Is a Deal a Deal? | LSR 166
Welcome back to the Legal Sports Report Podcast, Ep. #166! The crew discusses a report that ESPN and DraftKings could link up (00:58), plus white-flag chatter from California (06:19), a threat from regulators up north (11:21), and thoughts on the G2E gaming conference in Las Vegas.
Matt Brown (00:11):
Hello, and welcome to episode number 166 of the LSR Podcast. My name is Matt Brown, joined each and every week by the brightest minds in all the gaming industry with me. We’re back. And I lied to you last week and said we’re going to take this week off. It’s a bonus episode here with Adam Candee, Dustin Gouker. You can follow them on the Twitter machine if you want to. Adam Candee, two E’s, no Y. Dustin Gouker. If you want to follow me because you hate yourself, @mattbrownm2. We’re on all the places that you listen to podcasts. So, please go in, subscribe, rate and review. And if you’re watching this on YouTube, hi. Hello. Hit that subscribe button down below. We really appreciate that. We’ll talk what’s going on up over in Cali. We’ll talk some Ontario stuff. Adam and I will give our G2E thoughts here. But Dustin, let’s kick things off with yes, no, maybe? ESPN and DraftKings?
ESPN to enter exclusive sports betting deal with DraftKings
Dustin Gouker (00:58):
Yeah, there’s been a lot of ink spilled over DraftKings, ESPN, Disney, what all is going on. I mean, Adam and I have talked a little bit privately with our group here who runs LSR, and well, let’s start here. It started with a report from Bloomberg that there is a “large new partnership in the works between DraftKings and ESPN.” As we sit here, this is almost several days old now, but we don’t really have any idea what that means. So, we’ve spilled some virtual ink on this. People have been talking about this because Disney has been talking this up that it is getting into the sports betting space in a real way. Now, “large new partnership” leaves a lot to the imagination as we sit here. We don’t know what that means. I would venture to guess, again, this is my speculation.
We are not seeing DraftKings rebrand as ESPN Sportsbook. That would be pretty wild, in my estimation, because of all the equity that DraftKings has put into building its brand. What this new partnership is, is this just more integration of DraftKings and ESPN content? Is DraftKings going to be the exclusive provider of sports betting for ESPN? And how does that relationship work? We know none of that. So, we are wildly speculating. That’s what I’m sometimes paid to do. And what Adam’s paid to do, though, to wildly speculate about what this means. It could just mean a lot more money in ESPN/Disney’s coffer. It could mean DraftKings is spending a lot of cash for this placement and for potential exclusivity. But we don’t know a lot about it. It does not seem earth-shattering to me.
Just, again, reading these very few words that we have about it. Now it could be. But I’m going to say that we’ve seen a lot about Disney and ESPN talk. Disney talking about, “Yes, we’re going to be doing a sports betting app. But guess not.” I mean, if all they’re doing is taking some more money from DraftKings to be an access provider, then that’s not quite as exciting as ESPN getting whole hog into sports betting. So, all this with the caveat, we’re parsing basically three words about what this partnership would look like. And we’re still waiting for more details on that, which presumably will be forthcoming before the end of the year.
Matt Brown (03:17):
So, Adam, we look at this, and I mean, as Dustin said, I mean, there’s just such a wide range of how this could all play out, right? And so, that’s where we’re really wondering what would this eventually look like were this to come to fruition? Because again, obviously ESPN owns College GameDay. ESPN owns SEC broadcasts. ESPN owns the prize pig in all of football, which is Monday Night Football. They’ve got multiple different channels, multiple different networks, to where they could expand possibly past just Daily Wager, which they already have. So I mean, there’s just massive possibilities, basically, for what this could mean. Or it could mean, like Dustin said, just more money.
Adam Candee (04:04):
I mean, there are any number of questions that get brought up here, Matt, and we can start with another one. What does that mean for Caesars? Because Caesars has been out front here with ESPN for a while. It’s not like DraftKings hasn’t had a presence with ESPN, but it’s been Caesars Sportsbook that not only has been providing the odds, but the Daily Wager studios are at a Caesars property. There’s a whole number of questions that get brought into this, and a number of them to me go back to why have we not heard anything else since this report, right? You would think that DraftKings especially, if this were the real deal, behind the scenes DraftKings would be saying to everyone who would listen, “Yep, we’ve got the ESPN deal. Yep, you can go ahead and count on this.” Because you saw what happened with the stock price.
