NEW YORK – Following May’s repeal of the Professional and Amateur Sports Protection Act, daily fantasy sports provider DraftKings almost immediately expanded into the sports betting space.
CEO Jason Robins said it wasn’t a coincidence.
“We started mobilizing (for sports betting) as soon as the (U.S. Supreme) Court announced that they’d hear the (PASPA) case in late June 2017,” Robins said during a conversation with sports business journalist Darren Rovell at ICE Sports Betting USA conference Tuesday.
“We had to figure out a whole business overnight,” Robins said. “We had never done this before. So, by the time PASPA got repealed, almost a year later, we were way further along than we might have been if we didn’t get ahead of it.”
The gamble has paid off; Robins said that sports betting is already more than 20 percent of DraftKings’ business.
“In New Jersey, it’s over 80 percent,” he said.
DraftKings was the first to market for online sports betting in New Jersey in August and now operates a bricks-and-mortar sportsbook at Resorts Casino Hotel in Atlantic City, which opened last Friday.
Asked about conversion rates, Robins said that slightly under 40 percent of DraftKings’ active daily fantasy users in New Jersey had placed a bet on the company’s mobile sports betting app. He said that the number was “lower” than he’d expected.
“Still, that’s humongous,” Rovell said. “That means you have a very great list.”
Answered Robins, “Maybe I’m too ambitious.”
The habits of consumers are sticky, he said, and it’s taking a little more time “to convert people over from the black market.”
Rovell told Robins one of his best friends hadn’t shifted to sports betting “because (he) loves daily fantasy so much. A bet has a finality to it. (With DFS) I can enjoy my money longer.”
Robins said he also perfers fantasy sports, although he said that he played both. He likened it to going to a show at the MGM and then going to play at the casino.
“What you want are adjacent products that have good overlap, so you get good crossover,” Robins said. “But absolutely, there’s a segment of the audience that prefers one to the other.”
Robins said that he believes it’s important to be an early mover. DraftKings’ mobile app was the first in New Jersey, but within a month or two there were six or seven others.
“I think we still benefited from being first. I think for us it’s particularly important to be first because we have a customer base to protect,” Robins said. “Our customers will go find other places if we don’t offer the products.”
There are pitfalls, though, in talking about market segments. Robins said certain bettors are focused on getting the best odds and profit and tend to be the sharper bettors “that are not really the ones you want as much.”
Robins said the more casual customer “tends to stick with a brand, and as long as you’re giving them a good experience, I think most will (stick).”
After sports betting was legalized, DraftKings was inadvertently required to create a separate app for its sports book operation. Robins said his product team was afraid that they’d “break the app” if the changes required for sports betting were implemented into the fantasy app. Still, everything is linked between the two products.
“The account’s the same, the wallet’s the same, when we launch our loyalty program the loyalty points will be shared,” he said. “Everything is going to be platform-centric.”
Robins echoed MGM Resorts International CEO Jim Murren’s earlier remarks about the customer experience, saying that the fewer barriers there are keeping the consumer from consuming, the better.
Robins said DraftKings is looking into creating hybrid-type products to attract players who play daily fantasy, but don’t gamble, or vice-versa. He’s also “very hopeful” DraftKings will be allowed to reenter Nevada and operate in the state again. In 2015, the Gaming Control Board told daily fantasy sports operators they need to apply for a gaming because Nevada viewed daily fantasy as form of sports betting.
“We’ve had some good conversations with the regulators there,” he said. “Nevada is a market that is pretty important to us. We’re working on it.”
He also said that brick-and-mortar is important to DraftKings.
“There’s a lot there,” Robins said. “I don’t have a clear answer as to how, other than to say I think it plays an important role. We’re figuring it out right now.”
