The following is the unofficial transcript of a CNBC interview with FanDuel CEO Amy Howe from the CNBC Evolve Global Summit, which took place today, Thursday, November 2nd.
All references must be sourced to the CNBC Evolve Global Summit.
Contessa Brewer: Amy, it's great to have you here today, five years since the Supreme Court decision that paved the way for states to legalize sports betting and we've come a long way really fast. How would you assess the state of the gaming industry?
Amy Howe: While Evolve is certainly an appropriate theme for online gaming. Listen, I think there are a few sectors in the world that have evolved as quickly as online gaming and are continuing to do so right before our eyes. You know listen, five years in since the repeal of PASPA, where the Supreme Court decided they'd let the states legalize online gaming. I think the only thing you can say is that it is massively exceeded our expectations, where, you know, at about 50%, a little less than 50% of the U.S. population can bet legally. And if you think about you rewind the clock to 2019, we had three states, we're approaching, you know, 24 states, which puts you at about 50% of the population. But I think the exciting thing is the amount of runway we have ahead of us is just massive, right? This could be potentially a $40 billion market. Now you need the big states like California, Florida and Texas to legalize and igaming to pick up momentum, but no doubt that this is you know, massively exceeded expectations from day one.
Brewer: In a lot of ways, it is like the Gold Rush where everyone's going into the wild west. And they're elbowing each other aside, trying to stake out a claim having no idea whether there's actually gold to be found. And we're already seeing the repercussions. We've already seen some of the entrants, the people who – companies that got licensed for sports gambling have now decided to throw in the towel on that. And you have newcomers still coming. Talk to me a little bit about how you see the digital part of this business versus what we know Americans want after the pandemic, which is experiences, and how that plays into a strategy where you know, you were online first and foremost, but definitely have a retail presence and ideas about bricks and mortar.
Howe: Yeah, you know, it's interesting because if you look at the field right now, you have companies like FanDuel that are coming out this digital first right? We are digital native companies and then you have other companies that came at this, you know, from a brick and mortar prospective and are now moving online. I think the reality is consumers – there's a role for both. What we have very much focused on from day one, you know, and this goes back to – stems back to our heritage and the daily fantasy sports days is giving consumers the best possible experience online. Right? We have been obsessed about that product experience. And if you think about what's really taking off right now in sports betting, it's a lot around the player narratives and player props and the excitement of live betting and a lot of that stems back to the early DFS days, right? Where you're studying, you're picking, you're drafting your team and so you understand who those players are and how they're performing on the field. You know, the retail to your question does play an important role for us, it plays a different role. That omnichannel consumer tends to be quite valuable for us the retail component is important because it also gives us access as an online player. That those experiences online are meaningfully important, I think that's driven a real advantage for us.
Brewer: In this industry, your competitors and you all the time, it comes up – this omni channel approach, which means digital, retail and bricks and mortar. It means the media component as well. I mean, you're even now looking at Taylor Swift becoming part of a storyline that is driving action around where people place their bets.
Howe: Yeah, I think what's most exciting about the role that we're playing in, you know, live sports right now is that we're not just a betting platform, right? We are driving engagement to the broadcast and to the sport for NFL and NBA and you know, every sport you can imagine that I don't think you would have thought was possible five years ago. To your point on Taylor Swift, right, she's now on the scene and Travis Kelce bets have been unbelievably popular, but you know, you look at the NBA that just tipped off last week and there was a rookie Wemby from France who is now one of the most bet on players even over LeBron James and Steph Curry. So the role that we're playing is really phenomenal. And you know, I think if you look at FanDuel right now we have one of the most engaged platforms of sports users. And so we're able to partner up with the NFL and Sunday Ticket, right, we just partnered with Google this year, and YouTube on their first year of Sunday Ticket and we're driving great engagement to that product, the same way we are with the NBA and League Pass.
