Dream11's Dream Run: Minting Money, One Game at a Time
How is Dream11 minting money, one game at a time? Read on.
In the last part we saw how online gaming has gained traction, and is at an inflection point now (if you missed it, here you go). In this part, we'll look at how Dream 11 has become the giant that it has (and how it makes money).
While watching an IPL match, how often do we predict a team’s score and revel at our predictions when it turns out to be true?
Fact is – India is filled with cricketing pundits.
And, fantasy sports startups saw this as an opportunity.
Launch an app to allow these so-called pundits to use their cricketing knowledge and win real money. Sounds like a scene out of a movie.
Well, not really.
The Online Fantasy Sports (OFS) market has seen a huge growth. Currently, India is home to around 70 fantasy sports platforms.
In 2016, there were only two million fantasy gamers in the country (according to the Indian Federation of Sports Gaming).
Now, two out of three sports fans in India are aware of fantasy gaming or e-Sports, and the segment is projected to cross a whopping $5 billion in revenue by 2021.
Massive, right?
The biggest gainer?
Tencent-backed Dream11, which turned unicorn in April, has a market share of almost 90 percent. It recently raised another $225M at a $2.5B valuation.
Today, Dream 11 is the largest and most recognized OFS player in India with over 70M users.
In 2019, Dream11 generated a revenue of around ₹775cr ($103M), a 250% growth over 2018 revenue of ₹224cr ($30M).
Phenomenal!
Game of Chance vs. Game of Skill
Wait. But aren't fantasy games similar to betting? We make a guess and win money based on that, no? Is this even legal?
Betting and gambling laws in India are dictated by the States.
While “skill-based games” are usually permitted under most laws, games of chance are prohibited.
Therefore, games of skill are permitted, but games of chance still require review and permissibility by law. It basically operates in a legal grey zone.
Whether a game is a game of skill or game of chance depends on each individual case as decided upon by judicial pronouncements. Horse betting and fantasy sports have all been deemed as games of skill by most of the States.
There were several pleas which were filed against Dream11 in Indian High Courts alleging that it runs a gambling operation. Dream11 got these pleas overturned in its favour by proving OFS is a 'game of skill' rather than a 'game of chance' (betting).
What’s ingenious is the way they have branded this - "Khelo Dimaag Se" (Play with your mind)’ “Khel gaye dimaag se, marketeers!” (Marketeers played with their minds)!
Minting Money
Now that its operations are recognized legally, let us look at how Dream 11 makes money.
So, Dream 11 uses the concept of pooled bets and distributed risk to hook users.
For a specific match, say CSK vs RCB, several contests exist with different levels of prize money and entrants. Generally, the higher the prize money, the larger the audience.
Each participant has to select their Dream Team based on how the players have been performing and points are assigned based on the player’s performance during the match.
Dream11 is characterized by a low entry fee which usually ranges between ₹30-60. Since you have the chance to win prizes from ₹2 lakhs and above, players don't really mind paying the low entry fees. Also, Dream11 lets 50% of the participant pool win prizes, with the largest share of the cash prize going to the players with the most points and a smaller share going to lower ranks.
Unlike a lottery, your odds of winning on Dream11 is 50% (though the last few ranks win an amount lower than the entry fee). Higher odds of winning means more participation from users.
Smart indeed!
If you win, the proceeds are deposited into your wallet. You can withdraw this amount into your bank account whenever you like (a minimum of ₹200, however, shall always remain in your wallet).
Another amazing strategy by Dream11 to keep the user hooked. And earn interest income on the minimum balance (₹200) amount.
Side note - Leave something for us consultants to recommend, man :P Ingenious!
When a contest is over, not all the money pooled from entry amounts is distributed.
Dream11 keeps 15% of this amount as "platform fee" and the rest is distributed as prize money.
This is how Dream11 pays its bills. So irrespective of what happens, Dream11 makes money on every transaction.
God level!
But if this seems so easy, why hasn’t anyone else adopted this?
The thing is Dream11 didn’t start out with this model. They focused mainly on advertising and having several features like feeds, blogs, profiles, chats, social media and polls. With the expectation that a lot of users would join this new platform, they decided to keep the platform free for users to play and earn money from ads.
A fundamental shift in strategy saw the company pivot to a freemium model (a combination of free competitions + paid (premium) competitions). This is one of the reasons the number of paid users as a % of total users for Dream11 is at 15%, much higher than the average of 3% for other freemium apps.
The freemium model solved the biggest problem that Dream11 was facing - generating revenue!
Also, the company spent heavily on advertising campaigns (approximately 84% of its overall expenses). Hell, if MSD is their brand ambassador, you know they are in this for the long game.
Captain cool, with the uber concept of playing it safe using Dream11, resounded well among cricket fans. To top it all off, the company secured sponsorship rights for IPL 2020 by shelling out a massive Rs. 222cr.
Nothing short of a dream run.
But what if we told you that Dream11’s numbers don’t come close to another game that has taken India by storm? And was banned?
Guess which app are we talking about?
Stay tuned! More coming your way.
GameOn, ReadOn.
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