic market, so they should be able to make some level of positive economic profit over the long term, especially if government regulations of such sites increase which would raise the barriers to entry, making the market more monopolistic.

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  14. I think that Fan Duel is certainly an interesting topic, and even more so with its growing popularity. You seem to see commercials for it all over major sports networks and it kinda makes you wonder how they make so much money from a simple idea. Also with the argument that it is gambling takes it to the point where they are starting to dabble on the edge of being legal or illegal. Either way Fan Duel and other companies like it will be interesting to watch in the coming years.

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  15. Being able to watch sports is already a large revenue collecting market. Fans pay for game tickets, extra payment for special seating, concessions at games, fan merchandise and so on. Now, being able to virtually connect with their own interactive fantasy teams, sports has become more popular from a different perspective. It's incredible how much people will spend to interact with sports, however the possibility of winning a cash prize is definitely an incentive. I think what you meant was that the opportunity cost of eating a sandwich and not spending time of Fanduel is greater than not eating the sandwich and going on Fanduel, as Fanduel provides the opportunity of possibly winning a cash prize, making Fanduel the better choice.

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  16. Sports in general tend to pull in a lot of profit, if something has to do with sport, you know someone will be there ready to take part. So whoever created fan duel was basically a genius, they knew there was a huge market for it, and that it would more than likely pull in a huge profit, and look at it now; multiple tv commercials and advertisements all over the place. So honestly I didn't think at any point was fan duel not doing good, because I know for a fact they are pulling in bank.

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  17. This is really interesting to me since I never knew that you could have the opportunity to make that kind of money. I personally have never been that into sports, so I’m pretty sure that I would never make any money off the app, especially if they spend $465 on average. I have better things to do with that money, but for anyone who is a hardcore sports fan, have at it. It is interesting how much money they can make though.

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  18. I never had a real interest in fantasy sports but I did know that people could make decent amounts of money and that the people that were invested in their teams were VERY invested. I suppose that if you could turn a $5 entry fee into a few thousand dollars, two hours a week seems like a reasonable opportunity cost. And touching on what Mitchell G was saying, I really really want to know what kind of impact shutting down fantasy sports sites would have on local and large scale economies if the government does deem them to be illegal.

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  19. I think this is a very interesting topic to touch on due to the business exploding lately. Yes fantasy leagues have been around forever, but now people who know what they're talking about, or if they're lucky they will make money off of it. Not only is it a great idea, but they have gained popularity and value fast showing the idea was very successful

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