Brewer: How important then are the partnerships that you're making? I mean, for instance, people can probably hear the sirens, we're in New York City. There is so much competing for attention in a city like this. What do you want to do? You want to go to a show? You want to go see live music? You want to go for a run through Central Park? There are a lot of ways for people to spend their entertainment dollars. So how important are the partnerships in trying to keep those discretionary dollars at FanDuel?
Howe: Yeah, they're critical and you think about it, because we're still in the early days, like any ecommerce business, there's a race for eyeballs and a race to make sure that we can responsibly bring the best consumers onto our platform. And so the partnerships I mean, these are partnerships that we've been building up for years long before online sports betting was legal in the states. And everything from making sure we've got the right market access partners Boyd and – are phenomenal partners. But we partner with the biggest leagues in the world, right, NFL, NBA, the PGA Tour has been a phenomenal partner, WNBA. And what that allows us to do is it allows us to really elevate our marketing capabilities, right? When you're watching, you know, NBA on TNT, you see Charles Barkley who's talking about same game parlays and Kenny Smith, it's been a huge part of, you know, bringing the right users onto the platform, but also really driving the right level of engagement. And so it's been critical to our success.
Brewer: Well, ESPN has years and years under its belt of driving engagement and catering to its customers and trying to win new customers. How concerned are you about the tie up between ESPN and Penn Entertainment about relaunching as a sports betting platform and Fanatics coming in and snapping up gaming licenses and being able to offer sports betting to customers who currently are buying jerseys and hats and branded merch?
Howe: I think one thing you have to remember is that you know five years in there's already been a lot of very well capitalized, very strong competitors on the field and we'll continue to see more of those right, because we're so early on. I think what we know is you've got to have a superior product experience, right? At the end of the day, if your product doesn't work, it doesn't matter how great your brand is, you got to have, you know, a really phenomenal experience. But at the same time, one of the things that we're seeing which is not dissimilar to many ecommerce industries, is that you've got to have scale, right? And this year will be a very important inflection point for FanDuel, but I would argue for the industry. We should be the first U.S. operator – online operator to be profitable on an EBITDA basis for the full year right, which –
Brewer: And EBITDA, the earnings before interest and taxes and all of that. That's the crucial profit metric in this industry.
Howe: That's right, in any industry really. And what that means, you know, we talked about a scale advantage, why is that relevant? Well, it's relevant because in a world like online sports betting, where you've got – the barriers to entry are high, right? You can't just pick up and decide you want to be an online sports bettor. You have to be licensed, you have to navigate a very complex regulatory environment. There are significant costs to spend in creating a great product and technology platform. And oh, by the way, you're spending a lot of money making sure that again, you can responsibly bring consumers to your platform. So it's certainly not for the faint of heart. And if you're sitting there with a low single digit share, and you don't have that scale advantage over time, it just becomes harder to reinvest back into giving what consumers want.
Brewer: How much of your energy and effort are you thinking about igaming? That is playing casino games online, which, according to some of the research, estimates that it could be seven times more profitable than sports betting.
Howe: Yeah, igaming is a nice part of the overall value proposition. Right now, there are about five states that are legal, which puts it at about 13% of the population. It hasn't had the same regulatory momentum coming out of PASPA. But we do believe you'll see more of that over time. And what we're seeing is the crossover between –
Brewer: Why? Would we see more of it? Is it because states want the tax revenue? Is it because sports betting has made it more acceptable to bet generally?
Howe: Well, the reason it hasn't so far, and what you'd have to believe to think that it will open up is you know, there's – it's a bit more complicated because you have more stakeholders, right? If you look at some of the tribal relationships in California, in Florida, it's a good example of why it's been a bit more challenging for igaming. But I think over time, what you'll see is that when we can create – we demonstrated that when you create a safe and legal environment for consumers to operate in, it's actually good for consumers. But importantly, it's also good for the government as well, because those funds are then going to meaningful causes within the respective states.
Brewer: And do you think that AI will come in and change the business model? How much emphasis are you putting on that to push the industry forward? Or I don't know do you consider it a threat?
