What began as a rivalry between obscure startups in 2012 had become, within three years, a billion-dollar war, fueled by venture capital, that played out in living rooms across the country.
BILLION DOLLAR FANTASY is the story of two companies whose battle unleashed a carpet bombing of advertising as they sought supremacy in an exploding fantasy sports and gambling market: FanDuel and DraftKings turned into billion-dollar companies seemingly overnight—then, just as quickly, found themselves the target of FBI and Department of Justice investigations, and facing likely destruction. In this exclusive excerpt, SI senior editor Albert Chen takes us behind the scenes to reveal how then FanDuel CEO Nigel Eccles escalated a massive spending war on a business that no one could believe was even legal. Adapted from BILLION DOLLAR FANTASY © 2019 by Albert Chen. Published by Houghton Mifflin Harcourt on September 10. You can order a copy now on Amazon.
One early September morning in 2016, Nigel Eccles, the 43-year-old head of FanDuel—the fantasy sports company that over the last six months of 2015 had been valued at over a billion dollars, erupted into the largest TV advertiser in all of America, and was shortly thereafter deemed an illegal gambling operation by a half dozen states, while becoming the target of multiple Department of Justice investigations—emerged from a subway exit in lower Manhattan, squeezed through the morning rush hour crowd, and walked toward the grand entrance of the New York Stock Exchange. Donning a black blazer and a neat, sculpted coif, the embattled CEO had a bounce to his step.
This was the next stop on a small press tour with the start of another NFL season underway, and Nigel was getting word out that his seven-year-old startup was, despite breathless headlines to the contrary very much alive. He arrived at the CNBC studio that presided over the frenetic exchange floor, a TV studio bathed in an iridescent blue, with shiny surfaces and an array of screens and panelists perched over a long table, tugging at their earpieces, looking down at their tablets, checking their phones. An army of assistants were waiting to mic him up and apply a layer of powder to his face, and as the seconds ticked down on the digital clock before him, Nigel zoomed through the talking points in his head: on the regulation of his industry (Back legal and online in forty states...), on the much-discussed prospects of a merger with FanDuel’s bitter rival, DraftKings (The industry is about cooperation now...), on the new mission of the company (We’re focused on being social, less about the money...).
As he stepped toward the set, Nigel was suddenly seized with the alarming realization that he had forgotten something so vital that he felt as if he were about to wander in front of the cameras naked. Interviewers had a habit of asking him for a fantasy tip— the name of an NFL player, say, that could win a fan some big money with a monster performance. A softball, surely, for the founder of a fantasy sports company. In reality, the question always caused Nigel great anguish. As CEO he appeared unflappable, a former McKinsey man who was the picture of cerebral cool. Nigel was also an Irishman who was never a sports fan; he viewed any attempt to answer a sports question an opportunity to expose himself as someone who perhaps had no business leading a fantasy sports company backed by the faith of investors who had infused more than $350 million of capital into this little startup hatched by Nigel and his four cofounders in a converted classroom at the University of Edinburgh.
Nigel texted a group of FanDuel employees: Fantasy pick?
A reply: Dak Prescott. Cowboys QB.
Okay, Nigel thought. Prescott. Dallas Cowboys.
“Plus!” the host of the show was now saying, “The future of daily fantasy after a long legal battle across the country. We’ll talk to the CEO of FanDuel . . .” The red light on the camera flashed. They were on air, live.
“After some extended scrutiny over its legality, daily fantasy is back just in time for football,” said the host. “Joining us as Week 2 of the NFL season kicks off is FanDuel CEO Nigel Eccles. Bring people up to date. . . .”
Where to begin? Eleven months had passed since the nuke had gone off in his industry. Because FanDuel and DraftKings rewarded winners of their online games with prize money, some viewed the “daily” games they offered as a kind of Trojan horse brought into the sports gambling market, territory from which media companies and sports leagues had long been excluded. In early October 2015, though, the New York Timesdropped a front-page story that a “midlevel content manager” at DraftKings admitted to unintentionally releasing confidential data before the start of games on an NFL Sunday and went on to win $350,000 at FanDuel. Within weeks, both companies were shut down in Nevada, then New York state, and had become the target of federal investigations that delved not only into employees committing fraud but whether the companies were illegal gambling operations.
