Fantasy revenue continues to prove small potatoes for the state of Pennsylvania, with the industry failing to crack $1 million in adjusted revenue for the second month in a row.
For August, fantasy sports contests generated $943,620, a marginal uptick over July, when the state’s nine regulated fantasy operators took in a combined $878,185. Through four months of reporting by the Pennsylvania Gaming Control Board, the industry is up to $4.17 million, almost all of it accounted for by daily fantasy sports giants FanDuel and DraftKings.
Fifteen percent of that figure, or $625.7k, has been paid to the state in the form of taxes, a mere pittance compared to what is expected from PA sports betting when it rolls out in the coming months.
In what has become a recurrent trend, FanDuel and DraftKings stole the spotlight, collectively generating 98.2% of all fantasy contest revenue in August. It was DraftKings that captured the market share lead for a third month running, taking in $502,024, good for a 53.2% share. FanDuel was a relatively close second at $424,487 in adjusted revenue (45.0% market share).
In a distant third was DRAFT at $10,764. Fantasy Draft and Yahoo Fantasy Sports both landed in four-digit territory, two others couldn’t crack $1k in revenue, and Full Time Fantasy Sports and Fantasy Football Players Championship generated … nothing, marking the fourth straight month that the two hopefuls have failed to rake a single penny. Suffice it to say, the outlook isn’t so great for anyone but the Big Two.
Admittedly, August is a slow month for daily fantasy sports, as it’s one of only two months when just one professional U.S. sports league runs (MLB), and August isn’t exactly high time for baseball — they don’t call it the “Dog Days of Summer” for nothing.
It goes without saying that September, and the NFL frenzy that is paired with it, will result in significantly better numbers for DFS sites. Already, both FanDuel and DraftKings have generated heaps from several multi-million dollar guaranteed NFL contests, with more on tap for NFL Week 3.
Is sports betting the real golden goose for DFS sites?
It’s been said over and over again, but now we have more tangible proof that sports betting will be far more lucrative for FanDuel and DraftKings in Pennsylvania — and really in any state with mobile/online sports betting — than their daily fantasy sports operations will.
In neighboring New Jersey, the combination of DraftKings Sportsbook, an online skin licensed under Resorts AC, and FanDuel’s land-based sportsbook at the Meadowlands generated a steep $6.03 million in gross sports betting revenue for August, over six times what fantasy contests generated in the larger state of Pennsylvania. And all this before FanDuel launched its online skin, which debuted for desktop and mobile in early September.
Surprisingly, it’s the DFS sites and not established casino operators that have stormed out to an early lead in NJ, as the FanDuel/DraftKings duo accounted for nearly two-thirds of total industry revenue last month. Maintaining this level of dominance is certainly realistic, as with the onset of NFL season comes a spike in DFS activity, and therefore higher crossover potential to sports betting. That said, there is a lot more eggs in the NJ sports betting basket than in August.
In PA, both FanDuel and DraftKings will face less competition, as each license holder is limited to one online/mobile skin, meaning the industry will cap out at 12 online sites (at least initially) with only casinos/racinos allowed to apply for licenses. By comparison, New Jersey expects to support an estimated 20 online sportsbooks by the end of 2018.
It’s not all roses
Turning to the broader industry in a national sense, it’s clear based on what the nascent NJ market generated in revenue last month that sports betting will generate much more money than fantasy contests.
However, Pennsylvania will prove a more difficult climate for sports betting operators :
- Operators are required to pay a $10 million license fee, and required to fork over an onerous 36% of their revenue by way of taxes.
- As stated previously, there is a hard cap on the number of online skins in Pennsylvania. This could stifle the industry, as online sites are projected to be the bigger money makers compared to land-based outlets.
- To date, only two casinos have applied for sports betting licenses, Penn National and Parx Casino, and while we’re of the mind that the majority of the state’s casino will eventually take the plunge, it’s still an open question.
DraftKings doesn’t yet have a partner in Pennsylvania. FanDuel’s plans are clearer, as parent company FanDuel Group has partnered with Boyd, which itself has recently completed an acquisition of Valley Forge. Still, the PA Gaming Control Board has yet to announce that Valley Forge has submitted a sports betting application.
Inevitably, the duo will likely be at the forefront of the PA sports betting industry, but their hesitance does signal a lack of enthusiasm about the market.
The $9 million+ generated by NJ sportsbooks compared to the <$1 million raked by PA fantasy operators last month clearly suggests that daily fantasy sports revenue will be a drop in the bucket compared to sports betting revenue in Pennsylvania — it’s just that the bucket is smaller than it needed to be.