The number of participants in the daily fantasy sports space is not only growing, they're bankrolling the leading sites with massive amounts of cash, betting that sports fans will spend more and more of their time and money on their sites.
On Monday, daily fantasy sports site DraftKings announced it has secured an additional $300 million in financing.
The financing round includes investments from Fox Sports, Major League Baseball, the NHL and Major League Soccer, as well as Legends Hospitality (owned by the New York Yankees and Dallas Cowboys) and The Madison Square Garden Company (owner of the Knicks and Rangers). The Kraft Group, which owns the New England Patriots and Revolution, invested in a prior round.
Both DraftKings and its main competitor, FanDuel, are now valued at more than $1 billion each. With the new money, the total investment in DraftKings is now $375 million. FanDuel has raised $363 million from the likes of global investment firm KKR and Google Capital, as well as media partners Time Warner, NBC Sports Ventures and Comcast Ventures. FanDuel also has some NFL investors, but it has not disclosed who they are.
In the past year alone, daily fantasy gaming has exploded. DraftKings, which gave out about $300 million in 2014, now says it will award more than $1 billion this year in daily prizes. FanDuel, which awarded $560 million in prizes, recently said it will dole out more than $2 billion this year.
The rise in prize payouts and entry fees is more astounding when considering a longer time horizon.
In 2011, Fan Duel gave out $10,359,197 on $11,511,168 in entry fees for the entire year. The more than $2 billion the company gives out this year will come on more than $2.5 billion in entry fees. Entry fees across the entire daily fantasy sports category are expected to hit $11 billion in 2018, according to Eilers Research.
Between 2014 and 2015, the number of people in North America who said they played fantasy sports jumped nearly 39 percent, from 41.5 million to 56.8 million, according to research recently commissioned by the Fantasy Sports Trade Association. The data showed that those playing daily fantasy spent $257 on daily fantasy in the most recent 12-month period, while the average player spent $162 on traditional fantasy over that same time period.
FanDuel and DraftKings are spending huge money to market themselves. FanDuel sponsors 15 NFL teams and 13 NBA teams. DraftKings had a huge presence at the Belmont Stakes, where American Pharoah won the Triple Crown for the first time in 37 years. The company recently signed a deal with the Staples Center to have 4,400 square foot fantasy sports bar and lounge in the building where the Lakers, Clippers and Kings play.
Fantasy sports are considered legal thanks to the Unlawful Internet Gambling Enforcement Act of 2006, as long as the prizes are known, the results are based on real statistics and no outcome is based on a point spread or on a single athlete.
DraftKings has an advertising relationship with ESPN.