Fantasy Sports: The Perfect Investment Opportunity

Over the last decade, India has emerged as the preferred destination for online fantasy sports operators. For the uninitiated, online fantasy sports (OFS) is a type of game played online where every participant forms a virtual team of real-world players from two real teams competing in a professional sport in the real world. The participants’ teams then compete with each other based on the statistical performance of those players in the real-world match. 

The emergence of India as the go-to destination for OFS platforms is propelled by the digital revolution. There has been a stupendous increase in the number of smartphone and internet users in India in the last decade. India crossed the 500 million mark for smartphone users back in 2019, as reported by the market research firm tech ARC. The estimate of internet users in December 2020, by market research group Kantar, is around 639 million people.

Cricket is still the most favorite sport of the majority of Indians and is the reason behind the popularity of fantasy cricket. However, the new generation is developing a keen interest in other sports as well. The Indian youth have become ardent followers of sports like football, kabaddi, and volleyball, which is evident with the emergence of homegrown sports franchises like the ISL and the Pro Kabaddi League. Indians’ growing interest in different sports can be attributed to fantasy sports. A report by the FIFS states that 59% fantasy sports players have started watching new sports because of their interest in fantasy sports.

In terms of revenue, the OFS market has shown fantastic year-on-year growth. The OFS market reported the gross revenue of INR 920 crore in FY2019 and it rose to INR 2400 crore in FY2020, as reported by a FIFS-KPMG report. This is almost a 160% increase. OFS platforms are also deducting tax on the winnings before giving aways cash prizes to winners. The industry estimate of the tax on winnings was approximately INR 250 crore and the estimate of the GST paid by the OFS platforms is close to INR 445 crore.

The Indian fantasy sports industry is growing at a CAGR of 32%, as per a report by KPMG. This growth seems even more amazing when compared to the growth of the online gaming industry of India, which is expected to grow at a CAGR of 22.1%. The OFS industry of India is expected to be worth INR 2738 crore by the end of 2024. The FIFS has also reported a 4400% increase in the number of fantasy sports users in India, from 20 lakh in 2016 to 9 crore in 2019. This phenomenal growth was backed by considerable foreign investments in fantasy sports in the country. The FIFS reported investments close to INR 1500 crore from 2018 to 2019.   

The reason behind such huge investments in the OFS industry is the various avenues of profitability it provides. Let us take a look at how the OFS platforms are generating a profit:

1. League/Player Partnerships with OFS Platforms: Sports players/leagues and OFS platforms have a very mutually beneficial relationship. The intermingling of real-life sports with fantasy sports helps increase user engagement and player recognition. For example, the popular fantasy cricket app Howzat announced its partnership with cricket legends Irfan Pathan, Kumar Sangakkara and Kieron Pollard just before the Indian Premier League season and it proved to be an excellent move for both the app and the players.

2. Third Party Advertising: A report by KPMG shows that close to 53% fantasy sports players open fantasy sports apps more than once a week. This means that OFS platforms are providing advertisers with an engaged audience whose interests are already mapped due to their inclination to play fantasy sports. Many platforms are partnering with brands and cashing in on this opportunity.

3. Paid Contests: The majority of OFS games are real money games. Users pay an entry fee to join a contest and that money goes to the prize pool. The prizes are credited to the winners’ accounts at the end of the contest. OFS platforms charge a service fee on winnings, which makes them more profitable than most of the other businesses in India.
   

With these great revenue streams from fantasy sports, there should be no doubt that the future of fantasy sports in India is bright