Scientific Game

Asia’s final fantasy

Monday, 08 May 2017 16:00
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IAG speaks to Jeffrey Haas, Chief International Officer at DraftKings, about the rapid rise of Daily Fantasy Sports and the game’s global regulatory state ahead of DraftKings’ push into Asia.

By Ben Blaschke

 

Ben Blaschke: Thanks for chatting with us Jeffrey. Can you start by providing a brief explanation of exactly what Daily Fantasy Sports is and how it works?

Jeffrey Haas: I actually have calls with people who have no idea what Daily Fantasy Sports (DFS) is all the time. The first question I ask someone is whether or not they are a sports fan and a lot of people who are sports fans have played in some sort of season-long fantasy game with their friends and colleagues. Everyone pays their $10 or $100, they pick their teams or their fantasy players each week and whoever comes out on top at the end of the season takes the majority of the prize pool.

What we do is take the experience of a season-long fantasy game and compress that into a much shorter duration. It is one day, for the most part. For the English Premier League it might be across a weekend and for golf it is played across the four days of the contest. What we allow is the social experience of playing with friends – we have private leagues which people play in – as well as the opportunity to play with other players around the world. People love the social experience of that as well as creating an additional layer of engagement in following the sports they love.

 

BB: So DFS is changing how people watch sport?

JH: Yes, because players are watching games from start to finish now and refreshing constantly to see what is happening in relation to their DraftKings line-ups – not only their own line-ups but also in relation to their friends’ line-ups. And because we create a better sports experience, the sporting leagues and sports teams love what we do too.

Because of DraftKings, 55% to 60% of players have started following an additional sport. And they’re not only following their favorite players and clubs, they are following all the players and all the clubs across the entire season so they can make good decisions in terms of their line-ups.

That means consuming more sports content, which is why various leagues such as Major League Soccer, NHL, MLB and the owners of some sports teams have invested in DraftKings. They really believe in what we’re doing – creating a richer sports experience.

We don’t just consider ourselves a games operator but a media and technology company as well. We’re diversifying our revenue models in the United States to account for that. We’re doing more and more because we realize that as a media company with fans who are massively engaged in our product, there is a chance to monetize that.

 

BB: DFS enjoyed a boom in the United States in late 2015 but that same boom also attracted the attention of regulators. What’s the current status of DFS in the US?

JH: First of all I should point out that fantasy football has been around for more than 50 years in the United States. Fantasy sports also became massive among hardcore baseball fans which led to newspapers running competitions not just in the US but around the world.

The broadsheets would have a system whereby you would fill it in, check it in, mail it in, fax it in and then see how you were doing. It’s certainly been like that in the UK for 25 years or so.

Then there was the advent of online in the late 1990s. I remember playing season-long NHL with my friends in Toronto when I was growing up in the late 90s and loved it. What we’ve seen is new technology and consumer trends impact the transformation of a traditional game that’s been around for a long time.

About seven years ago somebody created this category called Daily Fantasy Sports which again is a phenomenal experience compressed into a shorter period. And when new categories emerge in any industry there is always a lag in regulation that is needed to create safeguards for consumers to ensure the operators are running their businesses to the best standards possible.

BB: Where does DraftKings fit in?

JH: DraftKings launched our business in 2012 in the United States and from day one we sought to run our business with integrity because we believe that’s vital both for our reputation and the reputation of our industry as a whole. We also want to make sure our players have a safe and positive experience.

As our business grew rapidly, we sought to reinvest our revenues into marketing and in 2015 we invested a lot of money into marketing and attracted a lot of attention as a result. That attention brought a lot of questions to our business in terms of who and what we are, how we want to operate moving forward and so on.

We were very quick to stand up and say, “We want to be regulated. We want to pay taxes, we are running a good business here and are more than happy to engage in discussions with any authorities who feel they are stakeholders here.”

As a result we engaged with legislators across the US as to what it is we seek to do and in the 18 months that have passed since then, 11 states have now passed legislation regulating DFS. The key point though is that they are recognizing in the statute of law that DFS is a game of skill and should be regulated as such. It focuses on consumer safeguards but of course there is a tax element there which we are more than happy with.

We’re seeing the advent of a regulatory infrastructure spread across the United States and of course this is good for our business, great for our industry and the best thing possible for our players. We’re very happy with what has happened.

 

BB: What is the regulatory status globally?

JH: We’ve been talking to regulators around the world, in every jurisdiction on the planet. We’ve been reaching out proactively to tell people who we are and what we are. That has included Australia, Asia, the CIS, Latin America, North America and of course across Europe.

One of the most interesting discussions we’ve had in Europe has been with the Malta Gaming Authority. We’ve been looking at this for years. In 2015 they published a white paper on games of skill and recognized that a different regulatory mindset was required to approach games of skill compared to games of chance. We had an opportunity to meet with them in December 2015 and in January 2017 they launched their new regulatory framework and legislation around games of skill. We were privileged and honored to receive the first controlled games of skill license in Malta and we launched in a number of European countries a few weeks ago where we are seeing some really strong results.

