EPISODE 200 | LSR Podcast

The Prodigal Son Returns | Sports Betting News | LSR


52 min
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The Prodigal Son Returns | Sports Betting News | LSR Podcast 200

Former LSR reporter and Eilers & Krejcik analyst Brad Allen joins the crew to recap the past few weeks of news and look forward to the future of the US market. What the PointsBet acquisition means for Fanatics, the shuttering of PlayUp, DFS prop betting rants, and the top storylines of the legal era.

Full transcript

Matt Brown (00:10):

Hello and welcome to episode number 200 of the LSR Podcast. My name is Matt Brown, joined each and every week by the brightest minds in all of the gaming industry. And I have not one, not two, but three of them with me on this very podcast. Of course, as always, Adam Candee and Dustin Gouker. But the triumphant return, episode number 200 of the one, the only, your friend and mine, Brad Allen. Brad, thanks for joining us here today, buddy.

Brad Allen (00:37):

Hey, thank you for having me for the 200th episode. You’ve made it longer than anyone thought you would, Matt.

Matt Brown (00:43):

This is absolutely true, and this is why I went ahead and blocked off the first three minutes of the show for you to give gratitude to the three of us for all that we taught you along the way, the mentorship and how awesome it was working with us on a daily basis.

Brad Allen (00:58):

Yes. I don’t know if you need three minutes, but thank you for your combined mentorship.

Matt Brown (01:05):

Yeah. It was like maybe three seconds in all of that, but no, it was great man. And honestly, you were a big part of a lot of these episodes with a lot of the content that you were able to go out and dig up and all the stories that you wrote. So, nobody better to have here on episode number 200 than you.


As always, guys, everything we do, absolutely free. So please, if you’re watching this video, go ahead and hit the little subscribe button, and if you’re audio side of things subscribe, rate, review. We do appreciate all of that.


So, Adam, let’s go ahead and we’ll … Listen, episode number 200. We took a couple of weeks. We took a beat. We wanted to make sure that we had it dialed in. We wanted to make sure honestly that there was enough news and everything to fill everything with. And of course, we were trying to dial in the absolute perfect person to have here for episode number 200.

Adam Candee (01:52):

I like all of those ways of looking at it, and all of them are true in and of themselves. Now, does it mean that some of us weren’t on vacation, some of us weren’t playing golf, some of us weren’t at a sports card show. There are reasons that we had to take a little time, but all of my favorite podcasts are on summer hiatus right now, so I don’t think it’s any different here for us and that it worked out perfectly to not only have the three of us who are normally here, but to welcome back NFL sharp Brad Allen for our episode 200.

Matt Brown (02:25):

I mean, Dustin, this is one of those things where … I know you now have a place where people can go get your thoughts. Brad obviously gives his thoughts on a weekly basis. Adam even. I need an outlet to get my thoughts out. I mean, you guys all have ways to get out your thoughts. I don’t have any ways to get my thoughts out.

Dustin Gouker (02:47):

I like to yell once in a while, too, so I have to get on here to yell. Yelling at Twitter and yelling on a blog, it’s different-

Matt Brown (02:53):

You could type in all caps, but I mean, it doesn’t really matter. Yeah, you could type in all caps, but it wouldn’t really do the same thing. Yeah, I know what you’re saying. So, this is good. At least verbally, we’re able to go out and get all that.

What the PointsBet acquisition means for Fanatics


So, let’s kick things off here. Brad, I do want to start with you on this because this is something that dates back to when you were still with us, which is what was going to end up happening to PointsBet, right? And that was one of the things that we brought up multiple different times over the course of, I mean, basically, the last two years. Because it always seemed like a very prime target for acquisition.


Look, the tech is pretty good, right? I mean, they do have some offerings. We can talk about their practices of how much you’re allowed to get down and all that; that’s for another day. What people’d be acquiring is the tech itself and the stuff behind it, which, look, I’ve used all the stuff, it’s pretty good, right? And so, we finally did get to where that was going to end up here just a few weeks ago.

Brad Allen (03:45):

Yes. So, obviously, ending up with Fanatics. I mean, it is interesting because you’re talking about how good the tech is, but we covered this in a report last week, two weeks ago. And it does still seem like the long-term Fanatics plan is to shelve most of the PointsBet tech. It sounds like they’re going to run two brands this season. There’s not going to be time to say get Fanatics licensed in Illinois say, and then try and migrate all those PointsBet customers over to the new platform. So, we’re going to sort of carry on as is this NFL season, I mean, but long term it is get those PointsBet customers off that platform over onto kind of the Amelco tech app that they’ve been working on for 18 months and then ultimately shelve a lot of that PointsBet tech. So, I guess, the question then is, well, what are you paying $225 million for?


And I think some of it’s the licenses, some of it’s the Banach piece, which I’m sure we’ve spoken a lot about, which is can you price everything from one single source? Because if you can, someone like DraftKings, who’s probably not there yet, they’ve got a load of different feeds. They’ve got a feed from Genius for NFL in-play. They’ve got Sportcast doing some SGP. But if you can get everything on site from a Banach or an Angstrom, maybe we’ll get to them later, then, you can just stick anything on site and an SGP — bang, bet that, keep that live for a cash-out the entire time.


So, Fanatics, I think that was a key part of that. They can get some of that capability with Banach. And then, obviously, some customers PointsBet has … Was it 100,000-plus customers? I can’t remember the number off the top of my head, but there’s some value there, as well.

