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Speaker 1: Hello, Welcome to the Bloomberg Business of Sports podcast, where

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Speaker 1: we explore some of the big money issues in the

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Speaker 1: world of sports. I'm Michael bar I'm Scarlett, and we

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Speaker 1: are talking a big deal between Draft Kings and the Cubs.

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Speaker 1: And a man has written a brilliant article on it

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Speaker 1: and you can check it out, by the way, in

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Speaker 1: the new issue of Bloomberg Business Week magazine. Peter Robinson,

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Speaker 1: thank you so much for joining us on the Bloomberg

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Speaker 1: Business of Sports. Thanks for having me. Well, tell us

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Speaker 1: about this deal. What is the deal that between Draft

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Speaker 1: Kings and the Cups. It's a deal for DraftKings to

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Speaker 1: build a sports book at the corner of Wrigley Field

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Speaker 1: at Addison and Sheffield. UM. And a sports book is UM.

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Speaker 1: It's a place where people can go and gamble on

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Speaker 1: sports and drink. And it's, you know, something that if

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Speaker 1: you visited Las Vegas you were very familiar with. But

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Speaker 1: they're really only just rolling out around the country and

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Speaker 1: this will be the second one at a Major League

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Speaker 1: Baseball park. UM. And the idea, UM is that the

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Speaker 1: DraftKings gets a place to acquire new customers and potentially

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Speaker 1: the clubs get younger fans. Because more young people, especially

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Speaker 1: young men, tend to gamble on sports. So DraftKings wants

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Speaker 1: new customers and hopefully it wants those customers for life,

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Speaker 1: because those customers would then bet on a variety of wagers,

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Speaker 1: and DraftKings can collect a lot of data on them

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Speaker 1: to kind of fine tune the wagers that they proposed

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Speaker 1: to these to these fans, these customers, can you tell

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Speaker 1: us a little bit about the kind of data that

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Speaker 1: Draft Kings would be collecting on each of these customers. Yeah,

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Speaker 1: it's um, it's interesting because these betting apps are are

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Speaker 1: fairly new to people. The Supreme Court ruling in that

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Speaker 1: opened up sports betting in states outside Nevada is still

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Speaker 1: fairly recent. And and the impression a lot of people

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Speaker 1: may have from these apps, just based on the ads

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Speaker 1: that are ubiquitous during sporting events, is that it's fun.

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Speaker 1: There's free money there for the taking, and um, when

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Speaker 1: just had a great time. Uh, And in you know,

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Speaker 1: talking to many people for this article, I found that

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Speaker 1: it can be that way. However, another way of looking

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Speaker 1: at these companies is that they're really big tech companies

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Speaker 1: that are collecting a lot of data about people who

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Speaker 1: are betting about their customers and UH they're able to

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Speaker 1: mobilize that data in a fashion similar to the social

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Speaker 1: media giants. One thing that people may not be aware

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Speaker 1: of is that the companies, you know, just like a

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Speaker 1: traditional casino that can kick out sharps from the black

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Speaker 1: blackjack table. That the companies can decide who the sharps

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Speaker 1: are on their book, and if they think that you're

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Speaker 1: person who's likely to win a lot, they can limit

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Speaker 1: the size of your bets. UH. They also um collect

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Speaker 1: information at sign up, which is social security numbers, geolocation,

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Speaker 1: things like that and going along. UM. I was told

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Speaker 1: by people who formerly worked at draft Kings that the

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Speaker 1: company UH sets an internal deposit limit for its customers,

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Speaker 1: and then if you want that limit increased, it mask

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Speaker 1: for bank statements. UM. So so it's really at handing

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Speaker 1: a lot of power to these private companies. Yeah, I

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Speaker 1: want to talk more about the sharps. UH. And there's

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Speaker 1: a good quote in there where people who are doing

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Speaker 1: it for profit, those are not the kind of players

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Speaker 1: we want now. Yeah, of course a casino doesn't want

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Speaker 1: anyone profiting all of them, but it's the sharps that

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Speaker 1: they're really looking at. And UH and I find it

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Speaker 1: interesting that because because these are the kind of folks

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Speaker 1: that will bet millions of dollars a year in sports. Yeah,

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Speaker 1: that quote is actually from Jason Robbins the Draft Kings CCO,

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Speaker 1: and his audience was, uh was an investor conference. Um So,

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Speaker 1: so his message to investors is that we have a

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Speaker 1: lot of control over the ecosystem. We can fine tune

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Speaker 1: things to push our ecosystem to the most profitable bets.

