WEBVTT - DraftKings CEO Jason Robins Talks Disney Deal

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>We head back to earnings with DraftKings out with their results,

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<v Speaker 2>cutting its revenue forecast for the full year. The company

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<v Speaker 2>also out though, with news that Disney signed a new

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<v Speaker 2>multi year deal to make the sports betting company the

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<v Speaker 2>official betting site and odds provider for the ESPN Sports Network.

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<v Speaker 2>Let's bring in DraftKings CEO Jason robbins, It's an interesting partnership,

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<v Speaker 2>and I think that's where we should start. How much

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<v Speaker 2>does this move the needle for you? You know, we've

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<v Speaker 2>talked in the past on this program, Jason with you

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<v Speaker 2>about the integration of the live sports event and the

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<v Speaker 2>broadcast with the betting activity. Your big picture goal with

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<v Speaker 2>this deal, Well, first of all.

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<v Speaker 3>ESPN is a you know, iconic brand. It's you know,

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<v Speaker 3>by far the biggest name in sports in the United States,

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<v Speaker 3>and they have an incredible portfolio, unmatched portfolio of sports content, influencers, talent.

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<v Speaker 3>So it's really, you know, for us, just the greatest

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<v Speaker 3>partner you can have when you're in the space we're

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<v Speaker 3>in and Jimmy Pataro runs it really understands and I

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<v Speaker 3>think values the sports betting space and understands that the

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<v Speaker 3>customer overlap is high and it's important that they engage

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<v Speaker 3>their customers by being partnered with somebody like Drafting, so

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<v Speaker 3>really excited to embark on it. We've been partners with

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<v Speaker 3>them many times in the past, so it's familiar territory.

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<v Speaker 3>We know all the people there and we're looking forward

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<v Speaker 3>to working together. And you add that to our deals

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<v Speaker 3>with the NBC, Universal on Amazon and you know others,

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<v Speaker 3>we have an unmatched I think presence across the sports

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<v Speaker 3>landscape over the next several years.

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<v Speaker 2>Prediction markets. Wednesday night, we were with Robin Hood at

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<v Speaker 2>their in person earning school. That was wacky. Don't know

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<v Speaker 2>if you consider that, but the month of October massive

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<v Speaker 2>volumes for them. You're being super thoughtful about predictions. I

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<v Speaker 2>understand that, and you have a clear strategy. My question

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<v Speaker 2>has always been how much a growth in a nascent

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<v Speaker 2>predictions market cannibalizes other offerings that you have.

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<v Speaker 3>I think very little. If you look at the UK,

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<v Speaker 3>for example, exchange based betting is about five percent of

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<v Speaker 3>the total pie, so you know that's probably about right.

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<v Speaker 3>And I think a lot of it is largely incremental

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<v Speaker 3>because they're market makers and others that are not present

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<v Speaker 3>on traditional sports books that generate a lot of the volume.

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<v Speaker 3>So I think it's very much an incremental opportunity for us,

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<v Speaker 3>and that's why we're so excited about it. We acquire

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<v Speaker 3>Realbird and we're also looking to you know, enter the

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<v Speaker 3>market sometime in the next couple months.

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<v Speaker 1>What's interesting, Jason, is investors analysts out there called out

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<v Speaker 1>on the actual earning script talking about how marketing expenses,

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<v Speaker 1>higher sales expenses did eat into the results, and they

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<v Speaker 1>call them also some ugly outcomes when it comes to

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<v Speaker 1>the sports games for that you can't control. But what

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<v Speaker 1>about the expenses you're going to have to have on

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<v Speaker 1>the predictions markets.

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<v Speaker 3>Well, we do plan to make some investment there. We

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<v Speaker 3>mentioned this on the call that we're going to be

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<v Speaker 3>more i think conservative in terms of the paybacks we're

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<v Speaker 3>looking for, just given how nissent a space it is

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<v Speaker 3>and the fact that you know, it's unclear kind of

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<v Speaker 3>how this will all play out, but we are going

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<v Speaker 3>to make some investment there first, of course, and getting

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<v Speaker 3>a product developed and making sure that that's you know,

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<v Speaker 3>the best in class. You can't win and we've always

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<v Speaker 3>said this product is the most important thing you can't

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<v Speaker 3>win if you don't have a great product, and then

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<v Speaker 3>you know, assuming that the numbers check out, we'll spend

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<v Speaker 3>marketing accordingly. We're going to be very data driven like

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<v Speaker 3>we always are, and everything we will test into it.