Dustin Gouker (05:21):

How many of those are unique? Sorry … I’ll jump in. How many of those do we think are unique though? Are those great customers, or are they even good? I don’t know. I agree with you. If we’re shelving most of PointsBet, it feels like paying a lot of money for customers and licenses and Banach.

Brad Allen (05:43):

I think if you look at what Angs-

Matt Brown (05:44):


Brad Allen (05:45):

… sorry. Yeah. I mean, you look at Angstrom, which is … Was it 200 million pounds or $260 million? I think it’s basically the same thing. If you say that’s worth 260 million, I think people I’ve spoken to would say Angstrom is slightly better. Maybe they’re better models and stuff. I think PointsBet said in their call yesterday, “We’re better. We like our capability better in Banach.” Obviously, they would. But yeah, if Angstrom is worth 260 million, I don’t think it’s unreasonable to think that Banach is worth 225-plus. As you say, some licenses, some customers, I agree that I would’ve thought probably vast majority are already in, you know. They’re already in some database somewhere.


Obviously, not necessarily the Fanatics database. It’s not like DraftKings has bought them, and then, you’re going to have 90% of those customers already. Like Fanatics doesn’t necessarily have those customers yet. So they’re more valuable to Fanatics than others, I would say.

Matt Brown (06:40):

Adam, I texted you on the side when I was on one of the trips that I was on. I was in a Fanatics state, and so I, of course, checked things out, so that I could do some live recon for us. And one of the things we speculated on is kind of true. We thought maybe, “Hey, is this a deal where they’re going to say, ‘Sign up, deposit, we’ll send you a hat of your favorite team,’” or whatever it was. Well, actually what it was, as soon as I signed up, the first thing I get is the promotions that they’re going to be running, which is the rewards program, which is going to be like Fanatics cash. And so essentially, every bet that you make goes towards Fanatics cash. And there is a tiered system in that, where if you’re making a straight bet, it’s worth less than if you’re making a parlay, which is worth less if you’re making the same game parlay obviously.


So, you get more Fan cash along the way, but it is to use in their store, right? So, there is an actual utility for betting on their platform outside of just being able to bet and sweat a game and stuff like you are going to be able to use the loyalty that you give them to purchase memorabilia or just swag or whatever it might be.


And again, I only say this because they had a large presence at that sports card thing. The sports memorabilia thing that I just went to. They have acquired all the licenses to all the sports cards and stuff as well, and then, that will be coming down the pike as well. So they will also be able to integrate all of that into what they do, so we were kind of right. It wasn’t necessarily sign up, get a hat, but it’s tangentially there.

Adam Candee (08:11):

It’s interesting because when you look at that play in particular like I texted back to you, you’re giving away the game, right? You’re telling everybody that same game parlays are harder to hit, and we’re going to give you more to be able to participate in that. However, we’ve talked so much on this podcast about whether it’s MGM Rewards, Caesars Rewards. Well, there’s got to be a way for Fanatics to play in the space, and they’re going to create it, whether it’s sports cards, whether it’s hats or whatever. Now, they’re going to have to be a little smarter about doing it than they were at the beginning because they got the Ohio regulators in a lather and, essentially, had to shelve their first effort at doing this. So hopefully it can be done in a more measured way.


To wrap up what Dustin and Brad were talking about with the PointsBet acquisition, we talked a lot about this at the time. If the customers were worth that much in the first place, they wouldn’t have sold for originally 150 million and then 225 million. We’re essentially saying they didn’t have the customers to compete in the first place. And so, now, you talk about whether the in-play technology is something that ultimately gets shelved or gets integrated. Well, we know that Matt King already said that the Amelco source code that they purchased and … Let me just take a moment and point something out for those who tried to tell us, “Oh no, no, no. We’re not doing the Amelco. No, we don’t have a deal with Amelco.” Yeah, someone on this podcast had reported that long before it happened. And so, bully for him and bollocks for them. That’s for you, Brad.

Adam Candee (09:45):

And so, Matt King already said the Amelco source code is basically unrecognizable, right? That their engineers have taken it and created their own version of it. So, will the in-play technology from PointsBet essentially be worked into that after this season when they’re going to run a dual product strategy? I think that’s where you really start to see whether or not this value such as it is for Fanatics plays out.

Matt Brown (10:08):

Brad, just kind of going off on a tangent here, but this is something I’m sure you guys look into and stuff like the rewards programs just in general, right? I mean, listen, I have anecdotal evidence just because I have a lot of buddies that live in Louisiana. They all recently got legalized sports betting. All recently started betting legally inside Louisiana, and they only play at Caesars and MGM. And I’m like, “Why? Why wouldn’t you have accounts everywhere else?” The 5 cents, the 2 cents, the whatever, all that does not matter to them because they’re climbing the reward stat. They’re climbing the tiers with the reward points, right? Some of them have already gotten to ruby status at one of the whatever. So that is more valuable to them than whatever, getting points to buy swag or getting whatever. What have you guys seen from all of this, and what do you speculate is going to be the play from how do you get loyalty from a customer’s side of things?

Brad Allen (11:06):

I would say it’s not something we’ve done a lot of work on. We’ve thought about it. One thing we did see recently we pointed out in our last report is that the Caesar Sportsbook app, its retention levels are starting to improve. I think that’s probably somewhat you’re talking about. With this reward scheme, you can get free stays in resorts, but I think the other thing that is probably happening there is because they’re spending so much less money now. They’re only getting those good customers. Like your friend who knows Caesars, they’re loyal to Caesars because of the brand. And so they’re not just getting someone who’s seen it on the tally downloads, it goes through their $500 bonus, and then never comes back. So I think that’s a good sign for Caesars in a way. If they’ve got enough loyalty and enough brand loyalty to get those customers in the door, they are showing signs of actually keeping them quite nicely. And I’d assume it’s the same for MGM as well, given how big that brand is.