For the industry, after weeks and months of dispiriting headlines and rulings, the tide had begun to turn at the start of summer: the strategy of lobbying state lawmakers to pass bills legalizing daily fantasy, one state at a time, was an arduous long game that would stretch on for years. The approach, led by the companies’ small army of lawyers and lobbyists, was also producing early results: in late spring 2016, Virginia became the first to pass a bill legalizing the very fantasy games that attorneys general across the state had determined were illegal; with each ensuing bill passed in a state house, the odds that any investigation into the legality of the business would result in indictments and arrests had dimmed.
Now, in the aftermath of the New York governor signing a bill legalizing daily fantasy for the state with the most customers in the country, Nigel could present a shiny face for the industry. “We’re online in nearly forty states,” he said to the CNBC cameras. “We obviously had to go offline earlier this year, a lot of headlines around that . . .”
“You guys spent a ton on marketing. You probably can’t keep spending that much,” a panelist quipped.
“I’d say last year was about awareness.” Nigel added, “We got a lot of awareness last year . . .”
The segment was off to a relaxed start; in truth, however, Nigel’s head was spinning. The quarterback. What was in bloody hell is his name? Prescott — yes, Prescott. Zak. Jak?
None of those options seemed exactly right. Just a few minutes into the segment, and he could feel a cold sweat breaking through that impenetrable layer of powder.
For the last year Nigel had awakened every morning feeling as if that was the day they could go bust as a company, for any number of reasons. As he looked at the cameras that faced him like a firing squad, it felt like the fate of the entire company hung in the balance once again—now on whether or not he could retrieve the name of the bloody starting quarterback of the Dallas Cowboys.
One afternoon a few months earlier, Nigel had an idea: to list, on paper, all the ways they could die. He sat down for this exercise, an attempt to regain some semblance of control over his life. He began:
• NY AG criminal charges and CA AG comes out negative, Nigel wrote, referring to the two state attorneys general—New York’s Eric Schneiderman, who had ordered FanDuel to cease taking “illegal bets” in his state, and California’s Kamala Harris, who was mulling whether to do the same—leading the growing mob of AGs who were now not only looking into possible fraud being committed at both companies, but also whether the businesses were illegal gambling operations.
• Boston FBI investigation
• Tampa FBI investigation
• Customer class action suit
He moved from the legal threats to other existential ones:
• Payment processors pull plug
• IRS defines player winnings as gross revenue, not net
• Pro leagues pull support
• Pulled from Apple app store
• Run out of cash
There, he decided to stop.
He was not the kind of tech entrepreneur who obsessed over productivity hacks and mindfulness, but as his company, hatched out of a converted classroom at the University of Edinburgh in 2009, had become a punching bag, the subject of breathless headlines (from UNICORN TO UNICORPSE,said the London Times) and late-night jokes (“These days, it feels like you can’t turn on the TV without seeing one of three things: a zombie, a Kardashian or a fantasy football ad,” quipped Trevor Noah), Nigel had been persuaded by acquaintances to try a meditation app. After a handful of sessions, however, his conclusion was that even a year in the Himalayas wasn’t likely to give him balance in his life, let alone 10 minutes in a closet with his earbuds in. He went on long runs to clear his head, but during his jogs through Edinburgh’s Stockbridge neighborhood, when he reached the stretch of houses called “the colonies”—small two-bedroom houses, built in the 1880s as affordable housing for working-class families and struggling artisans—the man who’d yet to cash in on his creation but, to his amusement, could find himself, surreally, on the IrishTimes’ “The Rich List,” as the 41st-wealthiest person from Ireland (ahead of Liam Neeson, Conor McGregor, even Enya), now found himself looking at the small row houses and thinking, When we go broke, this would be a very fine place to live.
And now, the list he was now staring at, of the ways they could die, was not having the intended calming effect.
The last few months had laid bare his mistakes as CEO—the missteps made by the leaders at both FanDuel and DraftKings, who, combined, raised $550 million in 2015 and burned through it all on advertising and marketing. How could they permit their employees to play and win money from the games they offered? How could they not have done more in the regulatory effort, building relationships with lawmakers and AGs? How, if wagering on the performance of players with the possibility of making six figures on a Tuesday night during a thin slate of NBA regular season games wasn’t gambling, was the messaging in the ads all about winning money? The ads that had reaped millions of new customers had also in the process put a big, fat target on both companies: Lawmakers, regulators, the media, any football fan on an NFL Sunday couldn’t possibly go without a few commercial breaks without asking, How can these companies exist? Isn’t this gambling?
FanDuel board members began to sense trouble when, during opening weekend of the 2015 season, friends began texting, Dude, what’s up with the ads? Please stop. Who could blame them? They ads were running every 90 seconds.
