Fantasy Sports - Deloitte

Fantasy Sports Creating a virtuous cycle of sports developmentFantasy Sports: India’s New Sunshine SectorMarket size*INR 34,600 CrCAGR(mediumterm)**38%FSPs operatorrevenue#Market sizeprojection***INR 5,200 CrGST generatedby FSoperators#Indirectrevenue#Forex throughFDI##ProjectedCumulative TaxContribution###INR 930 Cr INR 5,500 Cr INR 10,000 Cr INR 24,300 CrINR 1,65,000 CrThe FS industry’s economic impact reveals itself through several metrics[1]Indian Fantasy Sports MarketFantasysportsThe Fantasy Sports userbase grew at a CAGR of 130%between 2016 and 2021There areover13 CrFantasySports usersacross India80% FantasySports usersparticipatein freecontestsSmartphone60% FS userspenetration at started watching42% and lowmore sports thancost mobile databefore becauseleads to highFantasy Sports resultin deeper and moresubscriberactive engagementratesThe average Contest Entry Amount (CEA) acrossFS platforms is INR 35 and more than 50% of theusers win back their participation fees or more85% revenueis brought inthrough cricket*FY21 FIFS estimate basis CEA, **FY21-FY27 FIFS projection, ***FY25 FIFS projection basis CEA#FY21 FIFS estimate, ##FIFS estimates until 2021, ###FY25 FIFS projectionMarket size and revenue projections could be materially impacted by regulatory actions that result in adverse orfavourable effect on the performance of the Indian Fantasy Sports Market850% ofKey userdemographicfallstransactions on25-40-yearintheFS platformsbracket (which isinitiated from59%of the totalTier-2 anduserbase)Tier-3 cities

Fantasy Sports Creating a virtuous cycle of sports developmentBeyond the quantitative impact, FS can play a key role in seeding a culture of sports in IndiaDigital temAthletes& CoachpromotionSportsConsumption &ViewershipSportingCultureFS & real-life Sportsshare a rastructureDevelopmentSportsadoptionEngaging sports fans through Fantasy Sports platformsOn FS's potential to shine a light on underrepresented sports:I experienced fantasy volleyball in 2019, where the contest started with4,000 participants, kept on adding more every day, and went to over1.7 lakh by day 18. The discovery of a sport can and does happen viaFantasy Sports platformsJoy Bhattacharya (Quizzer, writer, and sports producer)9

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Fantasy Sports Creating a virtuous cycle of sports developmentDefining FantasySports (FS)What are Fantasy Sports?Fantasy Sports are digital sports engagement platforms,based entirely on real-life sports matches, whereusers build virtual teams with proxies of real playersparticipating in an upcoming match (or match-day) andcompete on real-world statistical performances of theseplayers, based on one complete officially sanctionedsports match. This allows users to emulate the role of acoach or a manager of a team, with the power to drop,recruit, or trade a player of their choice. The teams arefrozen, and the changes are locked before a match kicksoff. For some, it is about deeper engagement with thesports, beyond viewership, while for others, it is about thecompetition and strategy that it involves.FS offers a unique value proposition and is distinct, as itis based on real-life sporting events, offers meaningfulengagement with sports, and there is no simulatedgameplay involved. It is, therefore, not surprising thatthe structural boundaries are indistinguishable to thecommon man and there is often confusion outside of theindustry about what FS really is. It comes down to theconventions of naming, generational differences, andetymology in modern times.PerspectiveFS usersSkill sets requiredDigital literacyStatistical analysisKnowledge of the strengths and weaknesses of real-world sports personKnowledge of the environment, weather conditions, ground conditions, etc.Knowledge of the sport11

