NFL season cancellation would have a 'short term impact': DraftKings CEO

DraftKings reported mixed earnings for the second quarter. DraftKings CEO Jason Robins joins the On the Move panel to discuss.

Video Transcript

ADAM SHAPIRO: To DraftKings because they were out with their earnings earlier, and there were-- there's a lot to digest here. There was a loss, $161.4 million, but revenue coming in at more than 74 million, despite what's going on with the limited sports calendar. So we welcome into the stream right now DraftKings CEO Jason Robins. Good to have you here. What do you want sports fans to know about where we're headed and where you're headed?

JASON ROBINS: Well, first of all, on the numbers, we were very happy that we had a very strong revenue quarter. Ended up handily beating consensus and at the top end of our guidance. On the losses side, I think it's important for people to remember that we had a transaction to go public that we closed in Q2, and majority of those losses are related to one-time transaction expenses as well as non-cash accruals.

If you look at our adjusted EBITDA, which is more of a true reflection of the performance of the company, it's actually right on consensus. So I just wanted to make that note. As far as, you know, what fans should expect, we have a really, really exciting calendar of promotions and other sorts of events that we're putting on to celebrate, you know, both the return that's happening now of Major League Baseball, NBA, NHL, to continue to, you know, promote the golf tournaments that the PGA TOUR and others are putting on.

We're very excited that we're going to have the Masters this fall. And then, of course, most importantly, the start of the NFL season. We have $100 million that we are giving away to start the NFL season. All you have to do is go enter a free to play, completely free to play, survivor contest for week 1, and you will unlock your gift, which is anywhere from 5,000 to 25,000. And then we will have one lucky customer who wins a million simply by entering that free contest. So very excited to be doing that, and looking forward to giving away that $100 million.

DAN ROBERTS: Jason, Dan Roberts here. Thanks for coming back on.

JASON ROBINS: Hey, Dan.

DAN ROBERTS: You talked about how excited you guys are for the NFL season. That's always so important for you. But we are following closely the mess in college football. And obviously, a little bit of a different scenario there. But what if there isn't an NFL season? How bad would that be for you guys? How would you go about weathering that?

JASON ROBINS: Well, certainly, it would have a short-term impact to our revenues, but, you know, we have over $1.2 billion of cash on the balance sheet. In some ways, it's actually, you know, helpful to us if maybe some of the lesser capitalized competition that won't be able to weather it as well have to go through something like that while we are. Obviously, we don't hope for that. We-- we want to see the NFL season occur and get played as planned.

And actually, I think given, you know, how much effort I know has been put in by so many smart people at the NFL, and they've had their whole offseason really to plan for this, that, you know, we feel pretty good that the-- the right plans and safety measures are in place. But we'll kind of roll with whatever is thrown our way. Obviously, we, you know, are hoping for NFL and think it could lead to really huge numbers for us. But if it doesn't happen, then doesn't change anything about our long-term perspective and confidence and conviction in this market and what we're going to see over the next several years, not the next several months.

DAN ROBERTS: And-- and then while we have you, got to get your-- your take on this story about the IRS wanting to tax fantasy fees that you guys rake. And interestingly, it sounds like the IRS wants to brand those or label those as wagers. I saw somewhere that-- that you said you believe their analysis is flawed. What-- what's the story there, and how are you guys going to respond?

JASON ROBINS: Well, you know, listen, this isn't the first time that, you know, there's been in education process to help sort of explain, you know, the skill-based nature of the game and why DFS entry fees are distinct from wagers. And we do believe that, you know, upon sort of embarking on that education process, that it will become clear. And, you know, this is an issue, as you know, Dan, that's been, you know, for dozens and dozens of state legislatures and courts around the country, already considered over the past several years, and, you know, almost unanimously have come out on the side that DFS is clearly not wagering. It is clearly skill-based.

So we feel pretty good in that position. And we think that given the time and opportunity to explain and educate, that, you know, others will see it the same way. And, you know, it's really all part of the process. So we're looking forward to having an opportunity to-- to make that argument, and we believe the facts and data are pretty strongly supported.

JULIE HYMAN: Hey, Jason, it's Julie here. I want to go back to the issue of what sports are being played and what sports are not and what might happen in the fall. Let's say the NFL season starts as normal. Everything's fine. And then people start getting sick, and they have to start canceling games. What happens to tournaments when all of a sudden you're in it, and then games start getting canceled, or maybe the whole season gets canceled?

JASON ROBINS: Well, one of the nice things about daily fantasy sports is that, you know, the games last a day, or in the case of NFL, sometimes a weekend. But that allows us to be very fluid in the contests we post, and we can react to those things, you know, as more news would come out. Obviously, we all hope that that doesn't happen and that there, you know, are no cancellations or postponements.

And as I mentioned, I do believe that a lot of very smart people at the NFL have put a lot of time and effort into making sure that there are safe and secure ways to play this season, but we're prepared either way. And the nature of our product being daily fantasy sports and betting, you know, really allows us to, unlike a season-long fantasy sports product, really allows us to sort of react game to game, week to week, to what's happening.

DAN ROBERTS: Jason, let's end by talking about competition. You know, the whole gaming space has really, really grown in-- in the last few months. Interestingly, a lot of those gaming stocks, including you guys after you became public, Penn Gaming, which now owns a majority of Barstool Sports, you know, Flutter, the company that owns Fanduel, a lot of those gaming stocks did very well even while there were not sports going on.

And just yesterday on one of our shows, we were discussing an upgrade to Penn Gaming on the basis-- this is, of course, just based on one bank's analysis-- that Barstool Sports could start offering betting products. Where do you stand on sort of the competition outlook right now? Is that an issue for you guys? Are they now a competitor for you guys, Barstool, simply because of the Penn Gaming connection? And along with all that, is-- is the betting now a bigger part of your business revenue-wise than fantasy, or is fantasy still the bulk for now?

JASON ROBINS: So first of all, we're extremely excited that there's been so much focus from so many great companies. Penn and Barstool have very smart management teams. And the fact that they, along with IAC and others, have so much faith and conviction that this is an industry that will develop into a multibillion dollar opportunity, that excites us, and it helps validate, you know, the-- the hypothesis that we had.

We also think that having more and more, you know, well-capitalized influential partners that are interested in seeing more states adopt online sports betting and potentially iGaming is a very good thing for us, and that, more than anything, is going to drive our growth opportunity. As far as right now, we do not disclose revenues by different products, so, you know, can't really comment on relative size. But I think the last time we spoke about it last quarter, I did mention that daily fantasy sports was still the largest part of our business.

And as you can imagine with COVID, it's kind of hard to say whether that has or hasn't changed since, you know, the whole environment in sports is kind of getting back to a more steady, stayed position. But, you know, daily fantasy sports is our core. It's where most customers around the nation continue to engage with us, and it's a product we're going to continue to invest in and are excited about growing over the years.