DraftKings has been one of the biggest beneficiaries of sports betting in New Jersey, including launching the first mobile betting app in the state. When did the company start preparing for SCOTUS's ruling on legalized sports betting?
On May 14 last year, the sports world changed forever following the Supreme Court’s ruling to repeal PASPA and legalize sports betting. Less than a month after SCOTUS’s ruling, New Jersey governor Phil Murphy signed the state’s sports betting bill that had been passed a week prior. Since then, DraftKings has been one of the biggest beneficiaries of sports betting in New Jersey, including launching the first mobile betting app in the state. Sports Illustrated spoke with DraftKings CEO Jason Robins to discuss sports betting’s landmark day and the future of the industry.
1. We’re approaching the one-year anniversary of the Supreme Court legalizing sports betting. What was your reaction upon hearing the news?
It was a pretty exciting day. We had all been hopeful that that would be the outcome. But with how this process is, it’s hard to really predict. We were prepared we felt. It was kinda like, “Alright, let’s go.” We had prepared for this. This was the outcome we were hoping for. There was a brief moment of excitement and celebration, but then it was kinda, “Alright, it’s game time.”
2. Since the ruling was a "when" compared to an "if," how long had you and DraftKings been preparing to launch your sportsbook upon the Supreme Court’s decision?
We started preparing about two days after the announcement in June the prior year when the case was being picked up by the Supreme Court. We thought that this was too big an opportunity to not be ready. We were also very objective that we had never done this before, so it was something we couldn’t just kinda at the last minute pull together. So we said “Look, we have to be ready for this.” If it doesn’t happen, our Plan B was to launch our product we were developing overseas. So we said, “Look it’s not going to be a waste either way.” But obviously we were hoping since our customer base and our brand is more substantial in the U.S. that this would be the outcome. So it was really almost immediate after the case was announced.
Interestingly we were in the midst with our merger deal, we were trying to merge with FanDuel. The FTC (Federal Trade Commission) had just notified us a few days later that they had blocked the merger. It was kinda like this came in at exactly the same time, it was almost like a sign of what we need to put our focus toward. As soon as we found out that we were going to have our merger blocked, we said, “Well, here’s what we’re going to need to focus on.” When you start these things, it’s never starting to work because you don’t even know what you’re doing yet. So you start figuring out what to do, spending time overseas in London and elsewhere, talking to different companies just learning. Then within a couple months of work, floating design and everything started. It was a little over a year or I guess about a year after that, we were the first to launch in New Jersey.
3. Speaking of New Jersey, DraftKings does have a sportsbook there, but with most of the company’s success coming through online and mobile sports betting, do you envision DraftKings opening more sportsbooks in other states down the road, or relying solely on online/mobile?
We’ve been an online and mobile company since our inception, so that’s definitely our bread and butter and that’s what we’ll focus on. Like a lot of other online and mobile companies that have expanded in the retail space, we see opportunity there. So we’re continuing to explore different ways of going about that. We already have a second one that we’ve opened, I actually believe it was technically the first in terms of timing, in Mississippi. So two now, one in New Jersey in Atlantic City and one in Mississippi. So those are the two states we’re in, and both of them we have a retail presence. I’m not sure every state we’re in will have a retail presence, but there will be at least a number of them. Some of it comes from also our casino and other partners want to have a retail presence and DraftKings branding on it, that’s part of the attraction of us as a partner. So there’s also a partnership aspect to it as well.
4. What have you learned the most about the sports betting industry in the past year?
There are a lot of similarities to daily fantasy, but one of things that I’ve learned that’s been interesting is that it’s more mainstream than I even thought. Fantasy’s pretty mainstream, depending on what numbers you believe, as many as 50, 60 million people in the U.S. playing fantasy. That’s a pretty big number. While daily fantasy doesn’t have quite those big of numbers, it’s been pretty mainstream too—we’ve had almost 12 million registrants now. I thought a lot of the users, the players we had already acquired, were going to be much more of a substantial portion—and they are, it’s a little over half of our players that are using the sportsbook in New Jersey now are previous fantasy players and current fantasy players. But I was surprised it was that low even, I thought it would be higher. I didn’t realize just how mainstream sports betting was that it was literally double or more of the audience that we’ve been able to attract over many years for fantasy sports.
