Raise your hand if you had an entry into this week’s Millionaire Maker. Keep it up there if in week’s past you had more than one entry at some point. If you also complained about the payout structure at some point then keep it raised. At this point you can put it down because if I said you vowed not to play this week because they raised it to $40 and that you know you are still going to throw in a few satellite entries in DFS NBA this week then you would still have your hand up. The point here is you are not alone. We all feel the same way, yet we all have a few shots at the millions. Why not? We all feel we are better than the average player and have an edge simply because we study and read up on this stuff. If we have an above average although very small chance at winning a large cash prize with the odds tilted even slightly in our favor we are going to take a shot. It’s what we do. This is why the Millionaire Maker and it’s success is baffling to many of us, yet makes perfect sense for DraftKings to continue it.
There’s really only two ways to play the millionaire maker from my viewpoint. You either throw a line up or two in hoping to cash one or both and make some money while giving yourself a shot at a million bucks or you pool money together with a large group and attack it through multiple entries to spread your risk and coverage. The second option is almost exclusively a losing proposition unless you happen to get a lineup into the top 50. Based on a cash rate of about 25-30%, if you get a top 50 line up for $1000 then you should be able to make up the rest of the $1700 on your $2700 buy ins with the other 20-30 rosters in the money. Since most of those rosters are only paying $40 or $50 you could cash 30 of them for $1200-$1500 and still lose money if a late Jordan reed catch knocks you down to 51st and the first spot that only pays $500 as happened to me last week. That one little catch swung me from a slight profit to a pretty large loss even on a week when I had four rosters hit the top 600. In a tourney with 80,000 entries to have 4 make the top ¾ of 1% and still lose 30% of your buy in is a tough pill to swallow. When you cash 34 of 100 rosters and still can’t be profitable it becomes a very discouraging thing to keep investing that much time into. When your good weeks still lead to a loss and you have not cashed a top twenty finish yet, then the ROI on this looks horrible even if you do happen to sneak a few trains into a satellite and have 10 tickets for $50/$75 invested. While I know I will continue to fire a bullet or five I win through satellite’s, I will not be going as hard or as heavy as I was before.
As for the price point, I think it does scare away some of the casual players. The large syndicates and those with big bankrolls will still be firing a large number of rosters into it and I think they will have some overlay, but every week we see it half full on Saturday morning during College football roster lock and every Sunday at NFL lock it has 70,000+ entries. The demand is coming from somewhere as those rosters do not magically enter themselves.
Let’s rewind the clock a month. Everyone was excited that DraftKings was going to make someone a million dollars playing daily fantasy. We all took our shot to be that guy. Most people, including DraftKings, thought they would overlay the tourney and lose a few bucks. They considered it an acceptable loss as the idea was to run a tourney that would crown a millionaire and generate buzz. They were literally giving away tickets and running Qualifier’s left and right hoping to get close to filling it. Instead they knocked it out the park and filled the tourney at a profit of almost $300,000 on the first week not including the rake they made on the satellites. From an expected loss of $500K which was deemed acceptable to a windfall profit of $300K means they are $800K ahead of where they expected to be. The obvious conclusion then is to double down and run it back next week. They did and this time they did not fill it, but still managed to rake almost $100K off of it again before factoring in the rake from satellites. That put them ahead $900K from where they expected to be without factoring in added revenue from satellite rake. In week three they lost $73,000 from overlay followed by $130,000 in the fourth installment and $202,000 this week. After running a five week long strand of tournaments crowning a millionaire, which was only supposed to be a one week thing, DraftKings has basically broke even or came out slightly ahead when you factor satellite rake from running this millionaire maker.
The upside for them is that they can say they have crowned five new millionaires already this season and still have not had to dip into the reserve fund they set aside to cover the expected loss from running it the original first week they had planned. Remember that they are using this tournament to bring new players into their ecosystem with the shock and awe of a million dollar prize. It was never meant to be profitable and the fact it was allowed them to extend out the marketing campaign that it is. I’m assuming the rationale behind upping the buy in to $40 is that the casual player has shied away and the large number of entries are coming from large syndicates and players with sizable bankrolls that will continue to take those shots. The 74 rosters that $2000 buys a syndicate will still buy 50 rosters and good coverage at this same level now, so the reasoning is that it will not affect levels of play.
This is where I think DraftKings might be erring. I think they will see a large drop off in some of the syndicates level of play. People now realize this is a bankroll killing payout structure and $40 is too rich for many newbies to throw in more than one entry. For a mid level player, 10 entries at $270 was steep enough, but know that only buys you 6 which is not good coverage and at the same time the same 10 roster coverage is now a sizable $400 chunk of change. I had been able to pick off a few seats weekly in Satellites’s with a positive ROI on it, so if you did that too, then a few extra entries would only cost you a manageable $150 or so. Now that number is more like $250 or $300 and the higher buy in means the % of seats paid out per $5 buy in level just got 50% harder to get at as well. Where satellite pools used to pay out the top 15% at $5 with $27 tickets that is now down to the top 10% at the same $5 level for a $40 ticket.
I guess DraftKings feels if they can keep the same level of play from the syndicates then the price point is meaningless. My only problem here is that they must realize the large groups and players target a specific amount of money to spend and not a specific number of line ups. Most that played $2000 weekly will play the same $2000 weekly or stop playing all together. That means at best they take 2/3 the number of entries now for the same cost if not stop playing all together. I can see this falling way short of breakeven this week and will be interested to see if they keep it going and at what price point moving forward. They mentioned at the Breeder’s Cup that DraftKings is the place where they are crowning a Millionaire weekly. Once you make a bold public claim like that it becomes tough to back away from it and save face so I can see them keeping this going forward. The twitter feeds, daily fantasy webpages, and casual players alike are all grumbling about the payout structure yet we all had our hands up at the beginning of the article, so we are all guilty of not following our own advice. The guys running DraftKings are really smart dudes, so there’s got to be some method and analytics that tells them this has a good chance to work. We can at least give them the benefit of the doubt here as they have exceeded even their own expectations so far.