Who's Really Winning in DFS and Poker?

It has been compared to the online poker boom of 2004 and has seen millions upon millions of $ bet and won in its relatively short history – I am talking of course about Daily Fantasy Sports (DFS) which only the most blinkered of TV and online viewers can claim to be unaware of.

But where exactly is this money coming from, and going? And does its destination bode well for either DFS itself, or the online poker markets it is apparently challenging?

An answer, of sorts, has emerged recently; Ed Miller’s calculations in the field of DFS baseball make for a very interesting and surprising read.

It’s very much a case of sharks and overlays, according to Miller, with the little person missing out on the much-vaunted paydays which the big market players such as DraftKings and FanDuel are filling our screens with.

Miller is an ‘independent games consultant’ who has researched the entry fees and winnings of DFS baseball, and concluded that the biggest winners are the sharks who enter multiple fantasy teams - relying on the ‘overlay’ provided by the biggest companies to ensure that their profits are maximised.

The numbers are startling, as Sports Business Daily records show…

• The top 11 players have invested $2,000,000 and profited by $135,000 – an ROI of 7%
• The rest of the 1.3% of ‘professional players’ have pumped in $9100 with a $2400 profit, which is an even bigger ROI of 27%
• The minnows and ‘big fish’ in the reports are huge losers, with the biggest losers accounting for $3600 in entry fees, $1100 in losses, giving an ROI of -31%

It’s natural that the ‘shark effect’ comes at the expense of the ‘everyday Joe’ who is playing partly for fun and partly in the hope that, as in poker, he’ll land a lucky, life-changing payday.

If you imagine an online poker tournament where one of the full-time professional players enters himself 20 times into a tournament, has the time to spend researching the opposition, and also uses every software tool available, you start to see where the massive edge comes from. If you added an overlay – which in DFS is necessary as the big players try to tempt online gamblers into the emerging market – then it’s not difficult to see that the ‘shark’ can make a killing playing tournaments this way.

As Andy Frankenberger pointed out recently in a CNBC article discussing the ‘skill’ factors of DFS vs poker:

This ‘skill factor’ is a highly - contentious area, and the one which has both seen DFS gain hugely from, and could ultimately prove its downfall.

As Paul Nirenberg explained in a recent PokerTube article on the subject:

Nirenberg gets to the heart of the matter when he says:

The legality of DFS as compared to online poker is on which 2-time WSOP bracelet winner Andy Frankenberger (pictured below) has serious views on:

Indeed, but this doesn’t change the fact that we are where we are. The DFS giants are pumping millions of dollars into advertising and tournament overlays in a bid to tempt online gamblers into their domains, with the hope – or expectation that eventually player participation and entry fees will make the venture profitable.

As reported here recently, New York-based bizjournals had this to say on the matter:

Ed Miller’s baseball figures may show us where some of this money is going – 1.3% of the players making up 40% of the entries is a fairly clear indication of what the sharks are doing, as are the ROI’s they are raking in - but some of the DFS crowd claim his focus on baseball is misleading.

Justine Sacco, a FanDuel spokeswoman “takes issue with this study” because she feels “baseball is an incredibly ‘sharky’ game”. Sacco continues:

A good point, as the shark’s will have to invest a lot of time researching and working on their line-ups, and baseball is a different ball game from, for example, NFL. Sacco says:

But Miller’s work is the only one we have to go on so far, and it should be taken seriously. His views on why the sharks have descended also make for intriguing reading:

Ergo, the switch to DFS – funded by overlays and ‘fish’.

When we put the whole equation together, it asks more questions than it answers.

Online poker is not a game of skill, but DFS is. Why then do the DFS people claim ‘millions of winners’? They can’t all be skilful!

If online poker were to gain widespread legal status in the US, would the majority of DFS players – whom Miller seems to believe are at a disadvantage just now – return to poker? No, but a decent percentage might well do.

If DFS’ legal status were to suddenly find itself alongside that of online poker, could it survive in its present form? Again, no – likely it would revert to its former status as a fun year-long hobby, and the big companies would find themselves fighting the same battles as the major poker sites have since Black Friday.

Best-case scenario? Online poker and DFS finally end up with the same legal status. The overlays end because DFS has a wide-enough player base to fund itself, and the resulting level-playing field will lead to an overall increase in competition and players across both ‘sports’ – which in the US at least would seem to be the American capitalist dream, and lead to overall expansion and promotion of our online games. Everyone’s a winner!