The stock price soared quickly, then came right back down, and now is back down below where it started. Now to me, a lot of initial excitement now has been taken away from this, and we don’t know necessarily what comes next. So to me, the whole thing is curious at this point. I wonder if maybe Bloomberg got a little bit ahead of itself with the idea of what a partnership would look like. And to all of those people out there, I love our listeners. We meet many of them at places like G2E. If you are saying to yourself, “My God. They’re still talking about ESPN sports betting,” blame Bloomberg.
Matt Brown (05:29):
Yes. Also because it’s the biggest thing still left out there. So, yeah.
Adam Candee (05:37):
Such a joke stopper. Such a joke stopper. I mean, like an elephant raising up his giant foot and stomping down on it.
Matt Brown (05:45):
Listen, this is exactly what I do here, Adam. I’m here to, obviously, make sure that this podcast doesn’t get off the rails, right? I mean that’s my role here and all.
Adam Candee (05:58):
Yeah, it’s on the business card.
Matt Brown (06:00):
All right, Adam. I’m going to stick with you here. We’ll give our G2E thoughts in here in just a second. But I mean this is certainly something that came out of G2E. This is certainly something that has made a bunch of headlines here. We talked about it a little bit last week, but it looks like this whole California thing, people are waving the white flag.
CA sports betting Prop 26, Prop 27 likely to fail
Adam Candee (06:19):
This has been remarkable to watch over the last couple of weeks because the polling, as we discussed, is terrible around both Prop 26 and Prop 27 in California. You’re looking at neither one of them clearing 30% approval right now. Less for the online measure than for the tribal retail measure. And what we heard from both Jason Robbins and Amy Howe from DraftKings and FanDuel, respectively, is that they’re going to say the right thing about like, “Well, we’ll see what happens.” But both of them were already talking about the next iteration of this and the fact that we’re going to be looking toward 2024. It’s over. Let’s just admit that. This is over. It would be the upset of all upsets if either one of these passed come November. And I just find it remarkable that, for as much money as was spent on this, that neither one of these is going to come anywhere close to passing.
And from the tribal side of things, we discussed this last week where, yes, they would’ve stood to gain quite a bit out of 26 because it would’ve given them roulette and craps and the ability to sue card rooms over their games. But in the end, you have Victor Rocha, the chairman of the Indian Gaming Association, on one hell of a Twitter victory lap over the last week or so talking about … I’m going to boil it down to some talk from “The Wire.” If you come at the king, you best not miss. And that’s pretty much what he’s saying when it comes to California right now is that if you’re going to come after the tribes and try to get something done the way that the online operators did, you better come a little stronger than you did because obviously it didn’t work.
Matt Brown (08:01):
Yeah, I’m glad you brought that up because I was going to bring that up to Dustin. Dustin, I’m sure you saw it, as well. I would say more than a victory lap. That’s a whole victory race, essentially. He went 500 on that over Twitter. And Dustin, the thing, though, I guess what I was going to ask you about with this, and he is just one guy and certainly doesn’t completely wield all the power and all this stuff like that. But it certainly seemed like through all of the gloating about the win here and all that, it was basically saying, “It is going to be our way or the highway.” It was almost as if not like a, “Hey, well let’s meet somewhere in the middle,” type deal. It was more of a long like, “Hey, you better understand how things get done around here, or ain’t nothing getting done.” It didn’t seem like there was an olive branch trying to get extended or anything.
Dustin Gouker (08:48):
Yeah. And I think we could have told anybody this, right? That doing it this way, and without the tribes, was a pretty bad idea. They obviously thought they had a window where they could get this through without the tribes really being involved. And they thought, “Oh, we’ll just capitalize on this wave of sports betting legalization.” And again, Matt and I go back to the poker days. Poker got held up for a decade because the tribes were running the conversation. They never wanted it. Again, we go back to this. The tribes wanted the status quo. They again, like Adam said, they would’ve obviously loved to have more table games, some more on the enforcement against the card rooms. That would’ve been great. They were a hundred percent happy spending a lot of money for the status quo and to keep everything the way it is.
