The Fantasy Sports Industry
A Trariti Consulting Group Study by Swapnil Roy
Overview
Fantasy sports is an online game where participants create virtual teams comprising of real players of a professional sport. These teams compete based on the actual performance of the players in real games. This performance is converted into points, which are accumulated and totaled according to a scoring system chosen by the fantasy team's manager.
The scoring system can be either manually calculated by a league commissioner who manages the team or calculated using computer algorithms based on the actual results of professional games. The team managers draft, trade, and release players in a manner similar to real sports. The team managers use past data or player performance displayed on the platform to make informed decisions before playing. In summary, fantasy sports allows users to manage a team of players and score points based on their real-world performance.
Game of Luck v/s Game of Skill
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The debate on whether fantasy sports is a game of skill or chance has been a significant topic worldwide. In India, the laws pertaining to online gaming are unclear, causing potential legal issues for fantasy sports companies. While games of skill are permissible under Indian law, games of chance are strictly prohibited. The Indian courts have acknowledged that no game is purely based on skill or chance.
To determine the dominant factor in a given instance, the courts use the dominant factor test, which requires analyzing whether the skill or chance is the prevailing factor. After conducting several studies, the head of AI of Cartesian Consulting was convinced that skill plays a more significant role in fantasy sports than luck. As it is a state matter, some parts of India consider fantasy sports legal, while Andhra Pradesh, Assam, Telangana, Tamil Nadu, and Orissa have banned real money games conducted through online platforms.
Fantasy Sports Market
The fantasy sports market has witnessed substantial growth, with a value of $22.6 billion in 2020, and is projected to reach $48.6 billion by 2027, exhibiting a Compound Annual Growth Rate (CAGR) of 13.9% from 2021 to 2027. The market is segmented based on regions, including North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa. North America is expected to dominate the global fantasy sports market owing to its robust IT infrastructure and high internet penetration. Moreover, the rising popularity of football with an increasing number of players and their followers will drive the market growth in this region.
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The Asia-Pacific region is expected to grow rapidly due to its developing economies such as China and India. The region has a substantial number of internet and smartphone users and is witnessing a growing infrastructure. Additionally, the increasing youth population and their interest in developing economies will facilitate the rapid adoption of fantasy sports in this region. As per the UN, the Asia Pacific region has around 750 million youth aged between 15-24 years.
The global fantasy sports market report is also segmented based on sports, stage, demographics, region, and country. Football holds the largest share of the fantasy sports market in 2019-2020 and is expected to maintain its dominance throughout the forecast period, with other sports like baseball, basketball, hockey, cricket, and others also contributing to market growth.
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The fantasy sports industry in India is in its early stages with many players vying for the attention of the country's 800 million sports enthusiasts. This competition is set to continue as these companies expand into various sports leagues to attract advertisers, customers, and investors. The popularity of sports, especially cricket, and the low cost of data plans, combined with the high penetration of mobile phones, make these startups an attractive investment opportunity. In the last five years, these platforms have received a total of USD 112 million in investments from various investors.
Fantasy sports have had a significant impact on the Indian sports market, with a growing interest in sports beyond cricket. According to reports from the Federation of Indian Fantasy Sports (FIFS), 87% of fantasy sports enthusiasts now conduct research and gather more information to develop better strategies while playing, while 48% of users watch every game regardless of the teams or countries playing. This interest has resulted in significant revenue growth, with online fantasy sports platforms generating gross revenues of approximately 14% in the 2020 financial year compared to 9.4% in the previous year.
Furthermore, online fantasy sports operators deduct an amount in taxes from individual winnings, which has resulted in significant increases in tax returns. The industry has also led to the growth of complementary businesses such as online sports scoring platforms, content aggregators, sports merchandising, e-commerce, online sports streaming, and digital payments. The success of the industry has also attracted the attention of established brands seeking to market their products, as evidenced by Dream 11 sponsoring this year's IPL.
Fantasy Sports Market in India
The fantasy sports industry in India has experienced rapid growth, with the number of operators increasing from 10 in 2016 to 150 at present. Dream 11, a founding member of the Federation of India Fantasy Sports (FIFS), is one of the largest players in the Indian market. Other members of FIFS include MyTeam 11, HalaPlay, Fancode, Fancy 11, My 11 Circle, Faboom, Fanfight, and Guru 11.
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The majority of India's fantasy sports market is dominated by the top 4-5 platforms, which make up approximately 95% of the industry. The industry is expected to continue growing due to demand-side pull, expansion into untapped geographical areas, and the introduction of new game categories, which will result in new customer acquisitions for fantasy sports platforms in the foreseeable future.
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The promising potential of fantasy sports is becoming increasingly evident, as it garners support from various entities including businesses, sports organizations, and government regulations. This is a positive development for both the sports industry and the economy in India. With the pandemic causing the postponement or cancellation of many live sporting events, Indian sports fans turned to lesser-known sports such as kabaddi, baseball, handball, and rugby through fantasy sports. The online fantasy sports (OFS) industry was able to provide some respite for sports enthusiasts by introducing new sports and tournaments from countries that were free from Covid-19. OFS platforms hosted over 1,000 matches from around the world, and attracted over 5 million users.
Many experts believe that fantasy sports in India have not yet reached their full potential, as the industry is still in the process of being established. According to the Federation of India Fantasy Sports (FIFS), it is estimated that over 300 million Indian sports fans watched sports online in 2020, and at least one-third of them engaged in fantasy sports. With the increasing availability of affordable high-quality smartphones and digital infrastructure improvements, the industry is expected to continue growing at a rapid pace in the coming years. Therefore, it is safe to say that fantasy sports in India will be one of the fastest-growing industries in the near future.