DraftKings and FanDuel increase rake at some contests over the last few days.
Earlier this week, daily fantasy sports players over at Rotogrinders noticed that the rake had been increased on select GPP contests on DraftKings and FanDuel.
The rake increases come at a time when daily fantasy sports sites are not only competing for business but undergoing the difficult balancing act of sustainability and keeping customers happy. Rake has long been a sensitive topic but something that is vital to its growth.
What is Rake?
Rake is essentially the amount of fees that are taken by a DFS site to run the games. Daily fantasy sports site generally don’t indicate the amount of rake taken. Instead, to see the rake that is being take from a contest you will need to multiply the number of players times the buy-in. Then look at the total prize pool awarded and subtract the prize pool from the total amount of buy-ins. The difference between the two is the rake and historically and is almost always above 10%.
Rake taken from contests accounts for the primary revenue stream for the daily fantasy sports site — so without rake, DFS would literally not exist in its current form.
Why are Rake Increases a Big Deal?
Of course, on the other end of the spectrum, high rake effectively means higher cost for players. Extra rake makes it difficult to show a profit in daily fantasy sports contests. With rake increases, you essentially win slightly smaller prizes when you win. That adds up over time.
Let’s take a look at rake from a player standpoint. If there was no rake and all players were of equal skill level, over time, players would essentially be exchanging money back and forth. Of course, the skill level of players varies quite a bit with DFS. The worst players lose quite a bit and the best players can make quite a bit of money.
Historically, rake has been around 10% for many contests, with larger rake at GPPs. Over the last few years, rake has inched up to a point where recent rake increases have been put some contests in the 14%-16% range. What this means in simple terms for players, is that winning players wont win as much while losing players will tend to lose faster. At some point, if the rake were to get high enough, only the best players would win over over time.
— Dan Back (@dan_back) September 26, 2017
Lower Rake Options
Despite DFS’s consolidation over the last couple years, there are still alternative options for daily fantasy football players if they are not happy with the rake increase. It’s the beauty of competition — the freedom to take your business elsewhere. Behind FanDuel and DraftKings in traffic are two smaller sites with decent liquidity – FantasyDraft and Yahoo Daily Fantasy. Neither site provides the huge DFS prize pools of the top two, but there are usually enough contests running for many players.
These two sites are definitely worth a look if you find yourself perturbed by another rake increase. Yahoo, for example has a 12% rake for GPPs.
FantasyDraft, which boasts that rake has never crossed 13%, also offers rake-free head to head contests, which they have offered since last year. It’s worth mentioning that these contests don’t represent all of the h2h action at FantasyDraft, which probably at least in part indicates that some players either don’t care, are indifferent or are unaware.
There are drawbacks; however. In addition to fewer players, the user experience at FanDuel and DraftKings usually is preferred by many players with different types of games, features and tools. Promotions, which make up some of the difference in extra rake, are also more plentiful at the bigger sites. Ultimately, players should get a feel for which DFS sites are best for them and make that choice.