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Speaker 1: But the message to the public is come have fun.

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Speaker 1: Bet you can win some money. You can win some money,

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Speaker 1: and they'll also do whatever they can to keep you

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Speaker 1: engaged and to keep you on the platform. Um you

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Speaker 1: kind of did a couple of experimental bets as well,

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Speaker 1: and what you found is that obviously you need to

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Speaker 1: read the fine print because there's a lot of you know,

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Speaker 1: you talk about the ubiquitous commercials and ads, there's a

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Speaker 1: lot of like you can get this for free if

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Speaker 1: you just place your first bet with us, and it

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Speaker 1: doesn't always work out that way. In fact, it rarely

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Speaker 1: works out that way. Yeah. So this was fascinating because,

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Speaker 1: um many of the ads are are pitched as ums

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Speaker 1: as just a bonus that you know, you deposit a

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Speaker 1: thousand dollars, you get a bonus. In the case of

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Speaker 1: the add I went for, it was a deposit up

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Speaker 1: to a thousand dollars bonus. So I I put in

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Speaker 1: two hundred dollars, thinking, okay, if if I if I

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Speaker 1: lose this bet, I'll get forty dollars back. UM, and

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Speaker 1: I bet. I bet a parlay, which is a type

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Speaker 1: of bet that is based on multiple things happening. That

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Speaker 1: the books are especially UM eager to have people bet

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Speaker 1: on UM. It lost UM. But then I found that

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Speaker 1: I didn't did not have forty dollars. I had what

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Speaker 1: DraftKings called eight dollars in playable credits because in very

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Speaker 1: small print in the add it explained that the deposit

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Speaker 1: would be awarded in tranches of one dollar for every

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Speaker 1: twenty that since I had got two, I got eight.

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Speaker 1: And then they also UM something in the app popped

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Speaker 1: up called a bonus tracker, which was tracking my progress

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Speaker 1: towards UH toward winning this money, which which was you know,

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Speaker 1: kind of transparently designed to keep me betting more and

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Speaker 1: keep me in the system. UM. And so that those

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Speaker 1: are some of the techniques that that apps will will

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Speaker 1: use really to keep people beat and keep them in action.

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Speaker 1: Michael bar it's like a video game. It is. And

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Speaker 1: when you just said it, I mean I I've been

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Speaker 1: on plenty of these sites where you've got to bet

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Speaker 1: fifteen dollars to win the one dollar that you put

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Speaker 1: in uh to sole and say, for instance, I gotta

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Speaker 1: bet fifteen dollars worth if I bet one dollar to

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Speaker 1: get that dollar back. And and just like Peter said,

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Speaker 1: this is it's the same kind of sight. But like

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Speaker 1: you said, you gotta read the fine print. But if

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Speaker 1: you just want to have fun and go drink, you

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Speaker 1: want to watch a ballgame and go drink and then

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Speaker 1: talk to some of the fans and then then go drink.

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Speaker 1: This sounds like it's a lot of fun. It looks

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Speaker 1: like a beautiful venue from the renderings. Yeah, I'm looking

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Speaker 1: at the illustration. I wish people can see it, and

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Speaker 1: they can if they go and check it out on

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Speaker 1: the Bloomberg Business Week magazine. Peter, can you tell us

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Speaker 1: how life has changed? And I know this sounds like

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Speaker 1: an old drum. The moment they allowed online betting in

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Speaker 1: many states, life changed for the people in Las Vegas

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Speaker 1: because they realized, man, we don't have that grip anymore.