Two weeks into that 2015 NFL season, the FanDuel leaders gathered in Edinburgh. The meeting opened with an executive saying, “Do you all realize that last week DraftKings was the biggest TV advertiser in America?”
There was silence, a look on everyone’s faces that said, Can that possibly be true? Even they couldn’t believe it. It was true. DraftKings was the top advertiser, according to the rankings at iSpot.com, followed by AT&T, Warner Bros. and Geico. They all looked around, each of them now wondering, O.K., so now what do we do?
Only months earlier they held a commanding lead over DraftKings: a 65–35 market share. That lead was gone. At the start of 2015, when Nigel and the FanDuel leadership had considered what it would take for DraftKings to catch up to them, it was just a question of how much DraftKings would have to spend to acquire new customers. A simple math problem. The number that had been rumored in early 2015, of how much DraftKings was planning to raise and spend that year, was then staggering: $100 million. And yet that amount wouldn’t have made a dent in FanDuel’s lead. They did the math on how much DraftKings would have to raise and spend to catch them, and the number was outrageous: north of $400 million.
One night in early 2015, at an event in Manhattan where a number of industry bigwigs had gathered for drinks, Nigel ran into a partner at one of DraftKings’ investors. “They have something big planned,” that partner said.
“Yeah?” Nigel said. “How big?”
Nigel took a sip of his drink.
“Five hundred million dollars big.” Nigel felt the blood drain from his face. He had just one thought: Oh, f---.
What began as a rivalry between obscure startups with DraftKings’ arrival on the market in 2012 had become, within three years, a billion-dollar war, fueled by venture capital, that played out in living rooms across the country. With the NFL season in full swing, FanDuel’s ad spend was actually 10% under its budget because of a lack of inventory: DraftKings had bought up everything. Even more alarming was the fact that DraftKings’ exclusivity with ESPN, a deal struck earlier in 2015 and worth $250 million, was set to take effect in 2016. DraftKings was poised to overtake them, perhaps even shut them out entirely.
They had a choice: go head-to-head, or cede the market. The FanDuel founders knew the spending was outrageous, the deals value destructive. Still, at every turn, when asked if he would allow DraftKings to overtake them, the CEO always had the same answer: No f------ way.
Nigel and his four cofounders had built this industry, one new customer at a time. He and his wife, Lesley, the longtime chief marketing officer, had risked everything, putting their entire savings into this venture. In the most desperate times in the early years, Nigel, like a sad character out of a Dickens novel, would go to the bank to sell off another Krugerrand coin he’d collected as a boy growing up in Northern Ireland, just so that they could make payroll.
Now they weren’t going to let these late entrants from Boston take it all away from them. Nigel’s response to the board in September 2015 was the same—even as it was apparent to everyone in the room that it was preposterous that the biggest TV advertiser in the country was a company that at the end of the day was still a largely unproven product. Back off, now? Nigel asked. No f------ way.
One board member recalled walking out of the room thinking: Did we just say yes to that?
They did. And three weeks later, the final week of September, Week 3 of the NFL season, there was a new top advertiser in the country: FanDuel, which had spent $17 million with 2,536 airings of their TV ads over seven days.
When the FanDuel board met next, in October, the Times story had landed and the industry was under siege. This time, one board member asked, “Is there nothing we can do? Turn the ads off? Can we do an alternative creative, at least?” It was becoming abundantly clear that commercials that had been an essential part of FanDuel’s marketing machine—the testimonials that resembled Hair Club for Men ads, with real-life daily fantasy players talking directly to cameras, joylessly explaining the game while flaunting how much cash they’d won—were turning against them: According to survey results, nine out of 10 viewers hated the ads. But the answer to the board member’s question was no: Other creative was in the works, but the new ads—focused on the brand, not the money—wouldn’t be ready until November. There was nothing they could do. They were all in.
“HERE’S THE thing,” Nigel’s personal lawyer had explained to him, as Nigel faced the possibility of a federal indictment. “You guys are open and notorious.”
“Open and notorious?” asked the CEO.
“If you see white-collar crime, there’s criminal intent. Someone’s done something, and they’ve clearly known it was illegal, or suspected it was so, because it was hidden. It would be very unusual to claim that you were doing something illegal when you were doing it so openly for five, six years.”
“Open and notorious,” Nigel said. “Can we use that as a defense? Sounds more like a rap song!”
