A few thoughts on what happened with Footstock

I didn’t see yesterday’s email about Footstock shutting up shop until just before lunch. I glanced at my phone and saw a message from a friend that simply said ‘Just saw Footstock news‘. My heart sunk immediately as I knew it could only mean one thing. Another platform collapsing, more money lost, more people hurting. I haven’t totalled things up yet but I think I’m probably about £2k down from this one, although most of that I’d already written off.

I was an Indiegogo investor on Footstock – in from the very start. I liked the guys running it and thought that they might be onto a good idea. Of course we all know that having a good idea doesn’t mean squat if you can’t back it up but the early days were pretty promising and things seemed to be going fairly well.

Footstock was, at it’s heart, a DFS (Daily Fantasy Sports) platform. It’s well known that far more people lose on DFS than win. I could see this – I was a loser most of the time and really only ever played Footstock recreationally (for fun!), as I never thought it was something that would make me money. Seeing people losing gave me a bit of comfort that the model might actually be sustainable. We now know it wasn’t.

I think we can trace the problems back to this time last year. The sudden platform boom when COVID hit and everyone flocked to the virtual games was more of a curse than a blessing. Card prices shot up overnight, everyone was suddenly winning. People were buying packs left, right and centre, to grab a piece of the action.

It was great fun too. The thing with Footstock, above any other platform (in my opinion) was that is was fun in the moment. Action happened live in front of you. It had a level of ‘streamability’ that others didn’t – you could kick back with a beer and watch pack openings, roulette, virtual tournaments. It felt like a winning product at that point.

Then football returned and people went back to other platforms. The users had gone but all those extra cards were still in circulation meaning that card prices dropped through the floor – a race to the bottom very similar to the one we saw on Football Index when order books were introduced. People were losing again, and sometimes heavily. Footstock was losing too as the incentive to buy packs (their only real source of income) was greatly decreased.

The boom had exposed the flaws in the platform model. As well as the issues around scarcity, I always had concerns about the notion of the player card effectively acting as the tournament rake, with all tournament entry fees going into the prize pool, and nothing going to Footstock. This obviously wasn’t great for their bottom line and the need to build a fairly sizeable collection to compete in tournaments was still a bit of a turn off to new users anyway.

Not only did Footstock choose not to introduce any rake to raise extra income (or any commission on trades), they actively undercut themselves by offering huge amounts of tournament credit inside packs, sometimes as much as £5,000 in one pack. A lot of users I’ve spoken to have told me they hadn’t paid an entry fee for a long time – a huge red flag and one that had completely passed me by if I’m honest.

Footstock now had some bigger commitments too. They had to reduce the card circulation levels to match the user base so they started to buying unwanted cards back from users. There was also the marketing deal with Chris Kamara, the newly launched app and the £100,000 freeroll. And there were perhaps 3,000 users left? Maybe less than that.

So we had a situation where spend was increasing, income was reducing and most users were losing money too – a pretty toxic combo by any accounts. The writing was on the wall, yet just a few days ago we received assurances that they had a ‘strong foundation in place’ and that they had plans in place to grow ‘sustainably and reliably’.

We know that these plans were contingent on successful investment, some of which they had already secured and some that they hoped to secure during a planned Seedrs campaign which was about to launch. As a start up, I don’t think it’s particularly surprising or even concerning that they still needed investment at this point – the product needed to gain the momentum to transition beyond the start up phase and I think that’s hard to do without significant investment at the start. Someone described this to me as a bit like filling the rocket full of fuel hoping that you’ve got enough in the tank to blast through the atmosphere so that it can then just orbit on its own.

I believe these plans fell through in the last few days. I’m not surprised that investors got cold feet after seeing what was happening elsewhere and knowing that the Gambling Commission are likely to clamp down hard on the whole sector. With the promised investment unlikely to materialise, the rocket ran out of fuel and crashed down to Earth.

Footstock acted quickly, surrendered their licence and shut things down (probably quite responsibly). I don’t believe that they deliberately set out to scam people but that’s absolutely how it looks right now, I understand that. That’s the hardest part in all of this for me, and for many others. The team came across as passionate and caring. They told us that they’d be transparent all the way through. They seemed naïve at worst, and perhaps that’s all this was, but for them to pull the rug so suddenly is a real shock to people. We saw there were problems but many of us thought they’d either have enough time to turn it round or we’d see some really clear red flags and be able to get out in time. I don’t think anyone predicted it would end like this. We may never get any answers to the questions we have about this and I think it’s highly unlikely that any users will see any of the money in the platform again.

So here I am thinking, how the hell have I managed to get caught up in the collapse of three different platforms in the space of a few weeks? Once bitten, twice (not so) shy, three times… a lady? It’s just laughable really.

But actually, I can own these losses. At the end of the day, I knew the risks and, for me, this was never about making a ton of cash, so I can write off what I have lost as ‘entertainment I’ve paid for’. The thing that I’m most sad about is the ripple that this sends out across the whole industry, giving more power to the big, established bookies. I backed these platforms because I thought there was a better way. I still believe that. However, I can’t see a way forward for the sector in the short term now – these scandals plus the pending outcome of the review of the Gambling Act makes the environment look pretty inhospitable to innovative products right now.

In the longer term, hopefully new ideas will emerge. Failure should be our teacher, not our undertaker – there is much to learn from all of this. The question that remains unanswered is whether it’s possible to design a platform that is engaging for users but also sustainable for the operator. I suppose the closest we’ve got to that are the various DFS platforms, like FanTeam and DraftKings. Maybe any other models are always doomed to fail, who knows.

I’ve tried to be as honest as I can on this blog. I’ve never claimed to be an expert on anything and I’ve always tried to be clear that I’m approaching things from the perspective of an ‘average punter’. I never heavily promoted Footstock because it hadn’t quite got to the stage where I was happy to do that, but equally I never raised the alarm either. I genuinely believed in the guys running it and felt there was time to pull it into shape. If anyone got involved or stayed involved because of anything I said, I can only apologise.

Before the Footstock news landed, I’d just finished writing a blog about how Sorare is different to Football Index. I tweeted a link to the blog as people were reacting to the Footstock news, and I’m aware that this was perhaps not the best time to do that. I only did so because I sensed that people were ‘smelling blood’ and some were openly revelling in the idea of yet another platform failing – which got my back up a bit. I wasn’t advocating that people should move over and chase their losses. That never ends well.

My heart goes out to everyone who has been rocked by the events of the last few weeks. We’ve been caught up in a tsunami of epic proportion where we’ve ended up losing money, pride, communities we cared about and the ‘hobby’. For many of us, that ‘hobby’ was where we took ourselves off to when real life got tough, which makes it worse still. It hurts, really hurts.

I’m more acutely aware of risk than ever right now but I’ve no intention of pulling out of any of the remaining things that I enjoy. I’m not daft, I haven’t committed more than I can afford to lose and I know the risks are high. That approach won’t be for everyone and I can’t blame anyone for wanting to cut their losses and completely step back from all of this right now.

I’ll carry on developing my Sorare squad, picking out hidden gems on FiveYards and dabbling in FanTeam. Bruised but not broken. Thank you for all the messages of support and please do feel free to message me if you need to have a rant or just need to offload to a stranger. We’ve really got to keep on supporting each other, now more than ever.

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