Daily fantasy sites take aim at thenow-legal world of sports gambling
Published 12:00 am Sunday, July 1, 2018
NEW YORK — “Alexa, bet $50 on the Yankees.”
In the not-too-distant future, sports fans will be able to tap their phones, click on their smart TVs or simply blurt out commands for the digital device du jour to carry out, including how much of the family checking account to bet on whether Noah Syndergaard’s next pitch is going to be a ball or a strike. Or what Aaron Judge will do in his next at-bat. Or if the New York Giants will score on their next random early-September, third-quarter drive.
“We’re thinking about all of the above,” says FanDuel CEO Matt King, who has become a bit of a mad scientist, tasked with figuring out how to secure prime real estate on the sports gambling rocket ship that was cleared for takeoff last month.
For example, any game format you do in an office pool, FanDuel wants to be able to provide, from Super Bowl box pools to March Madness brackets. Working with regulators, King wants to mine into greater capabilities to offer more products to customers now that the shackles of illegal sports gambling have been lifted, allowing companies like his to unlock the potential to do so much more than daily fantasy sports (DFS) with their existing platforms — and develop new ones.
“There are many ways people interact with sports,” King says. “Some of it was done with pen and paper, some of it was offshore, some of it was with a bookie down the street, and some people haven’t really thought about it. We can deliver some really interesting products around that, that can capture the emotional game mechanics some people are interested in.”
Think of it as FanDuel and other fantasy companies could use only 1 percent of their brains before the Supreme Court struck down the Professional and Amateur Sports Protection Act, and now they can use everything they have to revolutionize sports entertainment in a pro-gambling world.
“The way people consume sports is going to fundamentally change in the next five to 10 years and we want to be at the forefront of that,” King says. “We come at it through very much a gaming lens, but gaming will also drive what content people are interested in, what games they want to interact with and a number of other things, so we feel like we can play a very interesting position, particularly if we do it the right way, through partnerships with others, because at the end of the day, we have one of the largest user bases of connected millennial sports fans.”
For FanDuel, that means about 7 million users. DraftKings reports its user base at about 10 million. It is not out of the question that once those sites pivot to become sportsbooks, those numbers may triple.
Gateway games
Ironically, for years, daily fantasy sports devoted massive resources to distance themselves from straight-up sports gambling. They worked hard to win designation as a game of skill and taught us the difference between that and a game of chance, which is what gambling is.
But in May, the federal sports betting ban was lifted and new legislation is working its way through statehouses across the country that will legalize sports gambling on a state-by-state basis. So now fantasy operators hellbent on staying away from games of chance are going all in on gambling.
“It’s a little bit of a fallacy to think of it as two products because the reality is that what it ends up being is a continuum,” says King of the connection between DFS and betting. “We knew our users wanted a broader spectrum, but from a regulatory perspective, we were limited. What we’re excited about is the PASPA repeal allows us to significantly expand the spectrum of things we can offer.”
Fantasy operators would not go into detail on the gambling games they are working on; that is their secret sauce. But with sports betting no longer illegal, they can do new and interesting things with their existing contests, such as allowing players to cash out in the middle of a game.
“I can’t actually do that under the fantasy designation, because I would be the house, if you will,” says King. “But under a more traditional sports betting law, I could potentially offer that product. What we’re excited about is not just the fact it opens up a new product over here, but it significantly expands the spectrum of things we can do. The bigger that spectrum, the more innovation we can deliver.”
A new era
At one time, FanDuel and DraftKings discussed merging, but now the two fantasy giants are locked in an arms race to win the new frontier of sports betting. Within weeks, you’ll be able to place bets with DraftKings and FanDuel-branded sportsbooks in New Jersey.
According to DraftKings chief business officer Ezra Kucharz, when the Supreme Court lifted the federal ban on sports betting in May, it signaled the third seismic shift in sports in the United States in the last 40 years. The first happened, he says, when ESPN started broadcasting in 1979, the second came in 1989 when WFAN in New York launched as the first all-sports-talk radio station in the country.
“I think you’ll see the value of teams go up, the value of media rights go up because engagement is increased,” Kucharz says. “Half our users are interested in a sport because they play daily fantasy sports so this is a third seismic shift in sports in this country in the last 40 years. I think that as a consumer, you’re still going to be able to watch sports in a lot of different places, but now you’ll be able to make it more engaging and a little more fun.”