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Speaker 1: The people in Atlantic City, they realize we don't have

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Speaker 1: that grip anymore. And now it's pretty much in a

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Speaker 1: lot of states across the nation and is looking pretty

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Speaker 1: good for California. Can you tell us the impact of this, Well,

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Speaker 1: you're you're seeing the rise of these these tech companies.

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Speaker 1: In a lot of cases, the legacy casinos are partnering

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Speaker 1: with companies like draft Kings and FanDuel. And that's because

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Speaker 1: the that the business is moving online phones seem to

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Speaker 1: win most of the time. And um, I mean, I

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Speaker 1: guess the real worry from some people have talked to

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Speaker 1: is is that the ease of access will will cause problems.

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Speaker 1: There are already some warning signs. In Illinois, there was

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Speaker 1: a study for the state's Partment of Human Services that

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Speaker 1: that found that UH three of adults have a gambling

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Speaker 1: problem right now and seven point seven additionally are at

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Speaker 1: risk of developing one. And that's that's perhaps due to

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Speaker 1: the easier access to it. And and and you're just

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Speaker 1: seeing a lot more marketing for UH for online betting,

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Speaker 1: and it's available that there's a DraftKings um AD that

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Speaker 1: we looked at where DraftKings promotes UM. You know the

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Speaker 1: idea of betting, you know, seven black jack hands at

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Speaker 1: once on your phone and you know, during a commercial

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Speaker 1: break while you're doing something else or uh. You know

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Speaker 1: that there's a testimonial in this ad from a guy

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Speaker 1: who says, it's great, I can I can bet you know,

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Speaker 1: at night and bed next to my wife. It's it's

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Speaker 1: it's it's sending society and a direction people maybe haven't

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Speaker 1: thought about it, aren't prepared for. Yeah, and we know

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Speaker 1: that DraftKings and fan juel do Um provide one numbers

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Speaker 1: and say that if you find that you are, uh,

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Speaker 1: you're gambling or your betting has become problematic, you know,

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Speaker 1: you can check out gamblers anonymous. So they are under

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Speaker 1: some mandate to make that information available. But at the

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Speaker 1: same time, you report on how these accounts, these these websites,

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Speaker 1: these apps also give back a portion of people's losses

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Speaker 1: to kind of keep them coming back, which is really disturbing. Yeah. Again,

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Speaker 1: it's it's um. It's a case where there there are

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Speaker 1: some regulations that require these helplines to be advertised and

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Speaker 1: they require, you know, the apps to exclude people who

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Speaker 1: asked to be excluded because they've had problems but it

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Speaker 1: but it really leaves a lot of discretion in the

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Speaker 1: hands of the operators. And and that case you mentioned

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Speaker 1: is one where I talked to someone who firmly worked

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Speaker 1: for for fandal and he and he felt this was

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Speaker 1: akin to giving an alcoholic a shot at the end

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Speaker 1: of the month. And in some places overseas, they've they've

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Speaker 1: been they've had legalized online betting for longer than we have,

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Speaker 1: and they have run into a lot of these problems,

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Speaker 1: and they've put up barriers that there's a regulation that's

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Speaker 1: coming into force in Ireland UM that will not allow

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Speaker 1: inducements of that, an inducement that would tell people, you know,

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Speaker 1: if you bet, we'll we'll give you your losses back, um.

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Speaker 1: And and and there is actually in this SLAF in

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Speaker 1: Ireland also a rule that you can't limit people based

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Speaker 1: on their success. So so there may there may be

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Speaker 1: some future scrutiny of these apps as as we as

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Speaker 1: they grow and as more people start betting with them.