The shuttering of PlayUp

Matt Brown (12:02):

All right, Adam, let’s talk about another story here that happened while we were gone and that is one of the companies no longer with us. Listen, we knew that this was going to happen. This is inevitable. It has happened in every single one of the gaming industries along the way. Poker companies came and went. We saw DFS companies come and go. And we knew that it was even going to happen in the sports betting side of things, and that’s where we stand with a company we’ve talked about a few different times on the pod.

Adam Candee (12:26):

Well, first of all, that gives us a chance to say RIP Fubo and MaximBet, which is always something worth remembering #neverforget. Yeah. So, now, it’s PlayUp. And I want to give some credit to Matthew Waters. He’s been out front on this story reporting on first of all the supposed, big air quotes, potential sale of PlayUp, the financial troubles for PlayUp, the New Jersey shutdown of PlayUp and now the Colorado shutdown of PlayUp. It’s two active states. So currently, there is no PlayUp technically in maintenance mode in Colorado, but that maintenance mode in New Jersey was quickly followed by the DGE shutting them down, revoking their license. To our knowledge, the first state level license revoked during the post-PASPA era. So, put that distinction up on the wall at PlayUp headquarters in Australia.


But we’ve talked to a number of people associated with PlayUp about the situation at that company. Apparently, things have been ugly for quite a long time there on the interior. We have some more reporting likely coming down the pipe at Legal Sports Report when it comes to that. So, PlayUp has been in your, shall we say, crosshairs, if you’ve been following the news because they had a failed sale to FTX, which was that going to be a purchase with actual money or Sam Bankman free fake cash. I don’t know how was that actually going to ultimately work.


And then, we had the story of Dr. Laila Mintas, the former CEO of PlayUp, who was accused of tanking that sale. And so what a tangled web we weave over at PlayUp, but it appears that another minuscule market share entry is on its way.

Matt Brown (14:22):

Yeah. Brad, one of the things you guys do very, very well is be able to give a pretty good idea of market share for these various brands and where they are. I’m assuming PlayUp didn’t even register. I’m assuming y’all didn’t even bother to put them on the list.

Brad Allen (14:38):

No; 0.1% if not even that, I don’t think. But I’m just thinking. So it wasn’t just the failed FTX acquisition for 450 million. There was even last year, it was going to be taken public as a spec with a $350 million valuation, and that was insane as well. I mean, obviously, Daniel Simic was the CEO there. I don’t know if he was just a superb talker to even get someone to go, “Yeah, we’ll buy you for 350 million or 450 million.” It seems insane given what they actually did and some of the market share they had. So, yeah. Yeah. Crazy.

DFS prop betting rants

Matt Brown (15:16):

Dustin, I want to get to this topic because this is something that I know is near and dear to your heart is what is and what is not DFS. And listen, you and I have played enough of it and understand that DFS in its truest form is definitely skill-based gaming, right? I mean, if you are good at it, you are going to be able to be good. If you’re bad at it, you’re probably going to be bad at it and whatever. We can at least agree on all that. But what actually is DFS is one of the things that has been super interesting somewhere along the way and something I know that is near and dear to your heart?

Dustin Gouker (15:47):

I’m pretty sure maybe on episode one, we weren’t agreeing on any of that of this podcast. Yes, there’s skill in DFS. I still think it’s gambling, whatever. The best players will win … It’s all water under the bridge until we get to today’s era where DFS sites are now basically sportsbooks. Again, not on a legal basis, but a bunch of these apps out there that are definitely offering just parlay betting, and yes, this is my pet project right now to talk about this and spread the gospel of this is going on.


So, there’s a Wall Street Journal piece about PrizePicks yesterday, and I think it’s going to be a huge eye-opener for a lot of people because I can bang my drum. We always talk about we’re in the echo chamber; do people listen to me or us outside of this? Who knows? I mean regulators do sometimes. But this Wall Street Journal piece shows that PrizePicks is like … Take this category of fantasy/sports betting, PrizePicks is the third most downloaded app out here, right? That is going to be eye-opening for people. And the fact that they are offering basically what amounts to parlay betting a bunch of combined two to six props on player outcomes in any sport, again, might be probably legal under a bunch of DFS laws and UIGEA and game of skill laws, sure, but they’re operating in the three biggest states of California, Texas, and Florida, where nobody else can go in other than DraftKings and FanDuel as traditional DFS, but they’re not offering this product that PrizePicks and a bunch of other companies that have basically done the same thing are offering.


So I don’t know where all this is going, but I think the Wall Street Journal piece kind of crystallized that this category is out there, and it’s very large, and it’s quasi-regulated. I mean, yes, they’re registered in some states with DFS, but this is a huge category that is only going to get bigger as long as these big states are sitting on the sidelines. California … Again, we’re not talking decades. Some people have to throw out decades until it is, and PrizePicks and others like them are there offering a placeholder product that is — it’s sports betting light. It’s not the whole catalog, but it’s a lot. So, I don’t know where it’s all going, but FanDuel and DraftKings are getting louder about calling this out. And Ohio regulators have called it out a few months ago.


