While the traditional daily fantasy market becomes increasingly crowded, a trio of sites have found their niche, not in the NFL or MLB, but in the world of competitive video-gaming.
Thanks in part to streaming platforms like Twitch, eSports have exploded in popularity in recent years. Players from around the globe regularly convene at packed live tournaments, playing games like League of Legends, Hearthstone and StarCraft for large cash prizes. The most successful of these “athletes” have achieved mainstream popularity and even enjoy rockstar status in certain corners of the globe.
In the eyes of the US government, these competitors are considered to be professional athletes, with their game of choice classified as skill-based. That distinction makes it easier for international players to procure visas and enter the country for tournaments, while it also opens the door for DFS operators to create contests based on major gaming events.
$612 million market
According to a recent study by SuperData Research, there are 134 million eSports fans across the globe, fueling a market of $612 million a year. The US makes up for about $143 million of that sum, with Asia representing a $374 million slice. Some analysts believe that the entire fantasy sports industry will be worth as much as $18 billion by 2020.
The popularity of games like League of Legends is staggering, with an estimated 94 million monthly users logging in to play, according to FantasyHub cofounder Chris Pierce. And when they’re not playing the game, they often tune in to their favorite Twitch streams to watch others play as well. “On average one in four gamers not only play the game, but they watch others play the game,” Pierce told DFN. “As more light is shed on the sport, you can expect that number to grow.”
The eSports DFS startups
Los Angeles-based AlphaDraft and San Francisco’s Vulcun are two startups looking to cash in on the eSports phenomenon with DFS contests tailored to videogame fans. Both sites have received major backing from well-known investors, and somewhat mimic the DraftKings/FanDuel dynamic in the traditional DFS industry.
In April, Vulcun closed a $12 million funding round led by venture capital firm Sequoia Capital, which allowed the company to offer a $10 million fantasy prize pool, the biggest the eSports industry has seen to date.
For its part, AlphaDraft closed a round of funding in May, receiving $4.2 million from investors like Metamorphic Ventures and former NBA Commissioner David Stern.
A third eSports outfit, Unikrn, recently raised $7 million from notable investors including Dallas Mavericks owner Mark Cuban, along with media executives Shari Redstone and Elizabeth Murdoch. Operating out of Australia and the United Kingdom, Unikrn is not yet available in the US due to the fact that players can bet on the outcome of games directly, something that is prohibited under the UIGEA.
Watching from the sidelines are the established DFS operators, who are considering taking the plunge into the burgeoning industry. “We look at eSports the same way we do any other sport,” said Pierce. “If you sit down and stream a League Championship Series event, you’ll be amazed by the raw talent on display. The more and more we look into eSports, the more excited we get about fantasy eSports possibilities.”