Through all those harrowing, surreal months for his company, Nigel was among the ones who hadn’t cracked. But the persistent drip, drip, drip of states shutting down the company—the count of attorneys general who had deemed the companies illegal gambling operations was at seven in early 2016—was wearing finally him down. The low point came in February 2016, as he arrived in California for a certain football game.
“Can you believe we’re . . . here? ” FanDuel’s chief product officer, Tom Griffiths, had said to Nigel as they walked through a Super Bowl fan fest in downtown San Francisco. Tom turned to the sad-sack bloke next to him, the man with the hollowed-out face that even in this California sunshine was colorless and solemn as a headstone. “This will be great—Peyton Manning, man!” Nigel looked blankly at Tom, a look that said only,: Peyton . . . who?
Nigel’s head was still numb from meetings with investors and partners who held the fate of the company in their hands. There had been an early-morning meeting he and his chief legal officer, Christian Genetski, had in San Jose. PayPal, one of the services that FanDuel relied on to process customer payments, was considering ending their relationship because, well, just about everyone was having second thoughts about their relationship with a company that was being compared by lawmakers to everything from a prostitution ring to a Mexican drug cartel. But with Nigel and Christian able to cite progress and movement on daily fantasy bills in a handful of states, the meeting with PayPal had gone better than expected; they weren’t pulling the plug—yet.
Even more important for Nigel was a meeting in which he’d face some of the most influential figures in sports, in town for the Super Bowl and also interested to hear from Nigel why they shouldn’t abandon him. The mainstreaming of the daily fantasy industry began with TV networks finally accepting advertising. Then it was getting the professional leagues on board. DraftKings’ 2013 marketing partnership with MLB gave the industry legitimacy and paved the way for an exclusive partnership between FanDuel and the NBA, and by mid- 2015 both daily fantasy operators had partnerships with more than a dozen professional sports teams.
“Someday we were going to have to become legitimate,” Nigel would later explain. “There was going to be a day where this gets all called into question, and if the leagues are on our side, we’re fine—and if they aren’t, we’re dead. Anytime we had these league discussions, it was kind of an insurance policy—what kind of value would I put on a league supporting us? If s--- hits the fan, well, a tremendous amount.”
S--- had hit the fan, and as he arrived at a conference room at a San Francisco hotel during the week of Super Bowl 50, Nigel knew he needed the support of the owners and executives in the room—men whose own reckoning was coming. Even as rights fees were exploding, fans were beginning to cut the cord and viewership was dropping, fast. This was part of a new reality for networks and leagues: Sooner or later, nearly all TV would be streaming. If any of the big shocks to the TV rights fees came to pass, as many believed they would, leagues needed something that would generate enough money to stop the hemorrhaging. There were two things that were going to save them. One was fantasy sports. The other was gambling, which was not legal in most of America—not yet, at least.
Nigel told them a plan was in motion, but there was a long road ahead for his small army of lobbyists and lawyers on the front lines, and the state-by-state route was long and full of mines. It could take three years, probably more. In the meantime, the ad spend would be significantly lower than it was in 2015—a relief, certainly, to everyone. Nigel felt better after the response from the investors and partners in the room, which more or less was, We’re not going to throw you under the bus—yet.
One day shortly thereafter, Nigel was home in Edinburgh, when his phone rang. “It’s Adam,” the voice said.
Adam was the NBA commissioner, Adam Silver. Nigel held his breath. It had been less than a year since FanDuel had struck a four-year exclusive deal with the NBA. The data was irrefutable: Studies showed that daily fantasy games increased the engagement of NBA fans, who consumed 40% more sports content, across all media, when they played. The partnership further legitimized Nigel’s business and a nascent industry, but it also signaled a changing landscape, with broad implications. The day after the FanDuel partnership was announced in the fall of 2014, The New York Times published an op-ed by Silver in which he argued that Congress should “adopt a federal framework that allows states to authorize betting on professional sports.” Leagues had always been staunchly opposed to betting, but now here was the commissioner of the NBA, on record, supporting the legalization of sports betting. Still, after the events of the fall of 2015, it was an open question as to whether a league would stand by the two embattled companies. For Nigel, it was heartening to know that he had a group of NFL owners behind them, but to have the NBA commissioner’s support was everything.
“I’ll be honest. I don’t know how this is going to end,” Nigel said to Silver over the phone.
“I do,” the commissioner replied. “With you and me testifying together in front of Congress, if it comes to it,” he said, his way of telling Nigel that he and the league were at his side. Nigel breathed a sigh of relief. His list of all the ways they could die seemed endless. Now there was one reason why they might live after all.
