Daily fantasy sports site FanDuel is entering the fantasy eSports market with the acquisition of AlphaDraft.

What we know so far about FanDuel and AlphaDraft

Forbes’ Darren Heitner broke the news first. From Twitter:

Former NBA Commish David Stern tells me that FanDuel has acquired @AlphaDraft, which he is invested in — Darren Heitner (@DarrenHeitner) September 24, 2015

Later, Heitner shared what Stern said in the context of a longer interview with the former NBA commissioner:

Heitner: It was reported that you participated in a $5 million financing round for fantasy eSports startup AlphaDraft. What do you particularly like about that company within the eSports industry? Stern: It was the first one that I had been introduced to in the eSports industry. I sat with the founder – his passion, determination and his absolute certainty that eSports was upon us in a big way — a certainty that I share. This was an early starter, almost a first mover, in fantasy for eSports, so I said I’m in. I was not a significant part of the $5 million, I assure you, and they’ve been acquired by FanDuel.

The news was confirmed in a press release later in the day. Few details about the logistics of the deal were available, although the release noted that FanDuel will bring AlphaDraft’s “employee base in-house to help create a one of its kind daily fantasy product specifically for eSports.”

FanDuel CEO Nigel Eccles on the acquisition:

“With over 200 million people globally watching eSports, AlphaDraft gives those fans a way to engage with this burgeoning entertainment product that creates an enormous opportunity for us. This is sports for a new demographic, with very little crossover with what are considered traditional sports fans, and this acquisition gives us the ability to leverage the expertise of AlphaDraft’s team, while helping their efforts in customer acquisition and building awareness of this new industry. It’s a win-win.”

Todd Peterson, CEO of AlphaDraft:

“It is clear that FanDuel is committed to the fan community. This pairing creates an incredible opportunity to drive the fantasy industry forward and create compelling products that will enhance all fan engagement.”

FanDuel vs. DraftKings, in DFeS

The move allows FanDuel to instantly compete with DraftKings, which officially launched eSports contests based on League of Legends on Wednesday.

It’s also possible that DraftKings was aware of the impending acquisition, and moved quickly to get its fantasy eSports product on the market. Either way, the entrance by both DFS giants makes a lot of sense in advance of the League of Legends World Championships that start on October 1.

On Wednesday, DraftKings announced it was partnering with six eSports organizations: Cloud 9, TSM, CLG, SK Gaming, compLexity Gaming and Mousesports.

Daily fantasy eSports, at a glance

Daily fantasy eSports (DFeS) is essentially identical to the mainstream DFS product. The competition structure, lobby, promotions, and other core elements are more or less interchangeable.

The difference is that DFS players build rosters from athletes in traditional sports, while DFeS players build rosters from athletes in eSports like Dota 2 and League of Legends.

AlphaDraft is one of two fantasy eSports sites that launched earlier this year, along with Vulcun.

Both sites started with relatively little fanfare, but the market escalated quickly. Vulcun has raised $12 million in investment funding, while AlphaDraft garnered $5 million in seed funding.

Legal Sports Report’s Chris Grove recently authored an in-depth report on the eSports betting and fantasy market for Eilers Research (full report here, executive summary here).

He estimated in 2015, DFeS sites will collectively take in roughly $20mm in entry fees from just under 600,000 active, unique customers participating in real-money contests. That, of course, was before DraftKings and FanDuel started putting their collective weight behind the nascent fantasy eSports market.

FanDuel continues to acquire

The AlphaDraft purchase continues a recent trend of FanDuel being aggressive in its plans and spending on infrastructure and acquisitions of late (not counting its ads on television):

Those moves come in addition to plans to expand into a new office in Edinburgh and open an office in Glasgow.

eSports gets more and more mainstream

For anyone who thought eSports couldn’t go mainstream, consider some recent events in the industry, beyond just two billion-dollar fantasy sports sites rushing into the market:

ESPN is planning to ramp up its investment in covering eSports .

is planning to ramp up its investment in . TBS will be televising an esports league featuring Counter-Strike: Global Offensive.

will be featuring Counter-Strike: Global Offensive. The recent Dota 2 competition in Seattle featured a prize pool of $18 million, and several other upcoming contests have seven-figure prize pools, as well.

Traditional fantasy sports vs. fantasy eSports

DraftKings and FanDuel are taking different routes into the DFeS market. DraftKings, as of now, is building its own product into its interface. FanDuel, by acquiring AlphaDraft, appears to be keeping the product at least somewhat segregated, although full integration into FanDuel is also a possibility.

The existing FanDuel and DraftKings brands don’t mesh naturally with the typical eSports fan, presenting what appears on the surface to be a barrier to entry. FanDuel seems to be side-stepping that issue, to some extent, with the acquisition.