Why Daily Fantasy Sports is Broken, and Our Goal to Introduce a New Model
By now, most (if not all) of you have seen the insider trading scandal that hit DFS sites this weekend. While some may speculate that this is the straw that breaks the camel’s back, I’d suggest that DFS in its current format has always been broken.
Here’s why:
Predatory Ecosystem
I am a proponent that skill factors into long-term fantasy sports success (just as I believe Poker requires significant skill). However, I also recognize that competition in this industry is inherently unbalanced. Predatory behavior is rife on existing DFS sites, with professional “sharks” circling the draft lobbies waiting to take advantage of unsuspecting “fish” attracted by prospects of a big pay day. While we all would like to believe we are the “sharks” in this ecosystem, many of us are more likely to be on the bottom of this food chain. Being bombarded day in and day out with advertisements leading us to the slaughterhouse is an insult to our intelligence.
Unfavorable Odds
The headline of multi-million dollar prizes has an understandable allure, but the truth is that for the casual player, winning is a pipe dream. The reality, according to a recent sample study conducted by the Sports Business Journal is that 1.3% of users on DFS sites claimed 91% of profits. Separate research by Eilers Research found that 70% of all players on these sites lost money. McKinsey has also done its own study that further supports these findings.
Flawed Game Design
A salary cap game, reduced to its core, is a mathematical problem that turns Fantasy Sports into a Pareto optimization exercise. It is perfectly suited for computers, algorithms, scripts, and models to take advantage of — an opportunity and advantage that professionals currently exploit to prey on less equipped casual players. In the near term, this is an arbitrage opportunity, and DFS sharks are milking it for all its worth. In the longer term, the game is destined to become less about player versus player (in the true sense), and increasingly become about player versus computer, and ultimately at its most efficient state, computer versus computer. The ecosystem around DFS is already developing highly sophisticated lineup optimizers, variance analysis tools, budgeting calculators and so on.
Imbalanced Competition
The problem herein is the unwillingness of existing DFS providers to introduce measures to foster fair competition at the risk of alienating “sharks” and disrupting a cash-cow business. As the saying goes, any dog would be unwise to bite the hand that feeds it. A simple matchmaking system could create a healthier ecosystem, but would rock the boat.
Information Asymmetry
To make matters worse, the recent light shed on alleged abuses of insider information in this industry further tilts an already imbalanced playing field. As a user, just ask yourself how many opportunities exist for asymmetrical advantage. Prices on the sites are not set by market mechanisms, but rather by site employees. Ownership percentages (a key variable in determining contrarian outlier plays) are also accessible to these same employees. These are just a few examples. As if we didn’t have enough to worry about with sharks, we now apparently have to worry about Megaladons (i.e., sharks armed with insider information).
Misleading Advertisement
The 100% deposit bonus these sites promise has come under scrutiny for misleading advertising. Users expecting to get a dollar for dollar match soon come to the realization that they have to play a multiple of their deposit before these funds get released. Citing a class action lawsuit filed in April of this year in Illinois, “At the high end, a consumer who had deposited $600 would have to spend at least $15,000 on contests, and do so within four months, to obtain what was promised as a “100% First-Time Deposit Bonus” or “DOUBLE YOUR CASH” bonus of $600; that would be $14,400 more than his or her initial payment.”
Link: http://www.legalsportsreport.com/1205/draftkings-faces-new-class-action-lawsuit-advertising/
It is abundantly clear that the industry needs a new model. One that reintroduces the core values that have made Fantasy Sports a cultural mainstay in the first place — values that have somehow been clouded by the chase for the almighty Dollar.
Fantasy Sports are meant to be fun, social, balanced, and fair. As a fantasy sports purist, I believe that these are the elements that make our season long leagues so sticky. There’s no reason we can’t incorporate those same values into the DFS realm.
Here are the core values important to my vision of the new DFS model, and some of the elements of what we are building at Sleeperbot (www.sleeperbot.com).
My list of values as we set out to build the new DFS model includes:
- A DFS game that feels like fun, and not work. Leave budgeting for the grocery store.
- A way to set my roster where I experience the adrenaline and strategy of drafting against real people in real time.
- To know the feeling of actually being able to root for my players on game day, and not worry that 100,000 other people also have him.
- The peace of mind that I’m not being taken advantage of due to mispricing, asymmetrical information, or insider dealings.
- The ability to play for pride, if I don’t want to play for money.
- To not get bait-and-switched with advertising gimmicks.
- A balanced competitive environment and a realistic shot at winning, including contest structures that promote these principles and matchmaking to ensure fairness.
- A game I would be proud to share with my friends, and to challenge them to play.
We have made the first step to creating this environment with the beta release of our initial game design this morning. We will also look to continue improving and refining the feature set until we attain the values highlighted above. Hope you will support us in our mission with your feedback.
Download Sleeperbot Here:
Android: https://play.google.com/store/apps/details?id=com.sleeperbot
iOS: https://itunes.apple.com/us/app/sleeperbot-fantasy-football/id987367543?mt=8