Thanks to increased sports betting, interest no longer wanes in blowout games. With popular in-game betting, baseball games with one team up 7-0 in the fourth inning, for example, will continue to draw interest, and bets, until the final out.
“It will be a fun way to experience or watch a game,” Kucharz says. “Whether it’s futures, pregame odds or in-game, there’s going to be something for everything. The consumer is going to tell us where to go just by where they place their engagement.”
Battle-hardened by their own state-by-state regulation fights from two years ago as daily fantasy won legalization as a game of skill, the DFS companies are older and wiser, and they better understand lobbying and lawmaking. They are also bolstering their legislative know-how with established betting titans to mark off territory in an estimated $150 billion market.
By comparison, only $320 million in revenue was generated last year by fantasy sports, according to research firm Eilers & Krejcik Gaming.
“The whole marketplace is going to evolve and it’s great,” Kucharz says. “It’s just another way to engage with fans. Fans can decide what level they want to engage. If they just want to sit back, relax and watch, that’s great. If they want to get immersed and have some skin in the game, that’s awesome, too. It’s going to be a lot of fun.”
Battle scars
Again, DFS operators have some experience with rolling out a new and exciting product. They also learned their lessons from two years ago. King admits they have a lot of “scars” from regulatory fights won and lost. They also have some scar tissue to remind them of the battered public perception they suffered from running too many commercials for their products. This time around, their expectations seem more tempered.
“If every commercial is a sports betting commercial in the state of New Jersey, people are going to get annoyed pretty quickly,” King says. “And so, you can’t ever lose sight of the fan’s side of this. People are going to see a lot of dollar signs, but at the end of the day, it’s about creating a great experience for the fans.”
Oh, there will be dollar signs. Plenty of them. Days after the Supreme Court decision, FanDuel was acquired by Irish bookmaker Paddy Power Betfair, putting the company in prime position to dominate the American online sports gambling space. Through Paddy Power, FanDuel’s name will be on the sportsbook at Meadowlands Racetrack — 10 miles outside New York City and just steps away from MetLife Stadium — that is slated to open July 15.
DraftKings, which hired a head of sportsbook in February, has a sponsorship agreement in place with Resorts Casino in Atlantic City. DraftKings, which planned to add 300 jobs earlier this year, also partnered with gambling platform architect Kambi to start building online games.
In New Jersey, you will be able to bet online starting in mid-July. Safeguards to prevent placing a bet from out of state have been in place for two years at FanDuel and DraftKings as part of fantasy regulation.
While operators may have been skittish to acknowledge crossover between DFS and sports gambling two years ago when lawmakers were crafting those laws, there is no secret their existing fantasy players are ripe to be sold a new set of games.
Boom times ahead
According to research commissioned by the Fantasy Sports Trade Association, 79 percent of fantasy sports players who are not gamblers said they will likely participate in sports betting once legalized in their state.
“When betting operators are looking for customers, their first stop will be fantasy sports companies,” FSTA president Paul Charchian said. “This research strongly suggests that the value of most fantasy sports companies will rise significantly, even when the companies themselves don’t take legal wagers.”
FanDuel investor Bradley Tusk has said sports gambling will double the value of his equity, and it could multiply fivefold once betting becomes common practice.
One way that will happen is through innovation. DFS companies got popular taking a game you played with friends and transforming it into an easy, accessible, digital contest. They are gunning to do the same thing with the personal relationship people have with their bookies.
In the past, sports betting meant picking a team or a point spread. You had to wait until the game was over to collect your winnings. But in the future, you will not have to wait for anything at all as bets will be taken before and during games and you will be able to place them on an endless menu of action that goes well beyond the final score.
In the end, sports in America is on the verge of a massive change.
In-game betting is already popular in Europe, where it is legal to bet on sports. But now that betting is taking hold in the United States, a massive new market of deep-pocketed players with a bottomless appetite for consumption of all things is mobilizing. FanDuel and DraftKings are preparing to build a smorgasbord of betting options that will make the all-you-can-eat buffets in Las Vegas appear quaint.
“I have a mobile-first, relatively young set of very avid sports fans that all have a funded wallet,” King says. “So we can play a role in the very broad market disruption if we do it right. Our aspiration is not to look at the products they have in Europe and bring them to the U.S. Our aspiration is we want to be a core part of how the next generation of sports fans consumes sports.”