It’s hard to believe this whole category just continues to exist as DFS. And yes, again, I’m not going to say there’s not skill in picking player prop parlays, but it’s still sports betting. It’s still a sportsbook.


And I’ll stop my rambling and yelling, but the one quote that got me is that the chief legal officer for PrizePicks said they have no interest in being a sportsbook. I have news for you. Your sportsbook, you might just be offering your sports book legally under this network of laws.

Matt Brown (18:46):

Yeah. Adam, this is one of those things where we don’t want to put words in anybody’s mouth, any company’s mouth, or anything like that, but I could only assume after fighting the good fight, the long expensive good fight that DraftKings and FanDuel did to get DFS legalized in these certain states under the parameters that there was. I mean, listen, when it first got legalized, there was still a gray area whether golf was even going to be allowed, right? Because it was like, “Is that single game, or is that multiple?” Whatever and all that stuff. And cooler heads prevailed there. But then now you see something like this, and again, I can only imagine behind the scenes this is heavily, heavily frowned upon, if not cursed to the high heavens.

Adam Candee (19:25):

Well, Matthew, it’s not even behind the scenes for very long. And that’s always what we’ve talked about with this whole situation is that the only way it was going to change is if the big boys like DraftKings, FanDuel, et cetera, were bothered by this, right? And that would mean that they would make some sort of noise, which, of course, would be hilarious given the history of all of this. But at the same time is really the only way that someone with heft is going to create a change. Because what we’ve discussed is that regulators at the state level are inexperienced enough with all of this, that they’ve just been trying to keep up with how to deal with sports betting, let alone trying to figure out is a PrizePicks or an Underdog a DFS outfit, a sports betting outfit? Well, it hasn’t been a problem, right?


But I will tell you, we have some reporting coming today at Legal Sports Report that is going to discuss some comments from one of the big operators that says that there are daily fantasy sites out there masquerading as sports betting. And that seems to be at least an opening salvo to be fired in possibly a bigger battle as we get down the line here for whether or not the PrizePicks and Underdogs of the world continue to operate in the space they have. And that’s why the quote that Dustin gave is kind of farcical all on its own. “We have no interest in being a sportsbook.” Yeah. Why would you, when you don’t have to deal with any of the overhead that comes with being a sportsbook, if you can essentially offer sports betting right as you are right now under fantasy sports laws or gray areas?

Matt Brown (20:52):

Well, Brad that’s I think what it really comes down to, right? Is if you look at it’s like … Look, we can argue the semantics of whether it is, whether it isn’t, whatever. That’s not really — I think in the grand scheme of things — what it comes down to. It’s more that you’re able to get into markets that aren’t available to these other companies. And two, you’re not having to pay the licensing fees and the taxes and all the different stuff like that that comes along with getting an actual gaming license in these states, which I’m sure again is probably pretty frowned upon in the boardrooms for these other people.

Brad Allen (21:22):

Yeah. I mean, it’s worth $10 million a license in some states. And then, it’s all the responsible gambling regulations and things you have hoops you have to jump through and protections you have to offer players. And obviously, these guys don’t really have to do that. It’s a very contentious topic in the island and cry check slack because I’ve covered, I think comments from the AGA before when they’re saying these are illegal operators.


I think DraftKings has said in earnings calls before like, “We need to go after these companies. They’re sort of taking share from us,” but there’s nothing happened yet really, is there? So, I don’t know what prompts a tipping point.


Someone sent me in Q1 PrizePicks numbers, and they’re equivalent to a top five US sports betting operator by GGR and handle. They’re already big. So, I don’t know what tips it to someone goes, right, we need to sort this out or whether that ever happens or whether that kind of gray area is fine, and they’re allowed to do it until the big states go. So, yeah, I don’t know the answer, but it is interesting.

Dustin Gouker (22:31):

And I need to piggyback on what Adam alluded to about. This is funny historically is that this whole problem exists because of DraftKings and FanDuel. They are the reason it exists because they pushed the envelope so far, right? FanDuel created the first generation of DFS. DraftKings did that and iterated on it a bit, and then they went and passed a bunch of laws codifying, “OK, player outcomes, skill, blah, blah, blah, blah. That’s fine.” Then, just a bunch of other companies that came and said, “OK, we’re going to use that.” And further push the envelope and say, “Oh, now you can just do this with player props, and it’s the natural outcome of all this lobbying that DraftKings and FanDuel did.” So it’s very funny that they’re now complaining. I mean, people complaining, they’re not always there during this time when DFS laws were getting written in 2015, ’16, ’17, but it’s crazy because they created this problem for themselves, and now, they’re going to go complain about it.

Matt Brown (23:25):

Adam, one of the things I didn’t really realize living here in Nevada, I didn’t realize how big these things were until I did start to go out of state and then started to pay a little bit more attention just to the content that’s being created. And typically, that’s a pretty good indicator of how these things or how much bigger … If there is content being created specifically for that singular app, I mean, there’s like PrizePicks content on a daily basis getting pumped out, right? I mean, it’s like here are our PrizePick picks for the day and all those things. I don’t get to play it here, so it just was almost out of sight, out of mind. And now, when you go everywhere, you do see that it is fairly popular. You do see whatever. And now, there are people literally that is their bread and butter is making PrizePicks content and things.


And so, it’s pretty wild to see that. I mean, going off of what we’ve seen here with sports betting in general or what like getting teased with it in California and teased with it in Florida and teased with it in Texas, the people who might have had any interest whatsoever, if this gets dangled in front of them, I mean, they’re probably jumping in head first.

