The center of the first great public relations crisis to befall Boston-based DraftKings and the daily fantasy industry was around the idea of company employees playing (and in some cases winning) on competing sites. DraftKings employees were playing on FanDuel (and vice versa). This is a fact that has now triggered multiple lawsuits and investigations, given the allegations of fantasy sports insider trading.
As part of its ongoing response to the crisis, daily fantasy companies like DraftKings and FanDuel have permanently banned employees from partaking in any daily fantasy competitions for money. But this would seem to create some serious problems for the companies. Why? Because DraftKings, in particular, managed to recruit talent early on as a company by promising to not interfere with participation on other sites (though playing on DraftKings itself was off limits).
DraftKings co-founder and COO Paul Liberman noted as much during a Babson conference in September.
“We have some people who make significantly more money off of our competitors’ sites than they do working for DraftKings,” Liberman said, according to the Boston Globe. He went on to confirm the necessity of letting employees play fantasy on other sites.
I was actually talking to my VP of analytics yesterday, and he was like, ‘Well, this guy that’s on our team can only work 9 to 5 during football and hockey season because he spends way too much of his time playing online.’ We have to let him do that; otherwise he’s never going to work for us. He adds a lot of value in terms of understanding product, understanding content.
Naturally, the situation now appears to be drastically different for DraftKings, to the company’s assumed detriment. One would assume many employees wouldn’t stick around for long, since the prospect of making “significantly more money” has been curtailed.
Yet the reality may end up being quite different. Though some employees may indeed leave, the fact is that times have changed for DraftKings. It has achieved major marketing breakthroughs and currently has a national presence. The simple fact is that DraftKings shouldn’t need to be forced into providing extra incentive in order to attract talent. It should be able to operate like a normal website at this stage.
Lesser-known competitors of DraftKings and FanDuel might be the real victims if an employee fantasy ban becomes the norm across the board. Sites like Draftpot or FantasyDraft currently lose money on a weekly basis in the NFL competitions. Draftpot, according to daily fantasy analytics site Super Lobby, lost over $54,000 in Week 5 since it has to try to lure users from larger competition while still offering palatable prizes.
FantasyDraft lost even more in Week 5. Super Lobby reported that it awarded $546,365 in total prizes, taking in just $409,183 in total fees. That’s a loss of more than $137,000.
To close the gap, these sites have to attract top talent in the daily fantasy world. Doing so would be much more difficult if employees were not allowed to partake in fantasy competitions on other sites. Neither site has confirmed whether or not employees are in fact banned, however (as they are on DraftKings, FanDuel and also Yahoo).
Yet it’s almost a moot point. If employees aren’t banned from playing, questions of legitimacy and fairness will haunt any company that chooses that road. And if they are banned, then the companies will be recruiting talent with the same handicap as the major powers in the industry. Either way, the ban will impact the smaller daily fantasy companies much more so than the larger competition.
DraftKings declined to comment when asked about the future of recruiting at the company, saying in a statement that “we are unable to answer any specific questions while we are conducting our internal review.”