Some surprising results too. The NBA, for example, is huge in Germany. Every day in Germany the NBA is our biggest sport.

 

BB: How many European countries are you currently allowed to operate in?

JH: DFS as a game of skill can be operated across the EU under any license using something called the Point of Origin Principle under the E-commerce Directive. That means if we are legal and licensed in one member state, such as Malta, we can use that license to operate in any other member state across the EU that does not otherwise regulate or prohibit the activity. So we can use this license in most of Europe but some places we can’t – France, Italy, the UK, Belgium and Denmark all regulate DFS as a standalone activity so you need to apply for a national license to operate there.

In Germany you don’t require that license. We do have a UK license so the countries we are operating in today are the UK under a UK license, Germany and Malta under a Maltese license and then we will be using that Maltese license to go into many other markets in Europe.

 

BB: Online poker is another skill game that has had to navigate a similar regulatory minefield as DFS across the globe. How do the two pastimes compare?

JH: Well as you know I previously worked in the poker industry for many years and can talk about poker at length but although poker is a game of skill, it still has that random element. Mahjong is a game of skill but still requires the shuffling of the tiles.

In DFS there is no systemic element of chance. There is no roll of the dice, there is no random number generator, there is no element of chance as to how people apply their approach to the game. It all comes down to your own skill and analysis of the players who are competing. It is a different type of animal and that requires a lot of education when speaking with regulators because their default position is, “This is just gambling.” It’s only once you show them the data and the research reports that you’ve done that they realize it is in fact something different and requires a bespoke approach.

BB: Which sports tend to be the most popular globally and within certain jurisdictions when it comes to DFS?

JH: We share liquidity globally and all of our sports are available in all of our territories. In the UK it’s no surprise that 93% of our players play football first – the Premier League, Champions League, Europa League and so on. We have seven football leagues available.

The second sport wouldn’t be a surprise either – 65% of our players play fantasy golf. And then they play everything. The NFL has been phenomenally successful in the UK which blew us away but the NFL has been investing in the UK for 11 years now. They will play four games in the UK for the first time in 2017 – two at Wembley and two at Twickenham – and all NFL games have sold out in previous years. The MLB wants to hold games in the UK too. UK players basically play everything, although I can tell you there are exactly 12 players in the UK who play NASCAR!

When we eventually launch in Australia and have AFL and NRL, there is no doubt that 90% of players will play those, but how many players in the US or Canada or Germany will play AFL or NRL? Honestly I don’t know, but we think globally. We make all of our sports available to all of our players, we have really compelling contests and we give people an opportunity to create a global community.

 

BB: Where does DraftKings and DFS as a whole stand right now in regards to the Asian market?

JH: We want to be a global operator so we want to be available everywhere, in every market on the planet in order to help sports fans connect with each other and we feel we have a phenomenal platform to do that.

I’m excited about the opportunity in Asia. I can’t tell you exactly what we’re going to do yet – it’s still early days – but one of the reasons we’re coming to G2E Asia is to meet people. We’re eager to meet everyone we can – particularly rights holders and legislators and regulators. That is our focus. But it’s not like this is entirely a greenfield opportunity for us. There are DFS operators live in Asia today.

Ballr.com is based out of Singapore and they are running a product that is not for real money but is advertiser funded. They are focussed on Southeast Asia.

There is another site called FanXT.com also out of Singapore. They are running a real money DFS product which I won’t comment any further on.

There is also a Mandarin language DFS site operating out of Taiwan today called FantasyPK.com and they’re killing it in Taiwan. Who knows this outside of the region? Very few people, so we’ve been doing our research and we’re learning.

Then of course there are two huge operators in Australia – Moneyball and DraftStars who are doing a great job. They are growing the market and people are loving it. We’re seeing regularly increasing prize pools – AFL, NRL and NBA in particular. Then in India, DFS is on fire with Dream11 doing a great job.

It’s not like we are the first people coming in. We’re just very interested, we want to learn some more and we believe there is a phenomenal opportunity. We just don’t know what that looks like yet or when we’ll go live.

 

BB: How do you feel about the potential for DFS in Asia?

JH: Oh very excited, but then I spent 10 years around Asia looking at the potential for poker … and look what happened over time!

We started it through PokerStars in 2007 and now it’s enormous – in mainland China in particular. We recognize the potential for DFS in Asia, we just want to do it right and what that means is going in respectfully, telling people what we are, who we are and asking how we do business here.

 

BB: With that in mind, what is your purpose for coming to G2E Asia in 2017?

JH: We’re looking to learn, we’re looking to meet people. Hopefully people seek us out or we can seek them out and we all learn a bit about one another.

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