5. What do you see as the next big innovation to shake up the sports betting world?
The challenging aspect of that question is that this is a heavily regulated industry. A lot of the things in a typical market that might occur, they’re not possible or they’re restricted in some way by regulators. I think for that reason it makes it extra hard to kind of predict what the innovation will be. Personally, I’m not sure there won’t be another innovation before this, but I think social and peer-to-peer based betting options is going to be something that develops over time and becomes a significant chunk of the way that people are experiencing betting. I think there’s a really large audience of people that want to bet with their friends.
We’re starting to see in fantasy, for example, that people, even though they love the big jackpot public games, there’s a fast-growing audience in our leagues product that wants to play with their friends. I think there’s a really big audience there on the betting side too. I was just at a wedding this last weekend, it was my college friend’s. People are tossing around, “Oh, who’s going to the NBA Finals,” and this and that. I can just totally see betting groups getting together, but they’re scattered around a bunch of different states across the U.S., so it’s just not an option in most of the places that they live. But I think once more states that have this, I think you’ll start to see social betting products developed.
6. Do you see DraftKings entering the television realm in the future, whether that’s having your own channel or buying up live sports rights?
Right now, those are not things that we’re really focused on. You never know down the road, it’s always possible. I think for us, having multiple partners that have significant ownership of live sports rights, streaming and/or a linear television presence. Those are things that are very attractive in a partner to us, that’s probably the nearest-term way I think we’ll play in that. You never know long-term, but that’s an expensive game. There’s a lot of people jumping into it now. It was already expensive when it was just the traditional networks, but now you have the Amazons, the Facebooks and others jumping in. I think it’s not going to get any cheaper. For us, there’s such a tremendous opportunity on the actual betting platform side as well as continuing to expand our fantasy offering. It’s hard to really focus on anywhere else.
7. Professional leagues want integrity fees or royalties as a way to profit from sports betting. Do you think that that’s a fair request?
I think like most things, there’s arguments on both sides. I think that there’s an argument that the leagues are spending billions of dollars creating this content every year and that they should somehow benefit from massive new revenue streams that are emerging on the basis of their content. Then I think there’s the argument that this has already been litigated and that statistics are public domain. The way I think this all shakes out is I think it’s going to be a mix of some legislative solutions where it sort of lays out for everybody how it has to work out with the leagues whether it’s a free or data rights or something like that. Then I think there’ll be a private market that emerges.
The thing I believe at the core is that it’s beneficial for everybody if the sports leagues view this as a positive thing, if they see revenue opportunities that emerge from it. I know not everyone in the gaming industry believes that, but I think that it’s just better for everybody. I believe that there are good deals that can be worked out. The sports leagues have a lot of really great assets, everything from their marks and logos, to game footage, to special data feeds that can provide a lot of value to companies like DraftKings that are trying to create innovative consumer products. Whether it’s legislatively or whether it’s done through private deals, I think we’re very interested and will continue to be very interested in striking deals with the sports leagues, which allow us to leverage the assets they bring to the table in order to create better products for consumers.
8. Fox Sports just announced their plans to enter the sports betting ring. With the pending launch of their app, where do you view them in terms of competition to DraftKings?
FOX is a great company. I think that their brand is very well-known, it’s a very good sports brand, and I’m sure they’ll do quite well. We had a partnership with them, actually still do, for many years. They were a shareholder for many years, so we’ve gotten to know them quite well and they’re a great group of people. I’m sure they’ll do really well in the market. I think the coolest thing about this is that it continues to make it more mainstream, make it more on the radar of big media companies, which I think will be very beneficial to the growth of the industry.