It happened at 2 a.m. on a Thursday. The New York State legislature voted to pass a bill that protects and regulates daily fantasy sports. It was the moment that DraftKings and FanDuel, the two ‘unicorn’ startups that dominate this market, have desperately awaited.
Next up, New York Gov. Andrew Cuomo must either sign the bill, do nothing, or veto it. (Either of the first two actions will make the bill a law.) It’s unclear when he has to act and what he will do, and even if the bill becomes law, additional legal challenges in New York could come. But those in daily fantasy sports (DFS) are breathing a big sigh of relief after a long and costly legal battle in which the two companies had to work together like never before.
One week after the result, Yahoo Finance spoke exclusively with FanDuel CEO Nigel Eccles by phone. (For our interview with DraftKings CEO Jason Robins, see story and video here.) Eccles called it the biggest milestone his company has had since its founding in 2009. He addressed merger rumors, marketing, and why so many people hate these companies. What follows is an edited transcript.
Tell me how you reacted when the bill passed.
We didn’t really know how the vote would go, even on the floor. I think everyone in all of our offices was watching it, whether it was 7 in the morning in the UK or 2 a.m. for people in New York. It was just elation. It’s a landmark. I had some interns in on Thursday and one of them asked me what the biggest milestone for the company has been, and I said, ‘This is it.’
Does this feel like the start of a new era for daily fantasy sports?
I think, to quote Winston Churchill, it’s not the end and it’s not even the start of the end, but it marks the end of the start.
I’ve said for a long time this industry will become regulated, needs to become regulated, and within three years we will be regulated in over 40 states. We’re not there yet, but when this bill is signed, that gets us to nine states that have regulations.
I’m very comfortable that in the next two to three years we get to 40 states, but I think this is the landmark one. New York is the state where we had the biggest issues. Any observer of the industry now says, ‘We can see it’s headed toward regulation.’ That’s very good.
What do you expect the timing to be for Gov. Cuomo?
We really don’t know. Our hope is certainly by the NFL season. That’s when most people play fantasy sports. If it could be before then, that would be great, but that’s really our target, is to make sure we’re up and running for the NFL season.
I doubt Cuomo cares about signing at the optimal time for your business. What if he doesn’t sign it until after September, when the season has already begun?
We could just start up again right then. But certainly our hope is to be up and running by July. I think they know, and I think we’ve been quite public, that we think it’s a good bill and we’d like to get moving.
Do you think New York passing the bill changes the public perception of the industry?
I think the narrative earlier in the year was some people said, ‘This industry will go away.’ To me that was crazy. Fantasy sports have been played 50 years; I just couldn’t believe that regulators wanted to go down the road of prohibition. So now this sets a milestone to say, ‘Look, regulators can work with this industry to reward innovation but also protect consumers.’ And that’s a narrative that as we hope other states will follow.
What do you think of the new rules in the bill? Age limits, licensing fees for operators, etc.
We think it’s a very good bill. This is a big industry with a lot of money going through it. It’s right that there should be consumer protection. People’s money should be safe. We certainly pointed out things that we felt would have been helpful to the industry, or helpful to consumers, but the bill works for large companies and for small companies. And we’ve been supportive of that because we want it to work for the entire industry.
Amidst the legislative session, rumors broke of a potential DraftKings-FanDuel merger, which now looks unlikely after the bill has passed. Did those rumors have any truth?
There have been discussions and rumors about it for almost two years. And I can understand it. We’re very similar companies, in the same space. There will be those rumors. I think also in the last 12 months we’ve moved from focusing all on growth and competing head on to now working together—on lobbying, on grassroot activities. What we realized last October was that the biggest risk to our company was also a risk to the whole industry. So in the past few months we started to work much closer with DraftKings and also with the FSTA [Fantasy Sports Trade Association].
So I wonder if these rumors are coming up again just because people see we are getting closer to them and that the companies are working closer.
I’d say that at FanDuel, we feel really good as a company. I’d say even more so than last October. One of our biggest concerns then was how does the industry become regulated. And now, certainly we had a quite painful bit of months, but now we have a clear path to how the industry gets regulated. I’d also say that I think it’s very healthy that we are working together with DraftKings. I think that’s a much better place to be as an industry.
Where does this market will go next?
On the legislation side, I continue to see this pattern we’ve seen this year. It’s a competitive market, I’d say it’s not just us and DraftKings, Yahoo [which owns Yahoo Finance] is a sizable player. And then lots of smaller players, some of them quite innovative. I think that will continue. I think with more regulatory certainty, people will be more willing to come into the market. Before, people said, ‘the industry’s not regulated, it’s hard to put a lot of capital into it because of that risk.’ So now I think we’ll see more players come in, and we’ll see more willingness to invest in the market. DFS is only around six years old, so it wouldn’t surprise me if in the next few years we see new variants and new forms.
What’ll be new with the FanDuel product this football season?
We always look at NFL first. With the new NFL season we focus on what new things we can deliver to the customer. So when our players come back this year, they will see a very different product. Not just the look and color scheme upgraded, but the game will be much more social. There are some very exciting pieces there: New ways to allow you to play with friends and make leagues; the mobile experience has been very significantly upgraded. We want people to come back this year and say, ‘Wow, this has transformed since last year.’
We’ve also done more with helping new players into the game and offering beginner leagues, and also highlighting highly experienced players. That was one of the biggest challenges this year. We’ve put little flags on those players, so hey, if you want to play against that guy, you can, but if not, you know who to avoid. [Note: Yahoo Daily Fantasy began marking veterans recently as well.]
Can we expect any shift in your marketing approach?
There will be a very big shift there. Last year was really about gaining awareness. And we did amazingly well at gaining awareness. What we didn’t do as good a job with was selling the product. The top reasons people play on FanDuel is they love the research, the competition, the live experience. So this year I think we will focus much more on selling the fun of the game itself, and bringing that fun into our advertising. I think our advertising last year got too serious. So this year, we want to bring more fun into it.
Why do you think daily fantasy sports is so divisive? The players love it, but many people hate it with a passion and have hoped for its demise.
I’ve wondered about that. Somebody once said to me, ‘There’s nothing more interesting in the world than your fantasy sports team, but there’s nothing less interesting than somebody else’s.’ I think it’s a lot like that, but also if you don’t play at all, well of course you have no interest and it’s all annoying to you.
If you listen to fantasy sports radio on Sirius XM, you can just hear people all day passionately talking about it. But if you’re not into it, I imagine that radio station is torture. I think that’s what divides people, is if you’re not into it, it’s like a weird cult. And then also, if I’m into a sport but not into fantasy, people find it really annoying that people view the sport I love in a different way than I do.
The funny thing is, if you watch millennials watching sports, they’re on their phone. The world has moved from passive to active. It used to be you’d sit down and watch media silently for hours. Now people want to discuss it and react as they’re watching.
We are giving people that option for sports. That is a good thing, but it’s also a much bigger train that we are just one part of.
Disclaimer: Yahoo, the parent company of Yahoo Finance, launched its own daily fantasy sports product last year.
Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology. Follow him on Twitter at @readDanwrite.
DraftKings CEO reveals what’s next after New York bill passes