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<v Speaker 3>But we did want to make sure as we guided

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<v Speaker 3>that we were thoughtful about giving the team some space

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<v Speaker 3>to be able to accelerate spend if the numbers look good.

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<v Speaker 1>And therefore the guide did pull back rather than uplift

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<v Speaker 1>going forward. Jason, but you say it's conservative. You talk

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<v Speaker 1>about an incremental opportunity from predictions, and I'm really interested

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<v Speaker 1>as how you make sure this doesn't cannibalize what you

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<v Speaker 1>already have out there. You've talked a lot about how

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<v Speaker 1>this might actually make more states accessible to sports betting,

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<v Speaker 1>because at the moment you can get fifty states with

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<v Speaker 1>this predictions market, but what you've got twenty five at

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<v Speaker 1>the moment for your offering, and you're about to and

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<v Speaker 1>you also have DC and then you're out of Missouri.

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<v Speaker 3>Yeah, I mean, I think you're exactly right that this

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<v Speaker 3>will hopefully lead more states to decide that they might

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<v Speaker 3>as well legalize sports betting. It's I think predictions are

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<v Speaker 3>a powerful talking point for that, because you know, same

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<v Speaker 3>as the illegal market, same as anything. In this case,

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<v Speaker 3>it's regulated. But the bottom line is it's activity that's

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<v Speaker 3>already happening in the state at some level that they

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<v Speaker 3>are not directly benefiting from and regulating. So I do

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<v Speaker 3>think that'll motivate some states, But for us, really the

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<v Speaker 3>cannibalization thing isn't a huge concern. We haven't seen that happen,

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<v Speaker 3>not just here, but as I mentioned, overseas where there's

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<v Speaker 3>long established I mean, it's not a brand new thing

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<v Speaker 3>like it is here. There's been predictions and sports exchanges

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<v Speaker 3>around for decades in the UK, for example, So we

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<v Speaker 3>feel like there's pretty good data out there to show

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<v Speaker 3>that head to head, the traditional sports betting product is

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<v Speaker 3>a much far superior product for customers.

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<v Speaker 2>Jason, you said that this is the most bullish you've

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<v Speaker 2>ever felt about the company's future. What are the underlying trends,

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<v Speaker 2>data points, behaviors of your customers that give you that

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<v Speaker 2>conviction and why do you have it now that you

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<v Speaker 2>didn't have previously?

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<v Speaker 3>Well, I think if you take a step back, you know,

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<v Speaker 3>it really starts with the progress that we've made over

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<v Speaker 3>the last few years in the position we put ourselves in.

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<v Speaker 3>Remember two years ago, we weren't even profitable. Three years ago,

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<v Speaker 3>we had nearly a billion dollar adjusted EBA de loss.

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<v Speaker 3>At that point, you know, we were getting killed in

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<v Speaker 3>the market because people thought we were going to run

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<v Speaker 3>out of money and go out of business. We really

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<v Speaker 3>buckled down, we grew revenues, we managed costs, and you know,

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<v Speaker 3>just a few years later we've had an over billion

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<v Speaker 3>and a half swing. So I think that shows that

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<v Speaker 3>we are in a great position. But also more importantly,

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<v Speaker 3>now we're in a position to play offense. We are profitable,

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<v Speaker 3>we have scale, we have the best product in the market,

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<v Speaker 3>we have the absolute best partnerships and presence across the

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<v Speaker 3>media landscape. About to launch sports predictions, which I believe

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<v Speaker 3>represents a huge incremental opportunity for us. So a lot

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<v Speaker 3>of really exciting things going on, and the only real

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<v Speaker 3>negative on the quarter was the sport outcomes. I think

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<v Speaker 3>all the steriover predictions is kind of nonsense, but the

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<v Speaker 3>really only negative sport outcomes. But that's a temporary thing,

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<v Speaker 3>that's not something that has anything to do with the

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<v Speaker 3>fundamentals of the business.

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<v Speaker 2>Draft Kings CEO Jason Robbins thank you very much,