Fantasy Sports Creating a virtuous cycle of sports developmentHow to participate in Fantasy Sports?Fantasy Sports allows users to create virtual teamswith real-life sports players participating in a real-worldsporting event. They then compete in a competition (acontest or a virtual mini competition of their own) wherethe team’s performance is based on the actual statisticalperformance of the player from across real sportingevents for the given sports match. Users are then rankedbased on the performance of their virtual teams duringthe sports match or the tournament.Users, to create their virtual teams, operate with a limitedvirtual budget. The allocated virtual spend capacity perteam and virtual price tags on players form boundaryconditions for building the team, where top-rankedplayers have high price-tags attached to them and thevalue varies based on the player’s real-world rating/rankings. To add another layer of complexity, certainconditions are imposed such as prohibiting selection ofmore than certain number of players from the same team,or position or profile.12Users win points based on how well the selected playersperform during the real-life sports event. The eventualoutcome of the match might not be the focus for users,but what matters is the individual performance of severalplayers from the participating teams in one completematch. Performance is often indicated by parameterssuch as runs scored or goals assisted. The user, in effect,takes the virtual role of a sports team manager to buildthe most effective team for a given sporting event. Thevirtual team's success is based entirely on the actualperformances of the real-life players in each completematch. The user's knowledge and adroitness towards thesport becomes key to selecting the fantasy/virtual team.While enrolling for a contest to compete in, the users(as on most platforms) would have an option to choosebetween a free and a paid contest. A user will be permittedto modify the team until a cut-off time (typically before thestart of the actual event). For a pay-to-participate contest,a portion of the Contest Entry Amount (CEA), typically 10to 20 percent, goes towards the FS platform fee, while theremainder makes up the prize pool.

Fantasy Sports Creating a virtuous cycle of sports developmentIllustration: A typical working of an FS contestAt the end of the sporting event, the contestoutcome is announced and if the user meetsthe criteria for the winning outcome, he/shereceives the predefined winningsUser watches thematch and reviewsperformanceThe FSP platformupdates the userrankings andcomputes theleaderboardRegisters for the contest by payingthe Contest Entry Fee (CEA) if it is apay-to-participate contestUser enters the FSP contest ofhis/her choosing before thepredetermined and predefineddeadline for entryUser researches on the sportingevent and players to create his/herfantasy sports teamLogs into the FSP platformFSP User13

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Fantasy Sports Creating a virtuous cycle of sports developmentIndustry scale, size, andthe market landscapeGlobally, the Fantasy Sports industry has been showinghealthy growth, with India being the fastest-growing FSmarkets with the largest user base at 13 crore, which isfurther expected to grow at a CAGR of 32 percent in thecoming years. The country has become a high-growth,in-focus market due to a large tech-savvy millennialpopulation base, growing affiliation with sports, rapidsmartphone penetration, and the availability of low-costmobile data; and is projected to grow from INR 34,600crore in FY21 to an estimated INR 1,65,000 crore byFY25, per FIFS estimates. [3] [1] However, the market sizeand revenue projections could be materially affected byany potential regulatory actions that result in adverseor favourable effect on the performance of the IndianFantasy Sports Market.Further, the growth in the Indian FS industry is expectedto be driven by advancing sporting infrastructure and thepopularity of sporting leagues across the country. Thisgrowth is also aided by several key environmental factorssuch as increased media digitisation, simplified digitalpayment platforms, increased adoption of affordablesmartphones, and significant global investments in highspeed internet infrastructure.Fantasy Sports user base growth (actuals and projection) in India (lakh) 1831-Mar-1931-Dec-1931-Mar-2131-Mar-22(E)15

Fantasy Sports Creating a virtuous cycle of sports developmentMultiple court rulings on the legality of Fantasy Sportsoffered by FSPs, their associations with sporting bodies,sponsorship of major sporting events, and recruitment ofbrand ambassadors of regional and international reputehave all helped the FS industry gain traction and expandits user base. Starting at approximately 20 lakh registeredusers in 2016, the Indian FS user base has grown to wellover 13 crore in 2021. In contrast, the Fantasy Sportsindustry across the US and Canada is estimated to havegrown from about 5 lakh users in 1988 to 5.9 crore usersin 2017, translating to a CAGR of 14 percent, over thecourse of 29 years. [4] [5]The rapid growth in registered users has further attractedestablished companies and start-ups alike to invest andinnovate in this space. There are over 200 Fantasy Sportsoperators in India, and their potential to attract users andgenerate revenue have attracted significant investmentsfrom domestic and foreign investment firms.The low-hanging fruit for FS operators in Indiaunsurprisingly came from cricket. The supply of “rawmaterial” has also seen growth, with an increase in thenumber of events the Indian cricket team participatesin. The IPL, which brings in several cricket matches in ashort window, has been a key growth driver for FantasySports in India. The success of the IPL has also spawnedmultiple T20 leagues across the globe such as the Big BashLeague in Australia, the Caribbean Premier League, andthe Super Smash League in New Zealand. The emergenceof such tournaments ensures that FS users have multipleopportunities to participate in Fantasy Sports contests allyear long. Cricket, today, accounts for over 85 percent ofthe total market value of FSPs [6].India Fantasy Sports market share, by sports type [7]Football 6.32%Baseball 0.04%Basketball 0.65%Cricket 85.24%Hockey 6.65%Others 1.11%16