That was a good outcome for them for getting everything else. So, then we get into 2024, and yeah, we’re hearing some hopeful notes about 2024. I’d argue right now we are in worse shape for legalizing California sports betting than we were before all of this started. Basically, the sportsbook operators have created enemies out of the tribes. Like you said, they need their support probably to get this through. If they run this same playbook in 2024, you might as well not spend any money because it’s not going to work. And the only difference is they’ve made this very much not about sports betting. These props were not about sports betting. It was about the Prop 27, homelessness was the issue, providing money for that. The winning issue across the United States has been legalized sports betting, and for some reason we just gave that up in California. Like we just said, “Eh, that’s not a winning idea. We’re going to go for funding homelessness.”
Which sounds like a good idea, but people, and I mean Adam can attest to this from seeing advertising. People are confused, I think. Sports betting is not really the issue in California? So, if we’re coming back at this in 2024, you need to reboot. I think you need to bring the tribes in and say, “What do you want out of this?” Tens of millions, hundreds of millions of dollars have been wasted to get nothing passed. And it’s a rare loss in the lobbying efforts across the US. There’s been wins galore across the map, and California will stand out as a pretty big loss, even though we knew this is pretty speculative coming into it. But as I sit here, I’d argue that we’re worse off than we were before this whole proposition movement got started.
Ontario hits $6 Billion in handle for online sports betting, casino in fiscal Q2
Matt Brown (11:21):
Dustin, let’s head up to Canada. And shout out to Julian, our loyal listener. Awesome, awesome human being, as well. Got to spend some time with him at G2E, and just a fantastic, fantastic guy. Listens every single week. So Julian, shout out to you, buddy. Head up to Canada here, Ontario. We talked about the gray market and how that had been going up there in Canada. And look, sports betting existed up there, never really legally, but never really illegally. Kind of just happening. And now, with the legalization, we are looking at some of that gray market, or all of that gray market, going away.
Dustin Gouker (11:58):
Yeah. It’ll be interesting to see what happens. So, Ontario regulators have announced October 31st as the transition period for unregulated operators to end. So, the backstory of Ontario, they’ve been licensing new operators. They have been taking those previously gray market operators that have been serving Ontario but without a legislative or regulatory scheme overseeing them. They have moved those operators now. The one we talk about all the time, Bet365. We talked about Pinnacle getting moved from the gray to the white market here in Ontario. So, in a few weeks’ time here, we have this hard date of if you’re not yet licensed as an unregulated operator, then you’re done in Ontario. You should be done. Now, what does that mean? Are they actually going to enforce that? The AGCO said it’s going to take appropriate regulatory action against any registrant that does not meet the standard once it comes into force.
So, there are certainly still both gray and pure black-market operators who have been serving Canada, the US and elsewhere that are still operating in Ontario and the rest of Canada. And it’ll be really interesting to see, if you are a gray market operator, are you actually pulling out of Ontario? Or is this going to be business as usual after this date? Certainly, I’d say if you’re continuing to operate in Ontario after that date, you’re basically throwing away any chance of regulation in a regulated North American market moving forward. That should be the caveat, I think, that stops people from being in Ontario if they have any desire to be in the regulated market here in the US and Canada moving forward.
G2E FanDuel, DraftKings all but concede on Prop 27 in California
Matt Brown (13:37):
Adam, you and I were fortunate enough to spend a couple of days walking the floor down there, shaking hands, kissing babies, talking to people who are within the industry in various forms, ways, shapes and fashions, and of course meeting some of our new team here. We have expanded exponentially since we started this podcast 166 episodes ago, and was able to share a meal of food with you, as well. So, that was all a big highlight for me. However, let’s talk about the actual conference itself at G2E here in Las Vegas. What was something you took away? I know you took in a couple of the chats, a couple of the education sessions, different things like that. What was your big takeaway from G2E?
Adam Candee (14:23):
So, I think what’s changed notably this year versus previous years with G2E is sports betting is now de rigueur. It is not necessarily the one big thing that everyone is trying to adjust to that there are so many dynamic topics to talk about. It is just part of the ecosystem. And in a way, that’s great, right? We wanted for a long time for legalized sports betting to just be part of the national US gaming landscape. In another way, when it comes to the actual conference itself, I think we had a pretty good sense of what was going to be said, right? I think the stuff that came out about California and what you got out of the CEOs essentially giving up on California for this year is probably the most newsworthy piece of it that came out. But as you and I discussed last week, Matt, we weren’t expecting a lot of technological innovation.
