Yesterday there were two really good posts on fantasy sports industry. ESPN OTL’s Don Van Natta’s deep dive was an excellent long read with a tremendous amount of detail about some of the self inflicted wounds that could have killed two high flying “unicorns” within a few short months of raising huge rounds. Dan Primack’s response was excellent, pointing out that both companies appear to have not just survived a hellish stretch, but managed to retain their unicorn status with both user and revenue growth.
Instead of focusing on some really good reporting all around, the focus is on ESPN’s clickbait headline that the industry had “imploded”. It’s really a matter of semantics and both journalists theses are technically correct. It is without question that Fanduel and DraftKings were very fast growing companies and the largely preventable and industry-wide mistakes thoroughly detailed in Van Natta’s piece, mostly driven by the two companies, almost killed the industry just as fast. As Van Natta’s piece touched on briefly, had the New York State Legislature not passed a bill at the absolute last minute of its legislative session, the finality and permanence of “implosion” that Primack objects to may very well have become reality. Primack is probably right that because the companies were able to pull out of their free-fall, implosion is not the best choice of words. But the fantasy sports industry would find most of the substance of Van Natta’s piece to be extremely well researched and accurate.
Regardless of what happens to Fanduel and/or DraftKings going forward, they are not the whole of the fantasy sports industry. The biggest news to come out of the articles was Primack’s noting that Ted Leonsis’ Revolution Growth led a “large” round in DraftKings, signaling the long awaited return of capital to the market. As Van Natta’s article noted, it was widely assumed amongst the industry that capital was frozen until there was regulatory certainty, and the momentum created by the New York State Legislature seems to have provided that. Startup activity in the space had ground to a halt, but this development will re-open the floodgates.
Perhaps the bigger story is, yet again, how wildly underestimated the broader fantasy sports space remains, despite already having gone through a period of great hype. As Van Natta accurately noted, Fanduel and DraftKings both had a terrible, horrible, no good, very bad year. And as Primack accurately noted, both companies still managed to emerge with legitimate billion dollar valuations in tact.
The correct conclusion is that the industry is officially back in business. Game on.