Dream11 emerges from a legal wrangle to build India’s leading fantasy sports platform

Sports enthusiasts and childhood fans Harsh Jain and Bhavit Sheth started fantasy sports platform Dream11 nearly a decade ago on a mere hunch that sports fantasy leagues would be big business one day. Today, after putting to bed a legal wrangle and many other challenges, the company is the market leader in the Indian online fantasy gaming space. 

When the Mumbai-based fantasy sports platform Dream11 raised $100 million from Chinese company Tencent last month, everyone went gung-ho over another Indian startup making it into the big league of invested companies. The latest fund-raising led by the Chinese investor helped take Dream11’s valuation to $700 million-$800 million. And yet, as is true with every other successful startup, there is a back-story ridden with challenges and triumphs that are not immediately clear to all and sundry.

To be sure, Dream11’s journey began all the way back in 2009, when two childhood friends Harsh Jain and Bhavit Sheth, who were also avid sports fans and engineers, started the company with a firm belief that sports fantasy leagues would become a big business opportunity in a country of a billion-something cricket fans.

The idea to launch Dream11 first took shape in 2008, when IPL was launched. At the time, Harsh, who was already familiar with the thrill of playing EPL fantasy football since 2001, began looking for a similar platform to play online fantasy cricket in India. He was shocked to learn that fantasy cricket did not exist in a country like India, where cricket is a religion and ardently followed by millions of Indians.

Determined to solve this problem, Harsh, who is an alumnus of the University of Pennsylvania and Columbia Business School, asked his friends if they wanted to join him in this quest. This eventually led to him co-founding Dream11 in 2009 with Bhavit, an alumnus of Bentley University and Harvard University.

The duo first started experimenting with various formats on Dream11 and pivoted multiple times over the span of three years, before finally finding a product-market fit with freemium single-match fantasy sports in 2012. Over the years, Dream11 has evolved into India’s biggest sports gaming platform, offering multiple sports – fantasy cricket, football, kabaddi, and basketball – to its four crore strong user base of Indian sports fans. Today, the company, which is yet to turn profitable, commands a large revenue base of close to Rs 100 crore (not disclosed yet in 2018); in FY 2017, it ended the year with Rs 62 crore.

Game of Skill

To understand Dream11 is to know that it is a game of skill. Dream11 offers sports enthusiasts a single-match daily fantasy sports platform where they can leverage their knowledge and showcase their skills in a particular sport, in return for instant gratification in the form of bragging rights and winnings.

Fans can also be team owners, rather than just spectators, as Dream11 allows users to create their own team of real-life players for upcoming matches, score points based on their on-field performance, and compete with others. The company is also the official partner of the top global sports leagues, such as the Hero CPL, Hero ISL, and NBA.

“Betting is the action of gambling money on the outcome of a race, game, or other unpredictable events and does not involve any skill or research, which is the primary premise of a fantasy sports game,” says Harsh.

In short, he likens fantasy sports leagues as a game of skill, a view held by the High Court of Punjab and Haryana in a landmark judgement delivered in 2017 in which it ruled that Dream 11 is indeed a “Game of Skill”.

The legal wrangle

“While there was a lot of ambiguity around fantasy sports in India, the Punjab and Haryana High Court’s landmark ruling regarding Dream11 being a ‘Game of Skill’, followed by the Supreme Court’s dismissal to challenge the HC’s verdict, gave a lot more clarity around the Dream11 format. This in turn has helped us gain our users’ trust and credibility in this nascent market,” said Harsh.

The High Court verdict, delivered by a single judge bench of Justice Amit Rawal while hearing a petition filed by advocate Varun Gumber on April 18, 2017, ruled that playing fantasy sports online involves a substantial degree of skill and does not amount to gambling.

In his petition, petitioner Varun Gumber said that he had lost a sum of Rs 50,000 which he had deposited on the Dream11 platform after playing a couple of games on the site. The loss prompted him to petition the court to order an investigation into Dream 11 under the Public Gambling Act, 1867 for promoting gambling.

The court rejected the petition, ruling that Dream11 was a game of skill and that the company operating Dream11 had been paying service tax and income tax and is duly registered as an incorporated entity with the registrar of companies, and that none of these authorities have found anything amiss in its business model.

The High Court held that ‘the element of skill’ had a predominant influence on the outcome of the Dream11 game, which follows the following format:

• Participants have to choose a team consisting of at least the same number of players as playing in a real-life sports team (eg - five in basketball, seven in kabaddi, and 11 in cricket/football)
• All contests are run for at least the duration of one full sports match
• No team changes are allowed by participants after the start of the sports match

The clarity that the HC ruling afforded was, in reality, central to Dream11’s success. For instance, the number of operators in fantasy sports surged to 70 from around 5-10 earlier in the last two years.