The quarterback — the damn quarterback. On the CNBC set, Nigel still couldn’t remember: What was his name? He could feel the blood drain from his face. Prescott. Wasn’t it Zak? Could it actually be Pak? Pak Prescott?
Nigel then had the thought to name any NFL player. There was a problem. He couldn’t for the life of him come up with a single name.
There was a word he used, half-jokingly, when he was asked to describe what it was like to be the CEO of a fantasy sports company: Impostor. The word got somewhere near the truth of how Nigel sometimes felt in a role that he’d never imagined he’d take on. Nigel grew up on a farm in Northern Ireland; was a mathematics major at St. Andrews University in Scotland; and had stints as a consultant and a media executive in the UK before starting a new company with four cofounders. The business was an online news prediction game but within months, they pivoted to sports — specifically, fantasy sports games, as they sensed an opportunity in an exploding industry in America. Nigel had felt the impostor syndrome take hold in VIP suites with the team owners talking sports; at the fantasy sports trade conventions pretending he was familiar with the oeuvre of the fantasy sports analyst with millions of followers who was the keynote speaker; at live tournaments trying his best to hold a conversation with the NFL Hall of Famer while frantically retrieving mental talking points — the name of that Hall of Famer, for starters — from a google search just minutes before introducing himself.
Now, he was attempting to retrieve the name of any football player, and was failing miserably. But before he was on the receiving end of the question, Nigel heard the host say, “. . . and when we come back, Donald Trump finally admitting the President was born in the United States!”
Saved by Donald Trump.
Nigel exhaled. As he walked off the set, though, he felt like a fool. He’d nearly had a panic attack on live TV because he couldn’t remember the name of a football player. He walked through the doors and out of the N.Y.S.E., into the bright morning, thinking:
What am I doing?
Nigel always believed he was the best man for the job of leading FanDuel, but now he asked, Why? Perhaps the Dak Prescott near death experience was a sign: maybe the role wasn’t his destiny after all.
If, that is, that role was even there for the taking. There had been so many unexpected twists these last few years that he’d learned he couldn’t possibly anticipate what would happen next to his company and his industry. As he left the N.Y.S.E, he couldn’t know that months later, in the summer of 2017, a proposed merger with DraftKings would fall through, for good, but not because of a tug of war between the two leadership groups but because the FTC would kill a proposed deal, citing concerns about the two companies holding a monopoly on the market.
Nigel also couldn’t know how much his board at FanDuel would clamp down over the next months, asserting more power, taking more control of the decision making, believing that after the crisis in 2015, it was time for a change in direction at the company—-time, perhaps, for new leadership. Nigel also couldn’t anticipate that within two years, the Supreme Court would rule that the federal law prohibiting sports betting was unconstitutional and would thereby leave the question of betting’s legality to each individual state, completely altering the sports landscape in America.
The ruling, in May 2018, would crystalize what FanDuel, DraftKings, and the entire industry as a whole had been hurtling towards all along: the moment that the road to widespread sports betting, for decades blocked by indomitable interests, would suddenly become clear and open, a gilded path laid out in front of them to a bright shiny new world. Because overnight, in the wake of the Court’s ruling to strike down the Professional and Amateur Sports Protection Act of 1992, these two fantasy sports companies that had been permitted to exist because they were not illegal gambling operations would, in an instant, become legal sports gambling operations, opening up sleek sports books and creating cutting-edge apps to take wagers from anyone, anytime, so long as there is a device nearby and an electric current in the air. And the battle between FanDuel and DraftKings would continue, into 2019 and beyond, the race to win an obscure fantasy sports market having turned into a race to win the entire $150 billion sports betting market.
Once, in describing what it was like to be CEO of FanDuel, Nigel had said that it felt like he was holding on to the tail of a dragon. The dragon that Nigel imagined was a sneering, untamable beast that had been roused and then taken flight after the explosion of competition between two companies; clinging to the tail, he felt the alarm and the fear and the freezing wind around him, all of it, but to let go would be to tumble into a hot lava sea below. As the stakes were raised at every turn, the dragon flew higher and higher, and he held on tighter and tighter.
After his near-death experience on live TV, Nigel could feel, for the first time, his grip on the dragon loosening. Within a year, he would be out as CEO. His creation, meanwhile, was about to begin a new chapter without him—one with a mission that was at once altogether new and also unchanged from what it was from the start: the pursuit to take every bet in America.