Jerseyans seem to like sports. We fill stadiums and arenas, argue passionately over the supposed superiority of the teams we like best and follow player movements as closely as we watch Springsteen’s concert schedule. Yes. We like sports.
But we absolutely love betting on sports. According to the Vegas Stats & Information Network, New Jersey last year supplanted Nevada as the top sports betting market, with $6 billion being wagered overall — topping the previous champ’s record of $5.3 billion, which was set in 2019. Nevada, you will recall, is where Las Vegas is. Vegas. Where sports betting has been legal since the Pleistocene epoch.
Sports betting has been legal in New Jersey since 2018, and sportsbooks represent a big and fast-growing business. And one of the biggest is DraftKings, which was founded as a daily fantasy sports platform in 2012. Matt Kalish, one of the company’s three co-founders, recently sat down with NJBIZ to talk about where DraftKings has been and where it’s going. What follows is an abridged version of that interview. The questions and answers have been edited for length and clarity.
The full conversation is available at njbiz.com/njbizconversations.
NJBIZ: I want to talk about how the company is doing and where it’s going and where the market is going, but I want to start for readers may not know it, with the origin story of DraftKings. If I remember correctly, you and a couple of friends founded it in April 2012. Did I get that right?
Matt Kalish: That’s right. A couple partners and myself started working on DraftKings back in 2011. We were building the company out of one of my co-founder’s spare bedroom in Watertown, Massachusetts, just outside of Boston. We were doing nights and weekends, while we worked at VistaPrint — we were all from marketing analytics backgrounds and our passion was really to do something entrepreneurial in sports. So this really gave us that opportunity to jump out of corporate America and do something entrepreneurial in an area that we love.
Q. Right and get out of corporate America. You went public last year in April by merging with a special purpose acquisition company so you’re now part of corporate America whether you like it or not.
A. Yeah, I guess once you grow, to a certain scale — you know DraftKings is now a $25 billion-plus company — you get to a certain scale and maybe get lumped in with big corporations. But I think our culture feels like a startup. We’re entering into new products all the time, like e-sports betting and igaming products in the last two or three years. We’re really just exploring and starting to build up our business, so there’s so much growth going on throughout the company and so many new factors that it feels very much like a startup.
Q. Well, I want to talk in greater depth about all of those things, but first your fourth quarter numbers, since it was a fairly recent earnings release. One of your co-founders was quoted as saying is basically that everything broke right for you in the fourth quarter – you had the Super Bowl you had the NBA playing. Was it just that simple? Because if I’m reading this correctly you had revenue $322 million, which is an increase of 146% over the same period in 2019, which is pretty impressive. Was it really just that the calendar worked right for you in the fourth quarter?
A. Yeah having all the sports back, you know that’s really the core of our business we’re a sports company. Our fans show up when there’s big events going on whether it’s NFL, college sports, the NBA starting up, and so the sports schedule all staying relatively intact obviously helps DraftKings quite a bit.
I also think just from a tailwind standpoint, in sports betting we’re now operating in 12 states and that’s more states than any other operator. Bills had passed and states opened up very recently, such as Michigan, Virginia, Tennessee, Illinois. Wo we got access to operate in a lot of new states that we weren’t in last year for Q4.
I think there’s a lot more to come. We’re still in only 12 of the 50 states with sports betting, so the opportunity for us to continue to extend expand and grow, I think, is really strong.
Q. OK, I just wanted to ask you a little bit about what it was like operating during the pandemic, because I mean as an avid sports fan myself, there were months, a lot of months, where there just wasn’t a lot going on. What was your experience when that was happening when, after baseball shut down spring training, the NBA shut down, the NHL shut down. What was it like for you to watch that happen?
A. We did everything we could to keep our audience engaged. The schedules all got thrown out the window, as you know in mid-March of 2020. The NBA went first and everybody else kind of canceled or postponed their seasons. March Madness got canceled. So we were just scouring the global sports landscape looking for anything that was interesting to our audience for a while there. Months like April and May, maybe it was table tennis, Belorussian soccer, like anything that.
One particular one that really stood out was esports. We grew our audience 20-times year over year for esports, just to get a quick handle. It became a staple of our offerings where the year before it was maybe more on the fringe and we’ve been able to hold on to a lot of that engagement even after mainstream sports came back online. So I think the content that underlie the engagement really changed a lot. Our team, though, is very real time.
Sports schedules are always moving around there’s playoffs there’s all this context around you know the offerings that we put into the market, so our team is really built for that. We’re very agile and we have a very, very good tech platform that lets us really kind of adapt to whatever is going on in sports.
Q. I’m curious about your relationship to the sports leagues. I’m old enough to remember when all the league commissioners thought betting was anathema and they just didn’t want to hear about it. Now you turn on sports — I mean, I was watching the Yankees spring training game and your logo was all over the place. How is that relationship going now? It seems like you’re developing almost a symbiotic relationship at this point.
A. We have great relationships with many of the sports leagues, many teams, media companies as well that cover the live sports, you know regional sports networks, et cetera. DraftKings is very active in that community in that world we have deals with the NFL, for example, an exclusive daily fantasy sports partnership. We’ve worked with everyone from Major League Baseball, NASCAR, UFC, all of the major leagues. We have great relationships and I think. that is a big benefit to the consumer in the end because one of the consumer’s favorite ways to engage with the sports that they love to beat odds.
I think really being able to bridge the gap and sit around the same table, and think about the consumer experience together, has been a huge benefit to the consumer. And I would even lump in things like teams’ in-venue experience, media companies covering the sports everyone’s really kind of coming in around this idea of how do we put the consumer first and what people want for a sports viewing experience and bring that to life.
Q. Wo what’s the biggest threat? What keeps you up at night?
A. In terms of our internal operations just keeping our execution bar really high. We’re scaling fast, and one thing that’s difficult to do is to scale at the growth rate of a company like DraftKings. We’re growing our revenue, our user base, employees, and the number of locations that we’re working out of. We are completing the integration of a merger … that’s an ongoing integration. We’re planning on switching our tech platform for sports betting during this calendar year to an in-house platform. So it’s really just keep our execution at a high level, absorb this scale, keep bringing on great talent, keep putting the customer first and serving the customer.
We feel like if we serve our customer well everything else kind of fall into place and really it’s just putting the company into a position where we can do that.