There really isn’t a lot of thought innovation in terms of what’s going on right now. The M&A market, as we know, has cooled quite a bit, PlayUp really being the only deal that has been close to consummated over the last few months here. And so, in a way it is, I’m going to call it, boring for lack of a better word. But in some ways boring is good because in the pre-PASPA days, everything was upheaval. Everything was, “Can this happen?” Everything was, “How do we get this into the US landscape?” And now it is. Now, of course, the next steps are obvious, right? We did have some talk at the conference about the unregulated market and what do you do about black-market operators and so on. But nothing’s really changed there, right? It’s the same as Ontario. Either you’re going to crack down on it or you’re not. And if you’re not, then cool story, bro. So beyond that, Matt, I don’t know. I’ll kick it back to you to say did you learn anything new? Did anything surprise you in terms of what you saw this year at G2E?
Matt Brown (16:14):
Not a ton of surprises. But Dustin, I want to get your thoughts on this because I was sitting in on one education session, and there was the, “Hey, what are you most excited about right now?” And the person said that he honestly felt like that there will be a breakthrough in iGaming over the next 18 months. And that we won’t just only be talking about the few states that have iGaming, that we will be honestly having real discussions about other states getting into iGaming. Eighteen months is a big window. So I mean, maybe so. For me, I hear that, and I say, “Look, for an optimistic standpoint, I think for sure that’s possibly something that could come down the pike here.” But I’m curious as to your thoughts because it was something he was genuinely excited about that we will be having honest, real discussions about iGaming happening throughout the rest of the country.
Dustin Gouker (17:12):
I’m selling on that idea, as always. We’ve been through this before. We’ve sat here and OK, we legalized New Jersey back in 2013. Everybody, “Oh, that’s going to be the start of that wave.” Guess what? No. Pennsylvania, five years later. Legalized. Oh, that’s going to be the start of the next wave. No. Michigan launched last year. Oh, that’s going to be a start of the wave. And now we’re sitting here almost two years after the Michigan launch, and we’ve had Connecticut, we’ve had West Virginia in the interim. We have not gotten to a critical mass, and this conversation has not advanced based on this, “Oh, we’re having real conversations.” That being said, yes, there’s a real opportunity in New York, I think, for legalization. They set the stage this year. I’d still put it as a fairly heavy underdog. Indiana, there’s going to be a real push to legalize online casino, as well.
But there’s not this groundswell of everyone’s getting into online casino tomorrow. That is not going to happen. I do think over a longer horizon, 18 months, five to 10 years, I do think we’re going to see more adoption. These companies that we talk about week in and week out on this podcast need to be an online casino, as well, and again, it doesn’t make any sense to just have one segment of online gambling in your app. If you’re going to be in online gambling, you should be in online gambling. And we have been reticent to do that because of the way the US has been slow — relatively slow — to adopt land-based casino gambling. And then, we’re going to see this eventually. The fact that we’re still basically in the dark ages of online gambling, it’s going to change. Eighteen months?
That’s optimistic. If we get another state in the next 18 months, that would be a huge win. We’re not going to start seeing US sports betting that dozens of states legalize some form of sports betting. We’re not going to see that in the next 18 months. We are going to see, I think, more bills, too, which is again, setting the stage for three, five, 10 years down the road where maybe we have. But we’re never going to have as many states that have online casinos as we have sports betting. It’s just a different product. The morality police are not the same on sports betting.
We’ve discussed that on this podcast. But yeah, I don’t believe that in 18 months there’s going to be a sea change in online casino. I’d say G2E, it should be changing into more of an online gambling conference. It’s just not going to because all the money is in slot machines and the vendors and the products that are sold to land-based casinos. That’s the industry writ large here in the United States. We have not made that transition. Until we make that transition, it’s always going to be this little side project of a lot of these. But BetMGM, DraftKings, FanDuel, Caesars, these are online casino companies, as well. And they need to be pushing into that in any state where it’s a possibility.
Matt Brown (19:54):
Adam, you and I had a brief conversation about this, but I think just for the podcast audience, as well. One of the things that was talked about, I talked to several different people out there and not just from a sports betting side of things, but from a gaming side of things, as well. And I guess we don’t really realize because we just feel like we’re out of the woods. We’re whatever, but the entire 18 months of basic real shutdown due to the pandemic then. Some companies operating out of an abundance of caution not getting people back into the office and doing different things or whatever. From an innovation standpoint, they were saying, “Look, we’re really just now getting back in the groove or whatever. So, we’re hopeful this time next year that we will have at least something interesting to pitch or exciting to pitch or whatever it might be coming down.”
