New research from business analytics professors at the Daniels College of Business
While fantasy sports have been around for many years, access to big data sets and computer power to process them is a relatively new phenomenon. New research from the University of Denver’s Daniels College of Business indicates that the daily fantasy sports market will change dramatically.
In their article, “Big Data, Efficient Markets, and the End of Daily Fantasy Sports As We Know It?,” which was published in the journal Big Data, Associate Professor Andrew Urbaczewski and Assistant Professor Ryan Elmore discuss the effects of applying similar technologies to other markets as a comparison to understand what could lie ahead for daily fantasy sports.
The authors build the case that fantasy sports betting is an investing market, most similar to options derivative markets. But, like the capital markets, fantasy sports players who use analytics have an advantage over those who do not.
“Millions of dollars are spent developing and refining models to compete in the daily fantasy sports markets, often to the gain of the tout sites such as RotoGrinders, RotoQL and FantasyLabs, among others,” they say. “The market itself has begun to resemble the financial markets, with television shows, pundits, subscription websites and print materials available constantly.”
By analyzing what’s going on in online poker, day-trading, casino gaming and cryptocurrency, Urbaczewski and Elmore profile three predictions:
- Daily fantasy sports will be solved more easily than tournament fantasy sports.
- The daily fantasy sports market will shrink relative to tournament markets.
- The daily fantasy sports markets will be shown to be semi-strong efficient and, thus, the methods/tools that are currently being used to exploit the market should become less useful over time.
“The market is already seeing exit points from large facilitators such as Yahoo!, which exited fantasy golf after the 2017 season,” the authors say. “Leagues such as the NBA are also likely to demand payment for access to data as integrity fees after the U.S. Supreme Court in May 2018 struck down federal laws prohibiting sports gambling, and this may extend to fantasy sports of all kinds.”
Based on their research, they also believe top daily fantasy players will shift their strategies to becoming providers of advice and data, and similar tools. Large market makers such as DraftKings and FanDuel are likely to try to protect their markets, and again may look to the online poker world for ideas as to how to make the casual customers stick around while not losing high-volume players to other pursuits. They have huge investments in their companies and will want to adapt as necessary to sustain their livelihood.
In addition, daily fantasy sports markets may also be subject to the whims of regulators, which they can attempt to influence but cannot control.
“Given the zero-sum nature of fantasy sports, we posit that big data will likely send it back to the days where it (and poker) existed before there were online variants and huge data histories,” the authors say. “There will be a small-stakes, largely private market conducted among friends, but there will also be a tiny-in-size but high-in-stakes high-roller market where algorithms battle out for supremacy and the edges between them become so small that even the expected value of the best players cannot cover the costs of information gathering or the sanctioning fees of the market makers.”
To read the full article, visit: https://www.liebertpub.com/doi/full/10.1089/big.2018.0057
Please note that the Department of Business Information and Analytics will host a sports analytics conference at the University of Denver Aug. 2, 2019.
More about the authors:
Ryan Elmore is an assistant professor in the Department of Business Information and Analytics at the Daniels College of Business. Elmore’s research interests include statistics in sports, nonparametric statistical methods and energy-efficient, high-performance computing. His work in sports statistics has led to the position of associate editor for the Journal of Quantitative Analysis of Sports (2015–present) and consultant to the Denver Nuggets professional basketball team.
Andrew Urbaczewski, chair and associate professor of the Department of Business Information and Analytics came to Daniels in 2013 from the University of Michigan at Dearborn, where he spent 10 years on the faculty, including six as the chair of the Department of Management Studies. Urbaczewski has written 23 articles published in refereed journals. His research has now expanded to sports analytics as well as information security education and electronic health record implementation.