Adam Candee (24:29):

And it’s important to keep in mind that for as much as we talk about the prop betting piece, when it comes to Underdog and PrizePicks in particular, that’s not all that they offer. There’s a lot of best ball, and there’s a lot of other contests that are going to look a lot like traditional DFS that you’ve seen down the line for a decade or more. So, when you talk about the handle/revenue that they have, yeah, they offer a wide suite of products that is going to allow them to do that, especially when that wide suite of products is being offered in states that the big boys can’t get into when it comes to sports betting. They are the only ones offering some form of sports betting in those large states. So, is the long-term play to do what DraftKings and FanDuel did and wait until the loss swings your way and then launch full on?


Or is the play to just hang on long enough to where one of the big boys buys you out because you have either a good enough database or some sort of innovative enough products? I don’t think that either one of them has either of those things yet because there’s probably an enormous amount of crossover between those playing DraftKings, FanDuel DFS games and those playing Underdog, PrizePicks DFS games. But the question is, how many out there in those big states that you mentioned are those who would like to bid on sports, who don’t want to bet offshore, who aren’t going to Vegas, who don’t have a bookie, who want to be involved in some sort of legal product? So, is it a short-term play? Is it a long-term play? I don’t really know, but as you said, Matt, when it comes to the content game, they have partnerships with the leagues. They have partnerships in multiple places that are helping them generate this content and get it out at scale.

Matt Brown (26:01):

All right, boys, we made it to 200 episodes and five years of doing this thing. And again, thank you for all the people that do listen on a weekly basis out there. Pretty much weekly basis for everything. I actually got a couple of different texts from people who were asking when episode 200 was going to drop, so I thought that was pretty cool, as well. So I do appreciate each and every one of you guys tuning in and helping us make it to this point.

Top storylines of the legal era


And Brad, what we did with 100 and I want to do it here with 200 again is just looking back over the madness that has happened since you started covering this, since you’ve really gotten into the weeds with everything and just looking back on, what was the really big memories that stand out to you since this stuff got legalized? Because I have a couple that just really stand out to me. But what’s the one thing when people are like, “Tell me what sports betting has been for the last five years that you just point your finger at.”

Brad Allen (26:58):

I mean, the big thing I always remember, especially when working with you guys, I think it was in the midst of the boom, where just everything was silly money and DraftKings was worth $30 billion or whatever, and everyone’s going to the moon, PlayUp was worth 450 million. And obviously, you saw that pretty much entirely collapse and all those companies … I think at LSR, we were sort of clear-eyed for a little bit, and some of these companies were going, “We’re not sure this is going to work.” Fubo’s plan of revolutionizing in-play betting that you can do on your stream and stuff. And it’s now come down to basically four companies that make money. And yeah, a lot of the areas out of the bloom. But I think now, you are seeing some real companies and making some real money, so it’s become a sensible industry perhaps rather than that kind of boom/bust that we went through.

Matt Brown (28:01):

Dustin, whenever you look back here, what are some of the two or three things maybe that really stick out to you?

Dustin Gouker (28:10):

Yeah. I mean, one of them is the biggest cool take of my life is that I was out here in the very post-PASPA era real soon after it saying DraftKings and FanDuel aren’t going to be the leaders in sports betting. Man, I missed that one, so don’t listen to me ever. In fairness to me, when I was putting that cool take out there, FanDuel would get bought. DraftKings had been working on a sports betting project for a year because they see the writing on the wall. The DFS business alone was not going to pay the bills long-term, and they were betting on the come on whether that PASPA would fall, and when it did and after the Supreme Court case in 2017.


So, it’s crazy to me. I’ve been through all of it, and they still lead and everybody’s saying “Still early,” but who’s coming to take their lunch? Nobody’s coming to take the lunch yet, the lunch money yet from them, and I’m waiting for it. And I guess, the biggest question are any of these companies that are out there right now, Fanatics new to the space. I’m curious what Brad thinks about. Sorry, I almost called you Bard, which is our pet name for you. I did call you Bard. Sorry. Brad. Is Denise on 365 coming, or is that a legitimate thing because we talk about that a lot?


I’m not sure I buy Fanatics is coming for the lunch. I do believe in five to 10 years that 365 could come, but who’s going to disrupt the space and that’s what I … I think back and look forward is, what is it, or do we have … We have this top tier of Caesars MGM, FanDuel and DraftKings; Barstool and others pecking at the margins in the next tier. Is that life, or is somebody coming in to disrupt?

Matt Brown (29:58):

Yeah. I-

Dustin Gouker (29:59):

Brad, 365. We talk about 365 all the time. As much as anybody about what their aspirations probably are. What do you think of them as actually coming in to disrupt?

Brad Allen (30:12):

I think they are legitimate contenders and could be number three within a year or two years because I think, A, they’re spending more. They’re getting on the start line of states like Kentucky. I’m sure they’ll be there day one with everyone else. They have 6% in places like Ohio. And I think they are committed to spending it. Obviously, they spend a lot of time Americanizing the product. There’s potentially a license available in Arizona now, so we would suspect them to get one there. I don’t think there’s a huge amount of massive growth opportunities around the globe for them. And I think in the last year and looking ahead in the next two years, they’ve gone, we can make this work now. I believe they’ve started sending over some big names from the UK office to the US to lead up US operations. So I think they are committing people, engineering, resources, money, and I think they will give this a proper go. And based on what they’ve done in the rest of the world, they will probably make a success of it.

