DraftKings Paid Estimated $4m in Week 1 NFL Overlays

Are daily fantasy sports (DFS) the same hit they were last year around this time? Perhaps not, given that DraftKings had to pay out millions of dollars to cover its contest guarantees.

According to Yahoo! Sports, DraftKings had 16 unfilled NFL contests that they offered guaranteed prize pools for.

“[DraftKings] was forced to cover the difference [for unfilled contests], an estimated $2-$4 million overlay, or the amount of the guaranteed prize not covered by entry fees,” reports Yahoo.

One prime example of DraftKings’ inability to cover the prize pools includes the “Millionaire Maker,” which requires $3 buy-ins from players and offers a $5 million prize pool.

“With over 1.4 million entrants ($4.2m), the company was still $700,000 shy of the guaranteed prize money.”

At first glance, this appears to be a DraftKings problem. But one look at other leading competitors like Yahoo! and FanDuel reveals that the industry as a whole may be falling short of its expectations.

“Competitors Yahoo! and FanDuel also fell short of having enough players in their large-pool games, but DraftKings reportedly saw the largest overlays.”

Yahoo! Sports asked DraftKings if estimates of up to $4 million in overlays were true.

“A DraftKings spokesperson disputed the $4 million estimate, calling it grossly exaggerated, but declined to offer the exact amount of the disparity,” reports Yahoo!.

Given that no exact figures have been reported, it’s tough to say whether or not DraftKings truly had to cover up to $4 million in overlays. But given the large unfilled guaranteed tournaments, it’s clear that DraftKings isn’t doing as well as hoped for by this point.

At this time last year, DraftKings and FanDuel were blasting commercials on TV and through other mediums on a regular basis.

According to FanDuel CEO Nigel Eccles, FanDuel cut down their TV advertising budget from $12.7 million in 2015, to $1.2 million this year. Eccles said that the decision wasn’t based on revenues, but rather that they’d succeeded in getting the word out about their product.

Of course, it hasn’t helped DFS sites that they’ve faced numerous legal challenges in 2016. New York’s attorney general, Eric T. Schneiderman, even went so far as to try and ban both companies from his state. All sides are currently working together now, though, as New York moves to regulate DFS.

Other states like Nevada have installed licensing requirements for DraftKings and other DFS sites, although no company is likely to foot the bill in a state of 2.7 million people – especially when there are so many other states that don’t have licensing requirements.

Given the bombs on Week 1 of the NFL season, it wouldn’t be a surprise if DraftKings and FanDuel lower their total guarantees moving forward.