European DFS for 2016-17: what operators need to be successful in Europe
As DraftKings and FanDuel look beyond the States to build up their businesses, Jon Trigg looks at the challenges associated with launching in Europe and what awaits the dominant US companies in the already competitive UK market.
In the early hours of 18 June, the New York legislature passed a bill legalizing and regulating the fantasy sports industry in New York State, the epicentre of the legal to-ing and fro-ing of the legality of daily fantasy sport (DFS) games in the US.
The decision does not affect Europe directly, but it’s sure to have an impact on how the market grows there, as the ruling impacts the two well-funded entrants from the US: DraftKings and FanDuel, as both look to Europe to acquire customers and grow their businesses.
Collectively, these American Goliaths have raised around US$600m in funding, but perhaps just as importantly, have been backed by sports rights holders and major sports media networks, as well as savvy dot.com institutional investors.
So, surely they must know a winner when they see one, right?
Coming to Europe
The approach from both DraftKings and FanDuel in Europe will be very much centred around soccer (we’ll call it football). What they’re interested in is building their liquidity pools around football to contribute to their existing Stateside pools.
Their business model is simple; acquire an audience on a key/popular sport, get them engaged (in the industry this is when the customer gets the ‘ sweat’), and once the punter gets the ‘sweat’ they’ll play alternative sports, providing a year-round income.
For example, golf has witnessed the fastest growth in converting users from the NFL (the major recruitment hook in the US). So, adding a European audience to an existing US audience will result in a bigger pool, therefore creating a ‘vortex’ where the US mainstream punters see big money pools and convert to play soccer games as well.
Meanwhile the European audience learns the ‘sweat’ and tries its hand at key US events, such as March Madness (college basketball), golf, tennis and Super Bowl-type events. Sounds easy huh? Certainly, the theory sounds very simple. But there are challenges associated with opening up in the European market:
- Localisation: Europeans have very different expectations with respect to how we play and engage with traditional fantasy products. For example, in North America, sports are more stats-oriented and this message is supported by the media machine, with every sports broadcast talking about yards per carry and which players would be great to include in your fantasy team. This isn't the case in Europe with the main sport (football), so the product and format will need to be adapted.
- Currencies: unlike in poker, a universal currency that we all pay in and win in simply won’ t work. When do we ever quote transfer fees in dollars? So, when will your London cabbie ever pay to play a fantasy game in dollars?
- Competition: we have a healthy, vibrant and growing sports betting market in Europe. The major operators want to protect their audiences, increase their spend and acquire more customers. DFS entrants can and will be viewed as an irritant, but opportunity lies therein for the traditional operators if they play their cards right. More on that later.
- Legislation: Europe is a very fragmented market - split between legal, grey and outright illegal/unlicensed operators. Legislation and regulation has many positive aspects, as it outlines parameters within which to work and provides consumer and investor confidence, but, it is time consuming and costly to manage. So, DFS entrants will have to pick their target markets carefully.
- DFS is not poker: The model may be similar in some ways, but the punter, the reasons they play and why they return, are very different to poker. Therefore, the approach needs to be aimed at the ‘armchair’ football fan and take on board the learnings of how to protect these players from the DFS “sharks” - who have always existed in Europe and in the US.
So, is it worth it?
The short answer is “yes”. First, we need to not get hung up on talking exclusively about DFS.
What we are talking about are ‘skill-based games’ where the motivation of the customer is not a 1-2-1 bet with the house/bookie, but a belief that their view and opinion on an outcome is stronger than that of a collective of other players, be they friends and families (who traditionally make the mini-leagues in the traditional season long games), or ‘randoms’ who you play in an open pool.
Skill-based games and predicting outcomes – who will score, which players are better than the others – is part of our sporting DNA; across Europe. We talk about it in bars, at work and voraciously consume media offering opinions and views.
This is the basic premise of what fantasy sports is all about – backing one player over another in their performance. Three million fans play the Official Premier League game. The Sun DreamTeam Fantasy game has over one million entrants.
In the UK alone, there are approximately five to seven million of us who play some form of fantasy and prediction game (from the football pools to traditional season-long fantasy). Across Europe there are multiple fantasy games on local leagues, with even small markets such as Norway that have around 60,000-100,000 players, to Spain and Italy where player numbers are in the low millions.
So there is a market here; but the approach has to be right. The landscape in Europe is highly competitive, in contrast to the US where FanDuel and DraftKings own 95% of the DFS market and merely have to increase the 10% participation level of the 57.4 million North American fantasy game players in DFS to show their investors the continued growth story.
In my view, there are three essential cornerstones to any strategy when it comes to acquiring customers in Europe and making a success of a skill-based game.
- The product: the game format must be squarely aimed at the ‘armchair fan’, not the betting punter, and be simple to play and understand. Gameplay, language and UX must also be localised according to the specific market. Europeans love visuals and simple graphical interfaces over stat-heavy and complex ones. Point scoring also needs to be kept simple and easy to understand, so as to not overwhelm the average fan and become more appealing to the sharks.
- The audience: ideally you want to own an audience or be seen to own an audience. The Sun and Sky Sports are two of the most powerful brands in the UK. They spin out a DFS product similar to DraftKings and FanDuel and they will likely win. They own the audience, have their trust and confidence, and importantly the weight of a huge brand-driven promotional machine behind them, so all their cash is not eaten up by customer acquisition.
- Prizes: guaranteed prizes are a must. Whether you run a pool or not, you need a strong ’call to action’ to get that pool going. Why was Sky Super 6 so successful? Not the product alone - it was just another predictor format - but they guaranteed £25k each week and had the weight of a hours' worth of TV programming to push it to their captive audience each week. Admittedly, not everyone is tied to Sky Bet or works alongside a sports broadcaster, but the above three cornerstones can still be applied to produce a smart strategy.
Established igaming operators will be considering bringing some form of DFS or other skill-based gaming product on board – as they have for a long time as potential acquisition and engagement tools. Sky Bet has already played its card with 'Fantasy 6 A Side', which has already achieved significant acquisition and revenue numbers from the end of last season and throughout the summer.
This indicates that DFS will be a model integrated by other operators, not least because the industry and market demands innovation and skill-based gaming offers their consumers just that. As for the DFS and skill-based gaming providers, the clever move would be to partner up with the gaming and sportsbook brands as well as traditional publishers (who are looking at auxiliary revenue streams).
The distributors (igaming operators and publishers) would retain the audiences, while allowing the DFS industry to grow and work as a complement to the sports betting market, also providing a “soft” stepping stone and cross-selling opportunity to the sportsbook.
The race to acquire customers over the next year will mean some consolidation, with and those owning/having access to the audience and working smart being the winners. Those who decide to go it alone with aggressive marketing plans and budgets will struggle.
However, one thing is for sure – daily fantasy sports and other skill-based games are here - and here to stay this time.
Jon Trigg is a fantasy sports expert who works with operators and publishers to develop their skill-based gaming strategies. He founded and grew fantasy games specialists SilentManager from 2002, growing the business and operating over 1,000 games in over 30 different countries. He sold his shareholding in February 2016.