Fantasy Sports Creating a virtuous cycle of sports developmentNevertheless, Indian FSPs have endeavoured to diversifytheir portfolio to include sports such as football, hockey,kabaddi, baseball, basketball, rugby, and volleyball.We note that OSFPs could play a key role in creating abroad-based sporting culture in the country, which goesbeyond cricket and to some extent, football. Cricket, whichgenerated INR 25,000 crore of CEA for FSPs in FY21 andis touted to reach INR 73,000 crore by FY25, might see itsshare going to other sports, but will continue to grow atCAGR 30% percent over the next four years and remainthe highest contributor. [3]Cricket, football, kabaddi, and hockey, together, accountfor over 98 percent of the total FS revenue and remainto be the staple offering of most FSPs in India. However,COVID-19 and its impact on live sports have steered FSPsand users to explore alternative sports globally, such asbaseball.Fantasy Sports user spread across sports % 3%2%Baseball17

Fantasy Sports Creating a virtuous cycle of sports developmentIndian Fantasy Sports market (actuals and projection) for non-cricket sports (INR crore) thersNote: Market size and revenue projections could be materially impacted by regulatory actions that result in adverse or favourable effect on the performance ofthe Indian Fantasy Sports MarketWhile COVID-19 continues to significantly impact sportingevents and the entertainment sector as a whole, there isstill an appetite for sporting events amongst fans. Multiplesporting events and tournaments, including the IPL in2021, have attempted to conduct sporting events behindclosed doors and with stringent protocols to ensure thehealth and safety of the players and staff. This has shownthe resilience of the industry and strongly indicates thatthere will continue to be suitable sporting events andsufficient coverage via traditional and digital channels,such as OTT platforms. This bodes well for the FS industryas well. The FS industry base in India grew by over 20 lakhusers between May and June 2021, and this growth can belinked to Phase 1 of IPL 2021. [1]This enormous growth induced curiosity and interestacross media, resulting in various Fantasy Sports YouTubechannels, vlogs, TV shows, newspaper columns, blogs,and forums where “experts” analysed performances andupcoming trends. Even though the whole phenomenonof Fantasy Sports started outside of India, major eventssuch as the FIFA World Cup, Champions League, andparticularly the Indian Premier League increased interestamongst Indian sports fans.18YoY change in total active users across differentsports categories [1]Note: The de-growth can be attributed to postponement of the IPL in 2019-20 andcancellation of Pro Kabaddi and Hockey India Leagues due to COVID-19

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Fantasy Sports Creating a virtuous cycle of sports developmentKey Growth Driversof The IndustryGrowing popularity of sportsand the rise of leaguesThere are strong and organic synergies between livesports and Fantasy Sports. Sport viewers have a highpropensity to engage and actively participate in fantasysporting events, as it augments their viewing experience.Results of a study released by the FIFS indicate that 60percent of Fantasy Sports users follow or watch sportsmore when engaged in Fantasy Sports. Currently, thereare 13 crore users who engage in Fantasy Sports, whilethere are 80 crore viewers of sports content suggestingmore than 85 percent viewers are still potential users forthe FS industry to seek future growth. [1] [9]Time spent watching a match [10]14%More than3 hours32%28%2 to 3hours19%35%1 to 2hours25%17%30 minutesto 1 hourLess than30 minutes16%6%8%Non Fantasy Sports Users20Users engaged in Fantasy Sports

