It’s just 'first or second inning' of sports betting legalization: FanDuel CEO

Yahoo Finance’s Adam Shapiro, Seana Smith and Dan Roberts speak with FanDuel CEO Matt King about the future of legal sports betting.

Video Transcript

ADAM SHAPIRO: Here in the United States, it's FanDuel. They own FanDuel. And FanDuel itself added 450,000 US customers. Let's talk about that with Matt King. He's the CEO of FanDuel. Good to have you here, Matt. I feel like we should be playing that song, the Queen song, "Don't Stop Me Now." Yeah, I mean, you guys are just roaring, aren't you?

MATT KING: Yeah, the consumer demand has been off the charts. Obviously, the return of sports has been a huge home run for us. We're currently tracking to be the first online operator to ever pass a billion dollars in gross gaming revenue for the year. And just really proud of everything the team's doing.

DAN ROBERTS: Matt, Dan Roberts here. Let's talk about some of the deals you guys have cut recently. You know, you announced a deal with the Grizzlies, a deal with the Broncos. It seems like this is the area now where the competition is really heating up, you guys cutting individual betting partnerships directly with pro franchises. But of course, I also know that you're moving quickly to open up physical sportsbook locations-- or at least, before the pandemic you were. Is that the main growth engine for you guys right now? And what's happening kind of faster?

MATT KING: No, we're seeing growth across the board. So the team partnerships and the league partnerships are a big part of the strategy, particularly in core markets where the teams typically kind of touch 70%, 80%, 90% of sports fans. So the Denver Broncos is a great example of that.

But we complement that with deals like the one we did with Intercom or Turner Sports, where we can really kind of reach the mass market, and more importantly, be integrated into the sports content. Radio has been a huge avenue for us. And so Intercom was a great partner to bring on board. And so you'll see a wide range of partnerships that we're doing out there.

SEANA SMITH: Matt, we're seeing more and more states legalize sports betting. We saw it in the recent election. How big of a growth driver do you see this potentially being for your company, and then also just for the industry at large?

MATT KING: We think we're in the first or second inning of this. So if you look at the states that were legalizing, you got Maryland passed a referendum. Louisiana did as well. But you look past that, you've got big states like Ohio and Massachusetts that are seriously considering it.

And one of the things that has been a positive outgrowth of the numbers you're seeing out of places like New Jersey and Pennsylvania is, almost all states realize that this is kind of common sense legislation. And when you take the economic opportunity and combine it with the resounding voter support for it that you saw in Maryland and Louisiana, kind of the legislators look at this as a kind of no regrets piece of legislation to push for.

DAN ROBERTS: Matt, we just got news of when the next NBA season will start-- December 22, which is great. It's also kind of crazy since we just wrapped the last one. But that's how things are going right now. While we have you, it was very interesting. In the summer and the fall, we saw a big dip across the board in live sports TV ratings.

Everyone had their theories as to why that was happening, but the NBA Finals were way down. The NFL ratings were down through the first five weeks. Some of the tennis tournaments were way down. Kentucky Derby was down 60%. What do you make of that? And did that affect your business? Did that affect how many people were engaging with fantasy and betting?

MATT KING: We didn't really see it affect our business. I mean, as you noted when we got on the call, we had over 450,000 new customers. We grew 80% year over year. So it's hard to see it in our business. I think-- and this is more art than science response-- you know, people just aren't used to watching NBA basketball in August. And they aren't used to the Kentucky Derby being in the fall. And I think as you see sports return to their more normal calendar, you'll see the ratings swing back.

And because also, the other reality is, when the NFL kicked off, you just had a lot of sports going on. And so you didn't have as much kind of individual attention on any given sport. You didn't have as much run-up in each of the individual events as you typically do. And so, I think you'll see the ratings come back.

ADAM SHAPIRO: You don't think there's going to be any kind of, like, demand destruction, though, that in the lulls that we're witnessing, that people may ditch some of what had been really popular live sports for perhaps some of the things they're are now enjoying online? I mean, for you, it's always good because you can bet on almost anything.

MATT KING: Yeah, no, it's a great question. I do think viewer patterns are going to change, right? I think you are seeing-- and we do our research. You're seeing more people that are following sports through highlights on Twitter than maybe tuning into the big game. And so I think you will see continued pressure on ratings from cord cutting if nothing else.

But that's honestly why we're having a lot of really healthy conversations with leagues and other partners about how do we leverage the scale of our digital audience to help them find sports fans that are out there that may just not subscribe to cable anymore. And so, I think you'll see some really interesting opportunities unfold as we see the disruption in the sports media landscape over the next couple of years.

SEANA SMITH: Matt, going off of that and some of the disruption that we could expect to see, I mean, sports betting market is soaring right now, but so, too, is a lot of your competition. You're clearly not the only game in this space. Some of the smaller players here are becoming, I guess you could say, more and more popular. What are you doing just to maintain that edge that you have? Because as of right now, you are pretty by far one of the market leaders.

MATT KING: Yeah, no, we've been really pleased with how customers have responded, not just to our brand in sports betting, but also to our product. And so we'll look to continue to have product leadership. If you look at what you can bet on, on FanDuel relative to anybody else on the average NFL Sunday, we typically have two to three times the number of things you can bet on.

We have some really creative products like same game parlay that are out there, where, again, we're one of the few people that has them, if not the only person. We have more live bets than anybody else. And so, we really-- we have been leading on product. That's part of the reason why we have the market share we do, and we're going to continue to lead on product.

ADAM SHAPIRO: Do you think your future, your company's future, at some point, includes a merger with the-- and I don't know what the distribution model is going to be after cord cutting is done, but a merger with, like, a Twitter or somebody is going to have the contract for the delivery of different sports venues?

MATT KING: I think anything's on the table this early in the cycle. You know, I would say the one thing that a lot of people have been really surprised at, as they get into sports betting, is the operational and regulatory complexity. We are a heavily regulated business, and that makes what we do very hard to replicate, particularly when you're doing it at scale with the quality of execution and product delivery that we have.

So, who knows? But I would also say, if you're a traditional technology company, a lot of times, you look at the level of regulation we have and say, that's more than I want. And so, it'll be interesting to see how it unfolds.

SEANA SMITH: Matt, we have the Masters this weekend. I know you were saying that a lot of times that we've seen a sporting event when they're outside their traditional time when we're used to seeing them, they're not as popular, at least in the sports ratings department. What are you expecting to see, just in terms of some of the excitement and some of the interest that you're hoping to generate this weekend?

MATT KING: Golf's a funny thing. I would say, the interest in golf is 80% correlated to how Tiger Woods does still. Obviously, what some of the younger golfers are doing is interesting, but nobody commands the kind of name recognition in golf that Tiger does. He's still our biggest liability on Masters weekend. And so I think if he does well, you'll see ratings, you know, really, really strong. You know, if Tiger doesn't make the cut, I think it'll be weaker ratings.