In the competitive Daily Fantasy Sports market, all of the operators are falling over themselves to attract your custom. Although DraftKings and FanDuel are the biggest names, there are lots of other sites that offer great value in attempt to secure your loyalties. (For a full rundown of these sites, check out our SuperLobby.)
From the players’ point of view, one of the best consequences of the operators’ battle for market supremacy is OVERLAY.
Daily Fantasy Sports sites love to boast of big guaranteed prize pools in order to attract users. Sometimes, however, these big events can’t gain enough entrants in order to meet the guarantee – meaning that the site has to dig into its own pockets to meet the shortfall. This creates overlay – which is, to the DFS player, effectively free money!
Let’s say that an operator decides to run a $100k guaranteed event, with a $100 entry fee. They are banking on attracting 1000 entrants who will each stump $100, in order to meet the guarantee. If 1001 or more players enter, then the site turns a profit on the event. Fewer than 1000 entrants, and there is overlay.
For argument’s sake, let’s say that the event fails to meet the operator’s expectations. Only 700 players enter, so the site only recoups $70k of the $100k that they have guaranteed in the prize pool. This means that the operator has to put up $30k of its own money – generating fantastic value for the players!
It’s incredibly simple. Prizepool equity is the value of your entry fee, expressed as a portion of the prizepool.
If the event had received precisely 1000 entrants, then it would have been equity-neutral for everyone (assuming all entrants are of the same skill level). This is calculated as follows:
$100,000 (prizepool) / 1000 entrants = $100 equity for every entrant.
In other words, the $100 entry fee buys everyone $100 in prizepool equity, making it a breakeven proposition. If the prizepool was somehow split equally between every entrant, then everyone would get their $100 back – no more, no less.
However, in this competition, there are only 700 entrants. Let’s run the numbers:
$100,000 (prize pool) / 700 entrants = $142.86 equity for every entrant.
If the prizepool was somehow split equally between every entrant, then everyone would receive $142.86 – pretty good, given that it only cost $100 to enter!
This is the beauty of overlay – it provides the DFS player with a bigger default portion of the prizepool than their entry fee would ordinarily warrant.
At SuperLobby, we are all about value. Our goal is to identify overlay, and to direct our users towards the tournaments that offer you the best bang for your buck. Check out the SuperLobby to see up-to-the-minute listings and get involved with the juiciest tournaments in Daily Fantasy Sports.
To find out how Overlay impacts on Value and Multi-Entry Tournaments, check out these articles