Dustin Gouker (31:20):

I don’t think people quite … Oh, sorry. Oh, one more. Just quickly on that. I think-

Adam Candee (31:24):

Dustin is wrecking the podcast.

Dustin Gouker (31:26):

Right. I’m trying. I just want to be the host today, apparently. I don’t think people really appreciate how little 365 has tried, right? They — actually brilliant now five years later — that they were not deploying all those cash to try to win customers, right? They basically said, “We’re going to sit it out until phase two,” and it’s starting to look brilliant that they just said, “Oh, we’re going to sit it out. We’re just going to pick our spots where it’s not too hard to compete, not spend a lot of money in customer acquisition.” It definitely express. I know we talked about them on the podcast, and there’s a lot of words spilled over them, but they have not really tried. Definitely like you said, evidence of them trying and if they try, they are definitely a threat, I think.


Sorry, Matt. I’ll let you host the podcast.

Matt Brown (32:08):

No, no, no. No worries, no worries. But just I was saying, I want to get to some predictions on some of these other companies out there. Certainly, we want to talk about 365 as well and being the one that we all I think genuinely, consensually agree across the board probably has the best chance of really messing things up. But Adam, I do want to get to you, your biggest kind of story in the sports betting landscape really here over the last couple of years.

Adam Candee (32:33):

Well, if we’re going to talk about within the last couple of years, I think you have to point to the sea change from the New York Times series that has come to everyone in terms of views on responsible gambling, views on regulation, potential for federal regulation because it all ties together with advertising, with college partnerships. And I think, you look at how this is going to change, and you see some fundamental ways that sanity came or is coming to the US market in those ways. And sanity is also coming in the financial ways that Brad mentioned. And I’m not going to say that … I mean, correlation is not causation, but there is correlation at the very least there. And so, I think that gives us a little better sense of where the market could be heading.


I think as you talk about, just to add to the 365 piece, Dustin didn’t look in the back end of LSR. If he did, he might have seen a follow-up on the piece that Brad did that talked about how will Bet365 make a splash in the US. And there might just be a piece coming from LSR right now following up on that and looking at the money that they’ve spent, especially in Ohio and some early states here this year.


So, that’s, to me, when we start to talk about the future, right? Whether we talk about 365, whether we see what Fanatics can do, whether we do our annual, what is ESPN going to do?

Matt Brown (34:02):

That was mine. Honestly, that was mine. Mine is still-

Adam Candee (34:05):

Yeah. Go for it. Take it then-

Matt Brown (34:06):

… no, that is mine. Still dangling. I honestly think though, last really truly big, at least off the top of my head like thing that could drop is are they going to do anything? Are they not going to do anything? What is eventually going to happen with ESPN? I mean, Brad, this is one of the deals I know you know but I mean, you’re not living here. Everybody my age, everybody, me, Dustin, Adam, we grew up entrenched with ESPN … ESPN is sports to us, right? I mean, it is … ESPN is sports. There’s no questioning that whatsoever, so that was the thing to me that it was going to be so massive whenever they decided to do, whatever in the hell they decided that they were going to do. And here we sit, still as we record this on July the 28th, still wondering what the hell they’re going to do. And I don’t think they even really know at this point what the hell they’re going to do. But, I mean, I don’t know if you guys have an opinion on what they could mean to the landscape or not.

Brad Allen (35:07):

Look at Fanatics, right? I think the problem that people come in now is that the vast majority of people have FanDuel, DraftKings. And so, when they go to download a sports bet app, they expect FanDuel, DraftKings. And so, I think the problem that Fanatics is facing is do we build FanDuel 2.0? Because then, people know what to expect, and we’d go, “Look, you bought a hat, download our app,” but you’re not as good as FanDuel because they’ve been doing this for five years or four years, whatever. And so, you’ve just bought yours. You are three years behind, or do you build something entirely different?


But then, people, they come to it and go, “How do I navigate this? This doesn’t feel like what I think a sportsbook looks like.” So there’s a bit of a barrier to entry. And I think someone like ESPN, they have the same problem. They’ll partner with someone, and do you just stick an ESPN logo on a standard sportsbook, which we kind of know it is probably not going to work, right? We’ve seen that not work at FOX Bet, or do you try and build something brand new, which is super hard? So I think ESPN is still looking obviously that they did miss the initial gold rush that we talked about. I think they’re definitely still poking the tires and talking to people, and they will probably do something eventually, but I just don’t know that there’s going to be a magic ESPN sportsbook which takes 8% market share and does well.

Matt Brown (36:32):

Well, I do want to throw these out guys just as we make predictions moving forward here because there are people that are still in the industry. We just talked a little bit about what’s going on with Bet365 obviously. The next one that’s super curious is Fanatics. I want to know … Let’s go to Barstool, right? I mean, as a collective, I think we can be fair and say that they have undershot what they probably thought they would be able to pull off with limited marketing and just going strictly with the fan base that they had. I think they had to switch strategies, obviously made some tweaks to different things that they were doing.


Adam, two years from now, three years from now, where we’re doing episode number 300 of this thing, what are we going to be saying about Barstool? Is it still around? Is it rebranded just pin? Where are we at with that?

