Daily Fantasy NFL Prize Pools: Have we reached the peak?

Written By PlayPicks Staff on November 12, 2014 - Last Updated on June 27, 2018
NFL Prize Pool

A few weeks back we all asked the question how high can these NFL prize pools climb? I think this weekend we finally got our answer. Neither DraftKings nor FanDuel were able to fill the site’s signature NFL tournaments this weekend and the repercussions of doing so are now being seen. Both FanDuel and DraftKings have reconfigured the tournaments for next week as the luster has dulled on both of them. Let’s take a look at what happened this weekend and what chain reactions those events caused.

 

DRAFT KINGS

 

As Predicted, DraftKings was woefully short of filling the $40 Milly Maker this weekend. What was more shocking to me though was why they decided to bump the prize pool in the first place to $2.5 Million? They managed to get 52,895 entries into this week’s version at the elevated $40 price. If they would have left the prize pool at $2.2 Million they would have only lost under $85K based on the $2,115,800 they did collect. Since they bumped it though they lost $385K this week and are now basically right where they expected to be after week 1 as I mentioned in the last article. Again now with the revenue from the satellite’s they are probably still above where they thought they would be when they started the Millionaire Maker, so it’s been a great run. Still I am interested in seeing if they can run it with a manageable loss the rest of the way or if they decide ultimately to cut it short before the end of the season. I definitely think the drop back down to the $27 price is probably going to help, but I honestly think they over estimated how much some of the bigger players are going to chase this pipe dream. Playing this tourney is akin to playing the lottery as it’s a very boom or bust proposition. We will all still have a couple of entries to this, but for the health of most bankrolls it is better to just take a couple shots and not go all in chasing a one in 50,000 chance.

 

Fan Duel

 

 

Fan Duel also failed to fill the Sunday Millions with 125,175 entries at $25 a piece for $3,129,375. They still managed to make a profit of $129,375 on it, so not a total loss. The dream of Playing for a $5 million prize pool is going to have to be put on hold for just a little while longer. The Industry may get there one day, but the calls for it to happen by the end of the season were probably a little premature. FanDuel has already put it in reverse and are dropping it back down to $2.5 Million guaranteed for next week with a smaller top prize and a flatter payout system. I personally applaud them for doing so too as the portion of my bankroll set aside for GPPs is taking a beating chasing these large prizes. Football season is very short and you really need to take your shots in order to make it profitable, but it will be nice to be able to grind out a small profit playing GPPs and give yourself upside again for a change. In all honesty you are just being greedy if you think $300K is not enough to get you excited.

 

Is this the right move?

 

I think what both sites decided to do was in the best interest of their respective companies, the industry, and the player base as well. For the industry it is good to see some rational sense being used when it comes to NFL prize pools. What started as a million dollar Sunday prize pool was trumped by a $1 Million first place prize on a $2.2 million prize pool. That then led to a $2.5 Million prize pool that grew again to $3 million. I don’t know about you, but my thought when I saw the new Sunday tournaments posted each week was, “That escalated quickly.” Neither company could have or should be trying to go any bigger than they already have it right now. At least not for this season.

 

For the players this is also a good situation. Let’s face it, we all have serious impulse control problems. If we did not than we would never have played anywhere near as many Milly Maker entries as we have or continue to do. The brass ring of $1 Million just seems so damn attainable. It’s hard not to reach for it. Even though we know it is not smart, it makes a whole lot of sense to us before rosters lock. As a group we are kind of like moths to a flame and therefore it was nice of them to cut us off for our own good.

 

As for the sites, it makes perfect sense why each of them did this when and how they did. Let’s start with DraftKings. DraftKings failed to fill the Milly Maker for four straight weeks now and for the first three of those they kept everything the same and just watched it slowly dwindle. As I said last time, they had budgeted for the first week to be a loss, so when they filled it for a few weeks they decided to keep it going. When they started losing money and not reaching break even on the Milly maker they decided they had to make a change. I have not seen or heard an explanation, but I would be interested to find out exactly why they felt the thing to do was jump up the price and add more money to the prize pool on top of it. It would seem to me that they would have had a better chance filling it if they dropped the price to make it easier for people to multi enter and also easier for some smaller bankroll players to take a shot or two, but that’s just my thoughts on it. After taking a big $385K hit minus the satellite revenue, they must have agreed and decided it was a failed experiment. While they did not come up woefully short the overlay they had to cover this week is not something they can afford to do going forward for the rest of the season. By advertising themselves as the site that crowns a millionaire weekly, they have really painted themselves into a corner here and now must attempt to salvage the rest of the season hoping to get close to filling a tourney they realize will probably overlay from here on out. The goal for them now is to try to figure out a way to keep this tourney from having too much overlay in order to not have to pull the plug. I think dropping back to $27 was a good start, but I would wager they fall short again this week and by a larger margin then they did when it was still at $27 previously. I guess they still feel that the publicity and new players to their ecosystem is worth the loss from the overlay, so it makes sense for them to continue it when seen through that prism. They use it as a marketing and recruiting tool, so this is considered acceptable loss.

 

As for FanDuel, this move also makes perfect sense for them. They are not chasing anyone so they do not need to get into an arms race with someone they already outgun. FanDuel is a mature player in the industry and they care much less about recruiting and incentivizing others to join their site. To them a tourney is only worth it if it brings in the money. They are releasing their earnings now and it would be a huge blow if they were overlaying their monster tournament. I think backing the tourney off here and taking 25K less entries is actually what they want. If they manage to fill this tourney at $2.5 Million like they have already done before, than they can reap the max amount of profit off it as they can. If you work out the numbers they were actually making more by taking less entries and filling the $2.5 Mill prize pool then they were by trying to bump it to $3 mill and falling short. For a company that makes all its decision with the bottom line in mind this was the logical move. For those of you bashing them for it just remember this is a business and the point of business is to make money for the business not the consumers of the products. FanDuel should have no problem filling the Millions this week and reaping the max amount of money off it as they can. It’s still the largest prize pool being offered so I doubt the change back to a measly $2.5 mill is going to chase people away. Escalating the pool as quickly as they did seemed a little out of sorts for the normally conservative FanDuel, so this was no surprise to many people that they made this change. I also do not think anyone knocking them for it really has a leg to stand on here for what it is worth.

 

Conclusion      

  

Let me be clear about one thing here before anyone takes what I am saying the wrong way. I’m not calling for this to be the heyday of DFS with it being all downhill from here. Anyone who invests in the stock market knows that things do not go straight up in a linear fashion. After a huge run up it takes some time to totally digest where you are before breaking back through the highs and making new ones. This is the DFS version of a stock pullback and like investing, sometimes a little breather to reassess before moving forward is both needed and warranted. I still believe in the upside and potential growth of this industry. I by no means think we have actually hit the peak of what daily fantasy ultimately will become. I just think for now, we have saturated and stretched the market for large field GPP tourneys to the limit of our present situation. With a few more big influxes of players it is not unreasonable to assume that the pools can grow again someday. Remember that while they may not have filled it at $3 Million, they did get enough entries to go over break even. Now that they backed it off $500K, I doubt they have any problem filling a tourney they already know they have excess demand for on FanDuel. Two months ago we were in awe of the chance to play for a Million dollar prize pool and now we get two chances to do that weekly with one first prize being as big as the whole opening week tourney and another still being more than 2.5 times its original awe inspiring size.  Both sites are well ahead of where even they expected to be currently, so there’s no need for them or any of the players to be upset about these changes which are definitely warranted.

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