And then, even from a gaming side of things, yeah, you can’t go get a car. We know that. But you got to think where else are microchips used and what are basically all microchips and slot machines and gaming tables and things and all this stuff. And one of the guys told me I could get a massive order right now. I wouldn’t be able to fill it because of the supply chain issues. And so, even though we all, from a life standpoint, have moved on, we’ve got to understand that lagging behind is going to be that innovation stuff, the supply chain stuff, all the different things like that. So, even the 2022 version of G2E looked a lot like the 2019 version of G2E for all of those reasons.
Adam Candee (21:23):
And I think you can actually take that and piggyback it into the iGaming discussion and see where land-based operators who might not be able to fill that demand with what you’re talking about, right? New machines, innovative equipment, et cetera. People who might be reticent to come back to a casino, you could see where that could lead to a softening of some of the land-based opposition to online gaming that makes part of the legislative process so difficult around this. And again, that is a glass, I’m going to say, a quarter full view of this.
Matt Brown (21:23):
Adam Candee (21:55):
Because in the end, you’re still going to have massive opposition from most land-based operators to the idea of online gaming cannibalizing their product, most especially from any state that has a tribal interest. And so, the idea that was espoused of 18 months being a horizon for iGaming legislation, I need to have a serious discussion with this human being to say you are Pollyanna in the worst of ways for putting this idea even out there because it’s not going to happen.
There’s no way. I don’t like to say things like that on this podcast very often of like, “That’s never going to happen.” It’s not going to happen that way. There are a million different ways that this can be opposed successfully. And as our old colleague and founder, Chris Grove, used to say, “It is a lot harder not to pass a piece of legislation than to pass a piece of legislation.” And so, when you talk about all the things we’ve talked about. And by the way, just to add one, California and the idea of what the tribes used against Prop 27, this ad with a teenager sitting at the dining room table betting on sports on his phone. Which is, of course, ridiculous and not plausible. But that is the same boogeyman that’s going to be put out there against iGaming legislation in a much more effective form.
Matt Brown (23:12):
And guys, I feel like we do this every year after G2E. But honest to God, I talked to at least a dozen different people who stopped me and said that they listen to the podcast on the regular, really do enjoy that we can sum up what’s going on in a week with a pretty fair and unbiased opinion on everything. We really are trying to just report as much as humanly possible on this slight little opinion stuff here and there. But look, Adam and Dustin and all the team out there really does.
They pour through all this stuff and listen to these things and read all these things and have these sources and people telling us stuff because they’re a trusted source of information. And a lot of people said that they really do each and every week. So, thank you guys for the support of the pod. I really do appreciate you guys listening and stuff like that. I wouldn’t be able to do this without those guys and everyone that they’re doing. I have the easy job. I basically just tee it up and let them knock it out of the park. And so, Adam, Dustin, tip of the cap to you guys, because honestly, had multiple people talk to me about you guys, as well.
Dustin Gouker (24:13):
It’s great to hear.
Adam Candee (24:13):
Why, thank you.
Dustin Gouker (24:14):
It’s a labor of love for Adam and I, this podcast for the years we’ve been doing it.
Adam Candee (24:19):
Did anyone, Matt, by the way. Did anyone say that they are following you on Twitter because they hate themselves?
Matt Brown (24:26):
No. More than anything, it was, “Have you always worn glasses?” And I’m like, I actually have not always worn glasses.
Adam Candee (24:34):
No, that is true. And I should have known it would be about your beautiful appearance.
Matt Brown (24:39): It wasn’t even that. It was just like, “Oh, I didn’t know you wore glasses.” I’m like, “I actually probably didn’t last time that you saw me or if you ever.” Whatever. Yeah, it’s a new thing I just found out I can’t see. So, yeah, it’s a new thing for me, as well. Guys, if you want to follow Dustin and Adam on the Twitter machine, you should. It’s @dustingouker, @adamcandee. Two E’s, no Y. And of course, subscribe, rate, review on the audio side. If you’re watching us on the video side, hello and hit that subscribe button down below. We really do appreciate that, as well. Everything we do, everything we talk about, you can find over on legalsportsreport.com. So, please go and take in all the awesome words over there. For Dustin, for Adam, I’m Matt. Talk to you guys next week.