Adam Candee (37:22):

Well, I’m going to take that for a second, and then, I’m going to kick it over to Brad because there actually is news around this. We can discuss, but we know that Barstool has now been fully migrated onto what you can call Penn’s proprietary technology. You can call it a combination of that and what they got in theScore Bet acquisition. Brad reported extensively on this when Penn was going through their first attempt at migration. And so now, we are looking at a situation where Barstool as a standalone brand doesn’t seem to have translated from media into sports betting. I think we can pretty safely say that it’s not going to be straight conversion of every 18- to 25-year-old who’s on that app into becoming a top sports better. And so, now, the question is can you up the experience with this new technology? And I know, Brad, like I said, you’ve paid close attention to this, so do you think that putting it onto a better tech situation is going to be what helps Barstool?

Brad Allen (38:27):

Well, it’s debatable whether it’s a better tech situation, isn’t it? So, we have Barstool over the last year or so at 1.7% share of the US sports betting market nationally. So, when they initially got into it, they were saying 10% podium position. So, obviously, they way underperformed that. And the last six months or so, on quarterly earnings calls, they’ve been going the product subpar. Obviously, it’s built by Kambi. It’s built by White Hat, so it wasn’t really them, although they did have control over the front end.


And they were going, product’s no good, that’s what we’re doing badly. You wait till we get on our own tech. It’s going to be superb. We’re going to take off. And then, they’re actually going to throw sort of marketing dollars at it. And we were always a little bit skeptical because the product always was solid. It came in seventh in our testing out of 42 apps, and it was fine. And it felt a bit like scapegoating someone else, like scapegoating Kambi and White Hat because maybe there’s other problems like what we talked about earlier. Just because you have a load of sports customers or people watching Barstool streams doesn’t mean they’re going to bet with you. And it also might be an issue that they are all 18 to 25. Maybe they’ve got no money. It’s not like an MGM customer who’s dropping $200 a bet or whatever. These are basically people with less money. So, are there other structural issues?


So, we did publish a note last week on the new tech stack, on the new product after they migrated it. And we did find it was slightly improved in our opinion, and now, it’s subjective. We only had our chief tester do it. It’s not like we sent it out to everyone. And I got angry emails from Kambi and Penn — or not angry emails, but — which probably means it’s accurate. If you’ve upset both sides, it’s like a negotiation, you’ve probably done well.


Kambi saying that obviously, the old one didn’t do well. Penn didn’t upgrade the front end. They spent no money on it, that was why it was crap. It wasn’t our fault. And from the Penn side, basically saying, this is brand new. Now, we’re about to start adding a load of features. It’s going to get a lot better.


So, long story short, we did think it was slightly better, but obviously, it’s not really got any volume yet. So, if it holds up in NFL week one, that’ll be a good test for it. And then, they promise they are going to start adding a lot of features of their own. So, maybe they pull away in a month ahead, and they do get closer to the top tier apps, but at the minute, they’re sixth or seventh in the US by our testing.

Matt Brown (40:49):

Dustin, if we look at Barstool as a whole, I think the only way Penn would pull the plug on the Barstool brand just in general would have to be if the Barstool guys themselves revolted against it. Or because, I mean, listen, they’re the marketing, right? I mean, all these guys with the hundreds of thousands of followers on Twitter, whatever and they’re doing their tweets and streams and whatever and all, I mean, that’s been the marketing to date. And the only way I think that Barstool is not Barstool still in two years or even three years or something like that would just be if all those guys where … They paid for these guys essentially, right?


Also, I think that’s one of the problems writ large in all of this is you are paying for the brand Barstool, but really, you’re paying for the personalities, right? It’s not ESPN where ESPN is ESPN and the interchangeable personalities, it doesn’t really matter. Barstool is those guys, right? I mean, it’s built off of the main characters at Barstool and stuff. And so, you’re really buying the people, and so, I think unless they decide to get the hell out of there or coup or whatever it is or something like that, I think it’s probably still Barstool for the foreseeable future.

Dustin Gouker (41:58):

Yeah. I mean, Penn’s in for a penny, in for a pound, right? What are they going to do, go to a Hollywood sportsbook that’s their brand in regional casinos? If they’re going to continue to play in the regulated online sports betting casino space, it’s going to be Barstool or bust, right? It’s the only option. Yeah, I mean, the tech, I read the Eilers flash note. Yeah, the summation was meh, right? It was slightly better. It’s hard to believe this is the key that unlocks the potential of Barstool, and then, you see people going around, “Oh, they haven’t done any marketing.” This is the value. This is literally the value proposition of acquiring Barstool was “Oh, this is the cheap customer acquisition funnel,” and that’s basically been borne out to not be true.


The funny part is, I feel like I keep seeing Barstool, the media, separate all of that is growing it seems like. It seems like there’s stories about how they’re hiring lots of people from other parts of the media industry, but does Penn care about that? I don’t think they care. From that point is where it’s like, “Oh, we’re sitting on our investment and growing that investment, and maybe they…” I don’t know. It still feels like the long term is this because I really don’t believe Penn wants to be a media company. Yes, they changed their name from Penn National Gaming to Penn Entertainment for many reasons, but I just don’t think they want to be in the media space, so I still think the long term is Barstool itself gets spun out. They license back the Barstool brand. They could still use it. It just doesn’t seem to make sense for Penn.


Again, if this doesn’t work over the next couple years, this new tech stack, I don’t think they’re going to be spending a ton of money on marketing beyond what they do. Although I think there’s plenty of room for Barstool to improve on how they market their product. I could do a mini rant diatribe on that, as well. But yeah, I don’t know what the … I don’t see them as anything more than they are. They have their niche, and what else are they going to do with that? I don’t see how they grow that meaningfully without some kind of major change, and I don’t think that the tech stack is that.

