In the U.S., it is football season all the way. The regular season is in full swing and armchair coaches are back after the fantasy draft, setting up their rosters each week for a taste of that number one spot. DraftKings and FanDuel are the most popular daily fantasy sports websites in the U.S. Last year, FanDuel and DraftKings recorded about $174 million and $106 million in revenues respectively, according to reports from Eilers & Krejick Gaming LLC. It’s figures like these that have attracted large investments by some of the bigger names in sports and entertainment.
For instance, Alphabet Inc. (GOOG, Financial), Comcast Corp. (CMST, Financial) and Time Warner Inc. (TWX, Financial) hold a stake in FanDuel. Other companies like Fox Sports (FOX, Financial), Major League Baseball, Major League Soccer LLC and even National Hockey League Inc. have thrown money into DraftKings. In fact just recently, Revolution Growth, the firm co-founded by Washington Capitals and Washington Wizards owner Ted Leonsis, was part of DraftKings’ latest $150 million round of financing. At one point, even the parent company to ESPN, Walt Disney Co. (DIS, Financial), was looking to grab a seat at the table of fantasy league sports.
Unfortunately for investors, the initial hurdle hasn’t been the number of dollars being flooded into this industry; it has been the limit to the amount of exposure an investor can gain within the marketplace. Based on the fact the two of the largest companies are still private, the overall option to get involved at least as far as Wall Street is concerned, could pose a more complicated method than other sectors.
“Online fantasy sports are just one of the many ways technology has disrupted the sports industry in recent years,” said Revolution Growth partner Steve Murray, who will join the DraftKings board of directors as part of the deal.
In recent news this month, Sprint Corp. (S, Financial) has made a deal with DraftKings. The two have joined forces where Sprint will be pre-loading all eligible Sprint Android smartphones with the DraftKings mobile app. In a recent press release, Janet Holian, DraftKings chief marketing officer said, “Our mission as a sports entertainment company is to bring fans closer than ever to the games they love. This is an exciting and natural partnership for DraftKings. Sprint connects its customers to their friends and family and now, through our DraftKings app, they can also connect with their favorite teams and athletes.”
But it isn’t just Sprint making a play at the marketing aspect of the industry. Take Verizon Communications Inc. (VZ, Financial) for instance. The verdict is still out on what will be the result, but as of now the plan is for the telecommunications company to go through with Yahoo (YHOO, Financial) for $4.8 billion. Not only does it give a lifeline to the faltering online tech company, but it also brings exposure to Verizon and their growing Fantasy Sports portal, Yahoo Fantasy. According to reports, Yahoo brings in more than $200 million annually from its fantasy sports products. The majority of this comes from the ads that get posted.
Other companies in the space include Fantasy 6 Sports (FNTYF, Financial), which has just recently begun seeing successful deployment of its gaming app on the Apple App store. Fantasy 6 recently acquired FansUnite to increase its ability to get a pulse on the social interactions of sport enthusiasts. Through contests and games, the company allows its users the ability to play with free virtual currency. And their recent foray into blockchain services specifically for fantasy sports companies via a new partnership with BTL Group Ltd. The agreement comes on the heels of BTL’s recent dealings with Visa Europe to find possible applications for blockchain tech in financial services. Compared to other companies, Fantasy 6 has more direct exposure to the fantasy sports space than other larger entertainment conglomerates.
Concurrently, Amaya Inc. (AYA, Financial),Ă‚ the owner of PokerStars, has also taken a direct interest in daily fantasy sports. The company announced StarDraft by PokerStars and acquired victiv.vom, rebranded it, and integrated it into their PokerStars platform. The company has attracted the likes of billionaire investors like Greenlight Capital CEO David Einhorn (Trades, Portfolio). In August, the prolific poker/stock market guru purchased roughly 3.96 million shares in Amaya, worth somewhere in the ballpark of $60 million according to reports. One of the biggest proponents outside of the poker assets is also the opportunity in Daily Fantasy Sports.
Einhorn’s fund, which was founded in 1996, has recorded an astonishing track record of successful investments, having returned 1,902% cumulatively, or 16.5% annualized through January 2016. Now that the daily fantasy sports industry has become more established, it’s becoming more evident that big money is looking to invest in more fully exposed equities.
With limited options, investors could consider this a time to be able to analyze the industry more closely and weigh in on just a few options that exist outside of big entertainment conglomerates like Fox & Verizon who only have limited exposure through minority interest.
Disclosure: The author owns no stock in any of the companies mentioned within this article & has received no compensation of any kind to write / publish this article, but he is affiliated with MIDAM Ventures LLC, a company which has an existing awareness agreement with Fantasy 6 Sports.
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