How а Fantasy Sports Craze Fueled the Booming Online Casino Industry

Author: Matthew Haynes

There was a time when the only form of entertainment that was vaguely associated to gambling in the US was something that swiftly became a standalone industry, namely fantasy sports.

It exceeded all expectations, while laying the foundations for what was to come. Had anyone suggested to both FanDuel and DraftKings, 15 years ago that they would develop into two of the largest online gambling companies in the world after first founding, it could be that they would have given you great odds.

It was at a time when both firms, almost at the same time launched, took an existing concept that was already very popular and developed it further. Fantasy sports, for many enthusiasts, provided players with the opportunity to pick a team of players to compete against others with points awarded each matchday for specific events in a game.

Both companies took this a step further, building platforms that allowed customers to place wagers on their fantasy team doing better on points than other people. At the time, this concept got a lot of opposition due to the gambling element. However, this was approved due to it being a 'skill game' and not outright gambling. For many, this was still considered to be somewhat of a gray area.

However, this new form of entertainment soon took off and became very popular with certain demographics, especially sports fans in offices, which bred increased competition, many wanting to gain bragging rights in the businesses that they worked in. Across the US, FanDuel and DraftKings, through clever advertising, soon cornered the market on fantasy sports, generating 10s of millions in revenue over the following years, while the legal US online gambling market was still just a dream across most states.

Pioneering the Path to Gambling Behemoth Status

In 2018, the state of New Jersey passed the online sports betting bill, and almost immediately, DraftKings and FanDuel were granted a license, simultaneously launching their own sportsbooks.

There will no doubt have been the suggestion that both companies were at some point anticipating that at least one state would pass such a bill, and they would want to be prepared for when that happened. No doubt, it was a touch of genius. The platforms already essentially had the infrastructure in addition to a core number of employees in addition to fantasy sports' close relation to betting. And, certainly, they no doubt had further plans.

The excitement that surrounded the mobile sports betting bill in New Jersey was considerable and both DraftKings and FanDuel were there to take full advantage; with many residents across the border in New York also realizing that they could make the short trip to place bets if they so wished.

Furthermore, very little in terms of marketing effort and ad budget was required. Thanks to both company's foresight launching eight years earlier and their sheer popularity, the vast majority of people were already aware of both brands. Compared to new companies that had to launch from scratch, they had to invest substantially more in addition to gaining potential customers' trust.

In the next few years that followed, more and more states began legalizing online sports betting, and with the brand recognition that both companies already had, customer acquisition wasn't necessarily a problem. Indeed, many were existing fantasy sports customers of either FanDuel or DraftKings and could directly benefit from opening a sports betting account, with many advantages such as free bets given as welcome offers.

Following this, a number of US states began to legallize online casinos and, suddenly, almost overnight, both brands launched casino platforms and, as a result, were already well positioned.

It is no coincidence that today, both FanDuel and DraftKings are the two leaders in the US online gambling industry; between them having well over half of the market share and significantly eclipsing their competitors in terms of revenue across every state. Certainly, many fantasy sports customers utilised each product; both sportsbook and casino, with both brands being particularly innovative in terms of cross marketing.

Correlation between Fantasy Sports and Gambling

According to numerous studies over the years, fantasy sports and online casinos can be deemed to be closely related due to them sharing many traits that appeal to their target market.

It has been found that fantasy sports enthusiasts have developed an increased interest in sports related slot games and table games. Many sports fanatics still crave to be involved in their chosen sport and combining this with the possibility of winning money has led many to participate in these types of slot games when there has been no sports fixtures.

Fantasy sports participants and gamblers over time, develop and hone their analytical skills in similar ways in order to play fantasy sports or casino games such as blackjack, poker, roulette, or even any kind of slot game. As such, there is a significant crossover, especially in the related behaviors and traits that are required to excel in both disciplines.

There is also no coincidence, that during the sports season when many fantasy sports products are at their most profitable, that online casinos often perform well. According to reports, studies have shown that fantasy sports participants demonstrated certain behavioral traits when it came to online gambling activities and, as a result, increased activity had been demonstrated during the height of sports seasons in addition to match days.

Furthermore, there are demographics to take into account, with many of these (age, gender, level of income) being factors in being determinant influences in the likelihood of both fantasy sports and online casino participation.

From a psychological and decision-making standpoint, there are many factors explainging the link between fantasy sports and online casinos. Heightened levels of engagement in both verticals make sure that participants are invested in the possibility of a positive outcome right up to the point where it is no longer viable.

Would Online Casinos Thrive without Fantasy Sports?

What does not appear to be in doubt, is the fact that both FanDuel and DraftKings (two initial fantasy sports platforms), essentially paved the way for the online gambling industry - especially in the US, which, compared to many countries, is still considered to be a young market.

Of course, to suggest that only fantasy sports are behind the online casino success would be inaccurate - certainly, other factors played a part. Quite a few of the online casinos that emerged following the passing of legislation in numerous US states already had well-known land-based brands, such as Caesars and BetMGM (MGM Resorts International). Each of these, for example, had flagship resorts in both Las Vegas and Atlantic City, so many people were well aware of who they were.

However, what was for sure is that both DraftKings and FanDuel more or less had the monopoly when it came to the online gambling industry, thanks to their foresight over a decade earlier to innovate a new concept that was their way of getting around gambling laws.

Despite each brand having very successful sportsbooks and online casino platforms, for many across the US, it is possibly still hard for them to not think of both of them as first and foremost fantasy sports platforms due to the fact that this product paved the way for future success.

Though, every year millions more potential customers become available to them from a marketing standpoint, after turning 21 - certainly for this generation, they are highly unlikely to remember DraftKings and FanDuel being fantasy sports platforms and, for the next 30 years, this will be the demographic that is the main revenue generator for these companies.

Trailblazers of Transformation

In just 15 years, both DraftKings and FanDuel have likely exceeded all expectations, that not even their founders probably imagined when they first set up the companies. Launching at a time of major economic uncertainty at the height of the global financial crisis, it was certainly a major risk, especially with disposable income levels for many, being tight.

Fast forward and in just over a decade, both fantasy sports companies became major gambling brands, indeed, FanDuel being bought by the publicly listed gambling organization Flutter Entertainment, which has a number of big brands under its umbrella including PaddyPower and SkyBet.

DraftKings, meanwhile, has been the subject of takeover bids, while it also sensationally had an offer in the region of $20 billion to buy the British-owned global gambling conglomerate Entain (who own Coral, Ladbrokes and over 20 other brands), turned down in the last couple of years, highlighting just how far it has come and the weight of the resources that the brand has behind it.

It appears that DraftKings certainly has ambitions to become a major, standalone company in the industry, perhaps primed to resist any takeover bids while potentially adding to its portfolio. What begs the question is the extent to which the founders anticipated the US becoming a major online gambling force years later after it launched and just how prepared it would be for this.

The next three years in the US will be very interesting to see what happens in the gambling industry, whether the passing of legislation in any new states will affect the hierarchy and to what extent both of these fantasy sports brands will continue to adapt in order to flourish.