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Speaker 1: There was a line in the article that jumped out

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Speaker 1: that DraftKings it isn't profitable, but the revenue is almost

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Speaker 1: doubled annually from three three million dollars in sift million

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Speaker 1: dollars in and then the one point three billion last year,

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Speaker 1: but it's still not profitable. Why well, but part of

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Speaker 1: the reason is that they're they're spending so much money

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Speaker 1: on marketing. It's it's the classic case of let's let's

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Speaker 1: spend money now and and we'll lock up the market

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Speaker 1: because only typically only two or three companies will will

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Speaker 1: become the most successful. So so so the idea is

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Speaker 1: that by spending money now, draft Kings will be the strongest,

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Speaker 1: be one of the strongest competitors in the future. And

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Speaker 1: then you know, and they've made the claim that that

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Speaker 1: spending well, it seems like a lot of money UM

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Speaker 1: actually pays off that they uh. One example was that

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Speaker 1: in New Jersey in the second half of they estimated

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Speaker 1: they spent three seventy one to acquire customers, but there

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Speaker 1: the long term value of those customers was more than UM,

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Speaker 1: which which is you know, occluding people I talked to you.

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Speaker 1: That's an exciting number that the social casual you know,

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Speaker 1: kind of mobile games may have UM long term values

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Speaker 1: more and you know, hundred dollars or less. Peter, can

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Speaker 1: you tell us a little bit more about Jason Robbins

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Speaker 1: and how he came up with this idea for Draft

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Speaker 1: Kings because he created this company, he started it up

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Speaker 1: before the Supreme Court allowed gambling in other states beyond Uh.

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Speaker 1: And he also had an early tie up with Major

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Speaker 1: League Baseball, which I didn't realize. Jason Robbins, Uh, he

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Speaker 1: grew up in Miami. He was sports nut. He would

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Speaker 1: he would play fantasy sports with his his friends and

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Speaker 1: got into fantasy sports leagues and um. But for his

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Speaker 1: his career he worked for Capital One, a credit company,

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Speaker 1: and they worked for Vista Print in marketing and analytics.

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Speaker 1: But he really wanted to start his own business. Uh.

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Speaker 1: And so with a couple of colleagues at Vista Print,

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Speaker 1: they came up for this. I came up with this

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Speaker 1: idea of you know, daily fantasy sports, of of you know,

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Speaker 1: a site where people who loved doing it wouldn't have

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Speaker 1: to wait the whole season, you know for the results

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Speaker 1: they could they could do it um quickly. Uh. And

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Speaker 1: so they started that, you know, back in and then

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Speaker 1: the site launched in twelve and Major League Baseball, you know,

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Speaker 1: as you say, it was one of the first leagues

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Speaker 1: to really spot the potential and they took an undisclosed

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Speaker 1: equity stake that year, and and it was Fantasy that

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Speaker 1: got MLB and all the leagues comfortable with with the

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Speaker 1: idea of betting on sports and atout. You know, there's

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Speaker 1: been no end of scandals over the years to do

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Speaker 1: a gambling and Pete Rose among them. But it was

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Speaker 1: several years where the fantasy site was operating and and

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Speaker 1: that that that got the league's comfortable for a while.

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Speaker 1: Um Draft Kings had a had what they called the

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Speaker 1: Draft Kings Fantasy Sports Zone at at Wrigley Field, and

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Speaker 1: that's when the Cubs got to know Draft Kings and

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Speaker 1: maybe one reason why they are comfortable with a sports

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Speaker 1: book now at the corner of regular this iconic stadium.

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Speaker 1: Bloomberg's Peter Robinson. Uh you can check out Peter's Draft

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Speaker 1: Kings Cubs deal article, a brilliant article. It is in

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Speaker 1: the new issue of Bloomberg Business Week magazine. Peter Robinson,

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Speaker 1: thank you so much for joining the Bloomberg Business of Sports.

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Speaker 1: We appreciate it. Thank you. I really enjoyed it. Thank you.

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Speaker 1: This has been the Bloomberg Business of Sports podcast where

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Speaker 1: we explore some of the big money issues in the

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Speaker 1: world of sports. I'm Michael Bar. You can follow me

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Speaker 1: on Twitter at Big Bar Sports. I'm Scarlet Fool. Follow

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Speaker 1: me on Twitter at scarlet Fool. Do not Forget. By

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Speaker 1: the way, you can catch these podcasts Mondays, Wednesdays, and Thursdays,

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Speaker 1: and you can download this show wherever you get your podcasts.