Fantasy sports cost real cash

kw: book reviews, nonfiction, sports, fantasy sports, gambling, wagering, business

My wild card selection this time is Billion Dollar Fantasy: The High Stakes Game Between FanDuel and DraftKings That Upended Sports in America, by Albert Chen. The book brings together three subjects that are way, way out of my wheelhouse: Fantasy Sports, Wagering, and Business.

I was surprised to learn that daily fantasy sports betting even existed, and amused to find that it was not considered gambling by legal authorities for more than twenty years. I just had to shake my head. I had heard of fantasy football and fantasy baseball, and from what little I heard, they were the season-long variety. I didn't know fantasy sports was a huge field for illegal betting. Had I given it any thought, I could have figured that one out. The cash flow of legal gambling in America is about $160 billion. I expect that illegal gambling is similar in size, or larger.

The book has the story of three businesses among a multitude: seasonal fantasy sports went on for a long time, and continues to be popular, but probably more so among fans of middle and older age. Once technology allowed, some hyper-fans began to build the infrastructure to support game-by-game fantasy lineups. Many such ventures were started. The three groups who obtained major venture capital funding, so as to act as middlemen and facilitate this kind of wagering on a huge scale, were DraftSheet, DraftKings, and FanDuel. Within a few years, DraftKings absorbed DraftSheet, and then there were two. Between them, annual spending for the advertising needed to build a national base approached $1 billion by the middle 2010's.

With that kind of money flowing around, the business overcame the fan-ness. Ironically, FanDuel was founded by five Britons who don't care much for sports. They were entirely into it for the business, for the money. A further irony; they didn't manage to hang on to much of the cash. A facilitator is like a garden hose: full of water when in use, then it empties quickly.

Several trends underlay the drama of this 15+ year narrative. One is the changing regulatory environment, including a Supreme Court decision in 2018 that effectively legalized sports wagering, including fantasy sports and daily fantasy sports (amazingly, they went against strong lobbying by casinos); the matter is remanded to the states to determine what to allow. State-by-state lawmaking is going on right now. Another is a growing demographic of people who have no patience at all. The product of choice among younger bettors is moving from game-by-game to play-by-play ("Will pitcher X throw a curve next?" "Will QB Y pass or run?" "Will cager Z try for a 3-pointer?" "Will skater W pass or shoot?"). The digital infrastructure now exists to support it. Some also stack their bets, with dozens of wagers outstanding at any moment, and certain ploys depending on the outcome of others.  And another is the increasing comfort of venture capitalists to fund FanDuel and its clones and competitors.

Here's the basic business proposition of FanDuel, circa 2014: John Doe and Sam Hill, facilitated by FD's software, have entered a "snake draft" (drafting alternately, and they can't draft the same player); they agree on a point spread for the outcome. Each puts $10 into the pot. The winner gets $19 and FD gets $1. Multiply by 100 million on any game day of your choice. It's amusing that none of the big facilitation companies has yet turned a profit. Advertising is expensive!

I find the entire situation saddening, however. Maybe I don't have the betting gene or something. But I do have three friends whose lives have been damaged or ruined by gambling. One man's marriage ended because he spent all his free time at casinos, places his wife tried to like but soon found abhorrent. Another man has no social life outside the casino, and remains single. A third got into high-stakes poker and other "games", and spent two years in prison for stealing more than a half million from an escrow fund he had access to, to pay off his losses.

The adage to remember: Professional gamblers don't gamble. They know how they will beat you before they meet you.

It was interesting to get a long look into these things. I was glad when the book ended and I could come up for air. One of those experiences I am glad I had, and don't care to repeat.