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Fanduel CEO on sports betting amid COVID-19: 'we’re seeing a lot of room for continued growth'

Fanduel CEO Matt King joins Yahoo Finance's Zack Guzman to discuss the sports betting outlook amid COVID-19 uncertainties.

Video Transcript

ZACK GUZMAN: Sports betting stocks have been some of the best performers here in 2020, with Draft King shares up nearly 400% since the March lows. And a large part of that has been the resumption of major sports after lockdowns threw games into disarray here.

And today, the NFL is reporting more coronavirus cases amongst its players. And coming off their postponed game this weekend, the Tennessee Titans were expecting a return to practice facilities today. But that was called off after two more players tested positive.

And now that calls into question the team's game for this week against the Buffalo Bills. And the Patriots also reporting a new case as well, and Stephon Gilmore testing positive. He now joins quarterback Cam Newton on the team's COVID-19 list.

So joining us to discuss that and the impact on sports betting is the CEO of the other major player in daily fantasy. Fanduel CEO Matt King joins us now. And Matt, thanks again for coming on, man. I mean, we talked about this before the season-- the NFL season got under way. And you were more bullish than I was.

I said it might just take a couple of cases to really start to see some problems here. It seems like that's happening now. So what do you make of the situation and how the NFL is handling it?

MATT KING: First and foremost, all the leagues and all the teams have to protect their players and their employees. So we applaud, frankly, people getting out there, testing people, and pulling them off the field when they need to.

I think you and I talked about baseball at one point, too. This stuff's inevitable, right? When you're not playing in a bubble, when you're traveling around, when you have this size of a roster, it's going to happen. And frankly, I think the league and the teams are handling it well.

And I think what you'll see is continued disruptions where a game gets moved here or there. But the benefit of football is they play one game a week. That gives you plenty of time to test, plenty of time to adapt and evolve. And frankly, I think it's a easier logistical challenge than baseball had.

ZACK GUZMAN: Yeah, it's interesting because that is a pro. They only play one game a week. But now also, flip that on its head. The Titans might be out two games in a row. And it starts to make some questions about what will happen with the playoffs and how that might look.

Obviously, it matters to you guys. We talk about the importance of sports on an app like Fanduel. We've talked about how online gaming might be there to help make up that stop gap. But if you do see the NFL season, I mean, that's a big issue for Fanduel, no?

MATT KING: Yeah, I mean, I think certainly fewer games means a little less engagement. But generally, what we've seen is, as one game goes away, the handle on all the other games goes up.

And so, I think it remains to be seen how the league will handle something like the Titans where they might be out for two games. Do they try to reschedule? Do they shorten the number of games? But I think you'll end up net, net with the vast majority of football getting played this year.

ZACK GUZMAN: And I don't want to spend all the time talking about the NBA. Of course, we're also still underway here with the NBA finals. And we've been seeing ratings fall off a bit compared to last year. Game 3, we saw ratings fall quite a bit to make it the last-- the least watched NBA finals game on record.

On that front, I mean, if we are seeing maybe people spill over to other leagues, are you seeing a similar trend in terms of ratings versus sports betting when it comes to the NBA action? How is that stacking up?

MATT KING: Yeah, it's a great question. I think inaggregate demand is booming, right? So our business has kind of never seen the volumes that we're seeing right now. And so, to your point, you're seeing probably less football bets than year over year in terms of a mix. Partly, a big chunk of that is just, you got fewer-- less college. You are seeing, obviously, more basketball.

I think the underlying issue is, people are used to and trained with the seasonality. And you see it kind of time and time again, where people are confused that the NBA finals are going on in September. It doesn't seem natural. And I think that drives naturally less interest, particularly when you have the plethora of other sports on.

So I don't think it's anything systemic. I think it's the fact that, you know, you're playing the NBA finals at a very random time of the year relative to what people are used to.

ZACK GUZMAN: And you say demand's booming, and that has been a question when it comes to the growth opportunities within the sports betting segment of the market. Deutsche Bank came out with the report looking at Penn National gaming specifically, but really, extending the problems there to kind of the sports betting market in general.

And data on that front was just recently published by Axios, polled by Civic Science, showed the runway that might exist in states that you're already operating in. And it showed that only about 6% of adults in those states have used or plan to use the Fanduel app.

So talk to me about the growth case there, because it would seem low. But also, 51% said they don't plan to use the app either. So when you think about growth, weigh both sides on maybe more states being added or if you have enough runway in the states that exist already.

MATT KING: Sure, so on new states being added, there is a ton of growth ahead of us, frankly, just even on the states that have passed a law, but not yet gone live. If you look at the next 90 days, Michigan goes live, Tennessee goes live, Virginia probably goes live.

And so you'll see a big chunk of the country start to adopt sports betting just because it makes sense. And it's good for consumers, it's good for the states. I think within each state, the reality is, we're seeing a lot of room for continued growth.

Our business in New Jersey, which is our oldest state, is still growing dramatically year over year. And that's both from the players that we acquired last year playing more, as well as a lot more players signing up. And so I think you're in the early days of adoption.

And when we survey players and potential players, there is a big chunk of users out there that we would term sideline spectators. They are people that are curious. They're interested. Maybe they've bet on sports once or twice. Maybe they played March Madness pools. But they're big sports fans. And they are inclined to try it. It's just going to take a little bit of time and education to get them there.

ZACK GUZMAN: And lastly, I mean, when we think about partnerships to access those sports fans, we've seen Draft Kings be pretty active with ESPN. What are you looking at in terms of options on the table for that, too?

MATT KING: We have a network of partners that we already work with. So if you look at-- we've had great integrations on Turner so far this year. With our brand, Fox Bet, we have a phenomenal integration with Fox Sports. And we also do a lot at the regional sports network level.

And so we're really excited about those partnerships. We also have a partnership with Pat McAfee, who we think is the premier personality in sports today. And he's been a huge advocate not just in Indiana, but nationwide. So, you know, we've got a number of really cool partnerships that we think are helping us connect with fans in a really differentiated way.