The New York Times Magazine has an in-depth analysis of the daily fantasy sports (DFS) industry. I'm not that interested in fantasy sports, but this article had me riveted:
Here’s how it works: Let’s say you run D.F.S. Site A, and D.F.S Site B has just announced a weekly megacontest in which first place will take home $1 million. Now you have to find a way to host a comparable contest, or all your customers will flee to Site B to chase that seven-figure jackpot. The problem is that you have only 25,000 users, and the most you can charge them to enter is $20 per game (anything higher is prohibitively expensive). And you’ll need $2 million or even $3 million in a prize pool if first prize is valued at $1 million (remember, you still have to pay second place, third place and beyond). So you need to somehow quadruple the number of entries. But how? You’re already paying high cost-per-acquisition fees to sites like RotoGrinders, which charge, according to Harber, anywhere between $100 and $200 per person they refer to your site, and you’ve already put your logo on every bus, trash can and ESPN screaming-heads show out there. You’ve also kicked in some of your own money (known as “overlay”) to spice up the pot.
The solution is simple: You let each contestant enter hundreds of times. But even given this freedom, a majority of people will enter only a few more times, which will help but probably won’t get you all you need. If, however, you can attract a few high rollers who are willing to book several hundred or even several thousand entries apiece, the path to the $1 million first prize becomes a lot more manageable. And as long as you can make sure those players keep pouring in their thousands of entries, you can keep posting the $1 million first prize all over your ads.
In the game lobbies of DraftKings and FanDuel, however, sharks are free to flood the marketplace with thousands of entries every day, luring inexperienced, bad players into games in which they are at a sizable disadvantage. The imbalanced winnings in D.F.S. have been an open secret since this past September, when Bloomberg Businessweek published an exposé on the habits of high-volume players. The numbers are damning. According to DraftKings data obtained by the New York State attorney general’s office, between 2013 and 2014, 89.3 percent of players had a negative return on investment. A recent McKinsey study showed that in the first half of the 2015 Major League Baseball season, 91 percent of the prize money was won by a mere 1.3 percent of the players.
So, how is this at all fun to casual players? Someone explain it to me.