Fantasy Sport - Enjoy the Ride but Play is Safe!

Fantasy sport, or online gaming platforms, has increased in India big time. They are growing at an exponential rate and attracting people of all ages.  There are now close to 20 games being telecasted on a daily basis, from cricket to football, kabaddi, basketball, hockey, motorsport, badminton, rugby, golf, volleyball, tennis and squash.

According to a study by the Indian Federation of Sports Gaming and KPMG India, online gaming revenue is expected to grow at 22% CAGR from the current INR 43.8 billion to INR 118.8 billion by 2023.

The study highlights the findings of a survey on fantasy sports users to understand their preferences and playing patterns. Some key points:

•  In 2018, there were 250 million gamers and 250 game developing companies in India. 
• 74% of users play fantasy sports 1-3 times a week, with the majority playing once a week.
• Around 20% of the respondents reported playing more than five times a week which indicates the growing traction of the genre in the country.
• Fun and excitement’ are the primary motivator for playing fantasy sports across all groups.
• The ‘opportunity to win money’ was seen as one of the motivators for around 30% of respondents.
• 54% of users play fantasy sports for free.
• 46% of the respondents have played paid contests at least once in the last 12 months.
•  Only 25 to 30% of the outlay on fantasy sports platforms comes from the users’ pockets.
• 70 to 75% of outlay is re-investment coming from previous winnings, cash bonus or periodical promotional offers given by the platforms to their users. 
• The majority of users from the top seven to eight cities in India were found to be playing less frequently than users from some of the smaller cities in the country.
• 71% of respondents played fantasy cricket, followed by 54% playing football. The non-cricket sports leagues in India are also witnessing increasing traction.

What is Fantasy Sport?

Fantasy sport, also known as rotisserie or roto, is a type of online game where participants assemble imaginary or virtual teams within a limited budget, consisting of professional players. Points are awarded to contestants based on selected players’ on-field performance.

The number of players picked depends on the sport. For instance users choose 11 players for a game of cricket or football, or seven players for kabaddi or volleyball.

These scoring point systems are simple enough to be manually calculated by a "league commissioner" who coordinates and manages the overall league. Points are also calculated using computers tracking actual results of the professional sport. In fantasy sports, team owners draft, trade and cut (drop) players, analogous to real sports.

The Ride

The concept of fantasy sport has been in India since the early 2000s. ESPN Super Selector, which launched in 2001, was the first such platform. More than 500,000 contestants joined the platform during the 2003 ICC Cricket World Cup in South Africa, and the segment hasn’t looked back.

In the last couple of years, aided by a rapid digitalisation wave, the participation in fantasy gaming platforms has soared, increasing ten-fold to around 20 million people. Currently there are about 70 fantasy sports companies in the industry with 30 of them having launched operations in 2017-18 alone. (HIGHLIGHT)

Initially most of the market was limited to cricket, but with the advent and success of franchise leagues, the concept has branched out of cricket to other sports. However, cricket remains the most popular among fans, commanding 90% of the market share.

Popular Fantasy Leagues in India

(Sources:  https://yourstory.com/2019/04/fantasy-sports-startup-dream11-mpl-ipl  and https://thebridge.in/the-future-of-fantasy-sports-in-india/)      

The Business Model

For any live match or event, a league runs various contests in its platform’s website and app. The users have an option to play either a free or paid contest. For all the paid contests, a part of the contest fee is retained by the company as a platform fee. This fee is the actual revenue for the company. The remainder of the contest fee goes into the prize pool which is then distributed amongst the winners.

The fantasy sport business in India is here to stay. It caters to the new-age, new generation entertainment segment and the upside potential is beyond doubt. However, like any other business, it is vulnerable to a variety of risks of which industry stakeholders should be mindful.

Key Risks

1.    Event Cancellation and Abandonment: In the event of a cancellation or abandonment of matches, the company is required to refund the entire contest amount to the users. This is a direct impact to revenue for these platforms, as the entire contest fee, which is otherwise revenue for the company, must be refunded.

2.    Cyber Risk: Most of these platforms employ high-end technology and software to run the contests and other operations. As such, these companies are particularly vulnerable to cyber risks. This includes risk of financial loss, disruption or damage to the reputation of an organization, or breakdown of operation from some sort of failure of its information technology systems. 

Solutions

Event Cancellation Insurance Policy

At Marsh India, we have devised a tailor made insurance solution to safeguard the revenues of such companies. The insurance covers direct loss of revenue due to cancellation or abandonment of matches due to perils like adverse weather conditions or act of god incidents like earthquakes and tsunamis.

Cyber Insurance Policy

A cyber insurance policy, also referred to as cyber risk insurance, is designed to help an organization mitigate risk exposure by offsetting costs involved with recovery after a cyber-related security breach or similar event. The coverage includes:

• Liability claims following a data breach incident including defense costs.
• Loss of profit following network interruption due to a cyber attack.
• Expenses related to regulatory actions including fines and penalties.
• Ransom payments following ransomware attacks.
• Data restoration costs in case the data is lost.
•  Forensic and other first party costs.