Startups and **** Series
With the IPL season kicking off, A day never passes without hearing “Dream 11”. Incorporated in 2008, The idea took shape during the first edition of IPL, having experienced the thrill of premier league fantasy, the founders went on a search to find similar platforms in India and ended up finding none. They launched dream 11 in 2009 on an Ad-based model for a long season format and pivoted thrice before finding the perfect product-market fit in freemium single match fantasy game in 2012 and then went on to become the title sponsors for IPL 2020, their incredible journey has been no less than a Bollywood drama. Here in this article I will dive a little deeper into the market, the scale and show you why the superstar is valued at over $5Bn today.
Overview
Dream11 is the flagship brand of Dream Sports, which also owns FanCode (a premier digital sports streaming platform), DreamX (sports accelerator) and DreamSetGo (sports experiences platform). It’s India’s biggest fantasy sports platform with 10 cr+ users playing fantasy (cricket, football, kabaddi, basketball, hockey, volleyball, handball, futsal, rugby & baseball).
Legally considered as a game of skill, Dream 11 allows users to pick a team for real-life games within an allocated budget, score points off on-field performances and compete with other fans. based on the outcome of the game the user can win money if their predictions turn out to be right.
Market and Background
Illegal betting is a huge market in India (some estimates say it's worth around$150Bn), fantasy sports has been catching up to this demand and has seen a compounded annual growth rate(CAGR) of around 165.9% during 2016–2020. The fantasy sports user base in India has grown from 2 Mn in 2016 to 100 Mn+ in 2020. The major factors driving the market are the emergence of various sports leagues which has garnered casual viewers, the increasing adoption of mobile games, the chance to earn extra income and is fuelled by marketing campaigns by fantasy sports startups.
Cricket continues to dominate the sports market in India. Roughly there are 85 cr cricket viewers on TV, of which there are 50 cr online viewers with 40% of them playing fantasy sports. Nearly all fantasy sports gaming startups in India work on the freemium model (Explained earlier in the Byju’s article) Users can participate in free-to-join casual contests, or pay to enter contests with cash rewards.
Basically, fantasy sports involves being a virtual manager/selector for sports games and scoring points based on the performance of your team players. Dream 11 commands 90% market share of the fantasy sports market in India.
Journey and Strategy
Dream 11 is founded by Harsh Jain and Bavit sheth. Both being huge fans of the fantasy leagues of English football wanted to do something similar for IPL. Dream11 started off as a personal project with the plan to help Indians be more involved in their beloved sport more than ever.
“Put your money where your mouth is… Show the world that you know what you are talking about and not just talking shop after a game has happened.” — Harsh jain
Initially, they operated on an ad-based model with season-long formats which did not find many takers, over the course of the next three years they experimented and pivoted the model thrice, before finding the perfect product-market fit in freemium single match fantasy game in 2012.
Dream 11 is a virtual monopoly in the segment. it has been dragged to various legal disputes and currently owes its legitimacy to the Punjab high court ruling in 2017 which stated that it is a “Game of skill” and cannot be considered as gambling. This in turn has helped dream 11 gain user’s trust and credibility in this nascent market.
Fantasy gaming was an alien product in India, it was hard to sell to potential investors, hires and users, building trust has been a gradual, taxing process for Dream 11. After grabbing initial rounds of funding dream 11 went on to invest big in marketing and promotions. It ropped in Ms Dhoni as its face and launched the “Dimaag se Dhoni” campaign in 2018 and followed up with aggressive marketing for customer acquisition in 2019 driven by the cricket world cup and the IPL before pulling off the biggest startup stunt ever by grabbing the title rights for IPL 2020.
The growth in user base is largely credited to the marketing, early mover advantage and network effects. Once you get enough users hooked it automatically brings in more users and the classic network effect comes to play creating a moat. Dream 11 user base has grown exponentially from 0.2 Cr in 2016 to 10 Cr in 2020.
Business Analysis
Sources of Revenue:
- Entry fees from the participants to participate in the paid contests.
- When the users earn on their bets, Dream 11 levies a cut of about 15–20% of the total pool (Casino Model).
Dream 11 has raised $785mn in funding to date and is yet to be profitable despite good revenues owing largely to marketing in the quest for user acquisition. As of Fy 2019 dream 11’s revenue stood at ₹801.7cr ($112.4Mn) and had a total expense of INR 934.8 Cr ($131 Mn) acquiring 40mn users, which puts the customer acquisition cost at Rs 234 (~$3.3). [The data for Fy 2020 is yet to be released].
Let’s take a case of a contest in dream 11, A user selects his/her team they are supposed to pay Rs.100 to enter the Dream11 cash contest. The total prize money is of Rs.3 lakhs and this will be distributed among the top 50%, total slots available for a match are 5,ooo that puts the total revenue to be collected by Dream 11 at Rs. 4lakhs.
Now, it has to distribute only 3 lakhs as the prize money (direct profit of Rs 1 Lakh), In this 3 lakhs, it levies a cut of 15–20% while disbursing as a commission (45k-60k).
There are n number of paid contests in various price ranges for every game, now put this into perspective for n number of games for n number of matches on which n number of users try their luck throughout the year. What are the numbers looking like!!
Dream 11 is a giant and going by the untapped market, potential and network moat it is a money-making machine for the future.
However, there is a huge churn in the users which is covered by the ability to garner more users and the business is largely seasonal. How the industry shapes up is something for the future to tell.
“Dream11 is a sports data company and fantasy sports is just the beginning. In the years to come, Dream11 intends to span across multiple dimensions of sports content, merchandising, ticketing, memorabilia and fan engagement.” — Harsh Jain
Conclusion
Eei Sala Cup Namde!!
Sources: Entrackr, Fintracr, Crunchbase, AJVC blog, ToI, KPMG, yourstory, Inc42.