Matt Brown (44:03):

Adam, Unibet, Betfred, Betway, Tipico, again, these are all operators that are operating currently as we sit here again on July the 28th in year 2023. If we’re talking here in two years from now, are we having massive consolidation and whether that’s … I don’t think these guys are obviously not going to get bought up. They would just decide to call it a day. Do you think that we see way fewer sportsbooks in two years, or do you think this is just whatever they’ll put along, it is what it is. Whatever money they make, they make, and it’s not that big of a deal?

Adam Candee (44:43):

You better take Betway’s name out your mouth after they just spent $20 million on an Illinois license, sir. Come on now. There’s some money to be spent now. In all seriousness, the question is not whether a sportsbook can be profitable, right? We know a sportsbook can be profitable. The question is what else do you have that allows you to continue operating that sportsbook? The history of sports betting in Nevada is not standalone sportsbooks. It’s sportsbooks that are able to historically pull a 5% win rate as a larger part of a gaming ecosystem that has much higher win rates than that. And the fact that it just happens to be someone’s preferred type of gambling that has been an amenity at these books for a long time.


So, can you continue to see 11% and 12% holds because everyone is playing parlays and losing and losing and losing? Do they keep showing up for the lottery ticket, right? Your odds are a hell of a lot worse playing the actual lottery than they are playing a three-leg same game parlay. But you’re probably not going to win either way very often. So, when it comes to the smaller operators that you’re talking about, it’s multi-step, right? What level do they have to get to to show a profit and make this endeavor worth their time? And I think the obvious for all of us is, what happens with iGaming legislation, and can they add something of those products to their suites?


And more importantly, a second level, can they add it in a meaningful way that is beyond what DraftKings, what Caesars, BetMGM are already doing? These companies already have hundreds of games in their iCasino suite in the few states where it’s available. They have a product that they’re going to be able to scale out to other states very quickly even if there aren’t that many states for them to be able to do it right now.

Matt Brown (46:39):

I’m glad you brought that up because that was actually my follow-up to Brad. I mean, some of these companies that are more established elsewhere, Brad, your Unibets and Betfreds and stuff like that, are they just kicking the can down the road until we get online casino? I mean, is that basically what we’re doing? And if that doesn’t come sometime in the next two or three years, then they’ll just pull the plug?

Brad Allen (46:58):

Yes. Well, yes for certain companies like Unibet, 888 and SI sportsbook, who have proper online casino DNA, and they’re actually good at the marketing and that kind of thing. Someone like Betfred is a little less obvious what their plan is to me because they are more sports betting DNA in the UK. And yeah, I just don’t know how they keep that going forever. So, yeah, I think there is going to be room for lots of online casino operators to make money. When I say lots, about 10, maybe a dozen up to 20, something like that. I think that’s probably less true of online sports betting operators, especially if they don’t have a niche. I think maybe something we’ve spoken about is like these regional superheroes. Someone like Rush Street, who can take three states where they’ve got properties, and they can take a little corner up in the north, and they can do well off that. But I don’t know someone like Betfred — without again meaning to keep going after Betfred — I don’t know what their identity in the US is.

Matt Brown (48:04):

All right, guys, I want to get out of here real quick. But Brad, I do have one final question for you here because, obviously, you pay attention to this stuff as much as anyone. It’s like Circa versus the world right now. Circa just wants to take on everyone, but it’s like Circa versus the world. They’re saying their model’s better than everybody else, and everyone else says like, “Well no, your model doesn’t work.” And obviously, just look at what we’re doing here. I’m of the mindset there’s room for everyone, right? There’s going to be room for the people who are price conscious and all that. And they don’t care as much about the bells and whistles and really do just want the best number. And I also think that again, there’s still the 98% that want the other stuff. I think everyone can all play in the sandbox together, but it seems like they don’t want to. What is your opinion in this?

Brad Allen (48:50):

So they’ve done really well in Nevada, haven’t they? They’ve got themselves a nice, good business in Nevada. I think it’s close to 10% or 11% of the state revenue, online revenue by our estimations.


I just wonder whether, A, that’s because they have that great property there and because there’s more wannabe sharps or sharps betting into them and because the competition is less good, essentially there isn’t FanDuel and DraftKings in Nevada. So I do think that as you said, 98%, I think it is something like that. They want live streaming. They want cash out. They want SGPs, and they want SGPs in play. There just isn’t enough people who want to bet five grand on the Rams -9. And those people are also … they’re doing that because they think they’re going to win.


So, maybe they’re idiots, and maybe they’ll lose due at 2%. But when you’ve got to pay 20 million for an online-only license in Illinois, it’s just hard to make much money on 2% margins. I think they’re at 4% hold or something Circa or 3% or 4%, something like that. But again, when FanDuels are 12% and they’re taking like 28 times your handle, what’s the better business? That one is just much, much better, isn’t it? So, yeah, I think there is space for them. They’re never going to be as big as another company, but I think there is room for them. Yeah.

Matt Brown (50:14):

Brad, do appreciate you dropping in, man. This was awesome to be able to chop it up with you here on episode number 200. I know we went longer than we normally do, guys. Hopefully, you got something out of this. I think there was some really cool stuff being shared here as we enter into the race to 300 episodes of all of this.


Of course, you can follow Brad over on the Twitter machine @BradAllenNFL. You want to follow Dustin @DustinGouker. If you want to follow Adam @AdamCandee, that is two E’s, no Y. If you hate yourself, you can follow me @MattBrownM2.


For Dustin, for Brad, for Adam, I’m Matt. Thank you for the first 200 episodes.

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