“We realised that some players were bad apples as they were running betting sites in the guise of fantasy sports. We wanted to protect the industry, self-regulate, set standardised best practices, liaison with the government, and protect user interests at all times. The only way to do that was not as Dream11, but as an industry body,” Harsh said.

And so in 2017, the Indian Federation of Sports and Gaming (IFSG) was formed. IFSG is India’s first and only sports gaming self-regulatory body with 12 operators as members. It recently appointed John Loffhagen as President, who, in turn, has been instrumental in formulating rules for IPL and ISL, among others.

Winning over Indian sports fans, one game at a time

But regulatory uncertainty was not the only challenge that Dream11 had to overcome. In fact, Harsh says that one of their greatest challenges has been around introducing a new concept to the Indian market.

“It was an alien product for the Indian market,” said Harsh, recalling the challenge they faced in launching fantasy sports in India for the first time in 2008. “This meant that we had to hard sell the concept to potential hires, investors, and, most importantly, users,” he added.

Building trust was a gradual process, as Indian users tended to be wary of online payments, a trait that has changed significantly in the last few years. Indian users were also generally more anxious about whether they would receive their winnings from online platforms.

And yet, today, nearly a decade later, Dream11 manages payments and payouts to winners, having earned the trust of over four crore users.

The company’s business model is based on a single-match freemium model of daily fantasy sports on the Dream11 platform. Once on the platform, users can play in practice contests that are free to join or in cash contests that require users to pay an entry or platform fee. However, 90 percent of Dream11’s users play in free contests but the company does not monetise this user base through ads as its focus is on providing a great user experience. The company makes money by earning a small percentage of the bets made, just as a dealer does in a poker game.

“Our goal is to create awareness around fantasy sports in India and keep getting more of India’s 800 million sports fans to play fantasy sports on Dream11,” Harsh said.

Dream11 is hosted on AWS and the backend is being built as a microservices architecture using highly scalable systems such as Cassandra, Kafka, MongoDB, and Spark. For its mobile web channel, the company has built a state-of-the-art Progressive Web App (PWA) to provide a near-native experience to its users. In terms of front-end, Dream11’s iOS app has been featured multiple times on the App Store, while its Android app boasts of 5 million daily active users (DAUs). With a large user base, smooth scalability is extremely crucial for Dream11, and the 100-member tech platform has proven its mettle by already hosting 1 million concurrent users during the IPL games in 2018.

In short, for Harsh and Bhavit, Dream11 is the result of several years of experimenting with the fantasy gaming format and a great deal of perseverance before they zeroed in on a product that would resonate with sports aficionados in India. But that perseverance has paid off. Today, Dream11 commands 90 percent market share in the fantasy sports league in India. Others in the industry include FanFight, DailyFantasy Cricket, and CricWin, all of whom have raised Series A funding of less than $4 million.

Bracing for growth

Now that the Tencent deal has been announced, Dream11 is working to help casual sports fans engage more deeply with their favourite sports and become core sports fans. Being a user-first company focusing heavily on real-time fan engagement, Dream11’s primary goal is to provide Indian sports fans with the best, most trusted single-match fantasy sports experience.

To do so, it uses new technologies and is amplifying the product offering with freemium formats for multiple sports such as cricket, football, kabaddi, and basketball. In fact, Dream11 aims to bring together all sports fans under one roof and to continue working on product enhancements and partnerships to keep improving and growing user experience.

Tencent’s investment in Dream11 does much to hype up the fast-growing Indian sports market. According to a gaming market report by Newzo, the global gaming industry was worth $149 billion in 2017. Some of the biggest sports leagues in the world such as the CPL, ISL and the NBA are using fantasy sports as their primary tool of fan engagement through Dream11. Even the IPL and EPL have their own fantasy sports offering, with the whole industry focused on providing a holistic user experience through highly engaging sports product offerings.

“Fantasy gaming is the future, and India is the largest market. If it takes off, it will be larger than any market in the world, including the US,” said Piyush K, the founder of Rooter, the sports engagement platform for live games.

The gaming industry’s user base, which currently stands at 50 million users will more than double to cross the 100 million user mark by 2020, according to the IFSG and the AC Nielsen. When it does, Dream11 will be front and centre in the race to lure more sports fans to its platform.

For instance, the company already seeks to double its revenues in a year from its current revenues of close to Rs 100 crore. And now, with the money it has just raised from Tencent, Dream11 hopes to remain the leader in the market. This, even as the online gaming space continues to see the birth of many startups that are looking to capitalise on India’s love for a wide range of sports.