Fantasy Sports Creating a virtuous cycle of sports developmentCricket dominates in India, representing 79 percent ofall sports channel viewership on television (2019) [11].Women’s cricket has also gained popularity; the first 12matches of the 2020 ICC Women’s Twenty20 World Cupgenerated 4.1 crore viewing hours in India, a 213 percentincrease from 2018. [12] While India may be a cricket-lovingnation, other sports have been gaining momentum overthe years. Since Pro Kabaddi League’s inception in 2014,Kabaddi has become the second-highest, sports channelviewership (2019). Football viewership also has beenbreaking records, from Euro 2020 viewership outdoingthe FIFA world cup 2018 to La Liga’s 72 percent increase inviewership since the restart, post COVID-19. [13]Illustration: India’s obsession with sports [14], [15], [16], [17]India won a Hockey Medal in the Olympics after41 years. It is the 12th Olympic Medal for Men’shockey, the highest in Olympic historyIn 2020, while “Coronavirus” was the most trendingGoogle Search globally, IPL came out on top in IndiaMost followed Indian on Instagram — Virat KohliThere are numerous reasons contributing to the growthin sports’ popularity in India. Firstly, the “entertainment”quotient of sports has been rising. The quality ofbroadcast, production, celebrity endorsement, andbranding has improved manifold through franchiseleagues in sports such as football, kabaddi, hockey,and now even kho-kho. There is also an emphasis onfan engagement and access through the introductionof vernacular commentary. Sporting events today areaccessible to anybody, anywhere, with a smartphoneand an internet connection. Flexibility has also increasedwith OTT platforms, allowing users to watch content on asecond (small) screen or while on-the-move.The growth of social media has provided acomplementary infrastructure for the growth of sportspopularity and in the evolution of fans, from passiveviewers to active and engaged participants. Social media,FS, and sports content platforms have become hotspotsfor fan communities to come together and discuss theirfavourite sports in granular detail and engage with thesport, and even celebrities and sportspersons.21

Fantasy Sports Creating a virtuous cycle of sports developmentLegal judgements sanctioning theskill element of Fantasy SportsIn India, games of skill are exempt from the provisionsof the Public Gambling Act. A key steppingstone in thegrowth of Fantasy Sports in India can be traced back tothe High Court of Punjab and Haryana’s ruling in favor ofDream11 in “Varun Gumber vs. UT of Chandigarh & Ors”[18], where it was judged that participation in an FantasySports contest required “material and considerable skillsby the user in ‘drafting’ of a virtual team and ‘playing afantasy game’”.Another key development is the Supreme Court orderpassed on 30 July 2021, reaffirming the judgementspassed by various High Courts and ruling that theoutcome in Fantasy Sports depended on the skill andknowledge of the participant instead of chance and doesnot encourage gambling, betting, or wagering.With the Supreme Court also upholding the judgmentand dismissing a subsequent petition, it built confidencefor the industry and brought legal certainty. Barring thestates of Assam, Odisha, Andhra Pradesh, and Telangana,where state laws disallow residents from engaging inonline games (be it skill, chance, or a mix of both), FSPscan operate legally across India. Operators offering FS in22accordance with the Charter of the Federation of IndianFantasy Sports (FIFS) shall be accorded protection underArticle 19(1)(g) of the Constitution of India, as a legitimatebusiness activity [18].With legal clarity on the preponderance of skill overchance in Fantasy Sports, FSPs sought to expand theirpresence in the Indian market and actively participate inthe ecosystem, creating ties with sporting associations,tournaments, and sportspersons.FSPs have also taken proactive steps to self-regulateand maintain the key characteristics of FS that the HighCourt of Punjab, Rajasthan, and Haryana had notedin their judgements. The Charter for FSPs issued bythe Federation of Indian Fantasy Sports defines themandatory requirements that FSPs need to adhereto for contests to remain tethered to the skill overchance principle. These include limiting FS conteststo international or officially sanctioned real-worldmatches, ensuring that FS participants cannot alter teamcompositions beyond a predetermined and pre-declareddeadline, stipulating the number of players and thecomposition of the team, contests based on a completereal-life match, and avoiding problematic actions such asauto-selection of players in a team.

Fantasy Sports Creating a virtuous cycle of sports developmentDigitisation in IndiaWith the overall rise in the importance, availability, andaccess to the internet over the past few decades, the waya viewer consumes and e

Fantasy Sports Cratin a irtuous y o sports dopmnt 7. 8 Fantasy Sports: India's New Sunshine Sector Fantasy sports Indian Fantasy Sports Market The FS industry's economic impact reveals itself through several metrics[1] The Fantasy Sports user base grew at a CAGR of 130% between 2016 and 2021 Market size* INR 34,600 Cr There are