Howe: It's a great question and both is the honest answer, right? I think there's not a company out there that isn't trying to figure out the role that AI is playing. You know, for us, there's a number of things we're looking at from improving tech productivity to using artificial intelligence and machine learning to identify what we consider to be risky behavior and proactively shut it down before it becomes an issue. So there's a number of ways right, that I think AI can ultimately be very beneficial to an online gaming company. The flip side is that, you know, there's a lot of bad actors out there that are also using sophisticated technology to target our platforms. And so we've got to stay vigilant.
Brewer: We saw with MGM and Caesars bad actors getting into the system, not even through AI or particularly complicated technology to get in. A human let them in. But that's got to be top of mind for you.
Howe: It is because you know, on the one hand, you saw the visual of thousands of consumers waiting to get checked in at MGM or their favorite Casino. But imagine millions of consumers trying to get onto your platform and they can't because a bad actor has shut it down. So it's something that we say, you can never be good enough here. And you know, it's a huge focus from Flutter on down throughout our entire organization.
Brewer: Amy, you've also told me you're very concerned about the specter of underage gambling. And you were an early on insister that FanDuel would not be part of sponsoring college athletes, name image likeness for college athletes. Why are you concerned about that?
Howe: Well listen, for two reasons. I mean, I guess in some ways, I wear two hats. I'm the CEO FanDuel, but I'm also a mom of three teenage boys. And you know, on the one hand, we sit here and we talk about how much progress has been made in a very short period of time. On the other hand, you know, I look at my home state, California, where sports betting is not yet legal, and it's becoming – as sports betting becomes more mainstream, I think the distinction between a legal regulated sports bettor like FanDuel, and some of the, you know, offshore operators who are not operating legally and protecting consumers, that line starts to blur and it's confusing. And so what that means is you can have, you know, underage kids who are on these platforms and, you know, not being protected by some of the tools and controls that we have in place because we're regulated.
Brewer: And the truth is, your teenage sons and everyone else's teenage sons are going to grow up in a very different United States than even five years ago because the availability of sports gambling is broad, because we see the advertising now in ways that we did not see even five years ago. How much does your strategy around responsible gaming come from your parent company Flutter and the vast experience – it's a much more mature gambling market in Europe, and there's been massive regulatory backlash now in ways that we have heard on earnings calls have disrupted profitability in Europe. How much does that then come in and sort of set strategy or inform your perspective?
Howe: Hugely, and you're right. I mean, listen, I see it with my kids all the time. Gaming and sports is just endemic, right? When kids are drafting their fantasy sports leagues, and they're watching four different games on Sunday, it's just it's part of the culture and there's a really positive aspect of that, right? But the unintended consequences if it's not managed the right way that you know, there can be challenges over time. To answer your question about the role that – if I think about the where we sit within Flutter as the largest global gaming operator, we have the benefit of hindsight, right? Of looking at some of these more mature markets, UK and Ireland and Australia, and knowing full well that, you know, if we can lead the industry and the sector the right way and build a responsible set of tools and a responsible sector, if you will, I think we can manage this in a way that you don't have some of the more draconian measures coming in late in the game because the flip side of that is if, you know, if regulatory bodies come down too hard, all that does is it pushes consumers back to the black market. And so we have the benefit of within Flutter, right? We know what works and doesn't work in terms of how we build good responsible sectors. And I think it's a huge priority for me as a CEO and our company.
Brewer: As CEO, you're also bringing some diversity to the table in terms of your background that you did not grow up in gaming, you didn't grow up in the fantasy sports world. You didn't even grow up in Wall Street like some other leaders of casino companies. So tell me a little bit about your background and what you're bringing to the table that might make your leadership look different.
Howe: Yeah, it's, you know, I reflect on that question a lot. You know, I was a partner in McKinsey for many years. And then I ran Ticketmaster during the pandemic, which you know, the entire live entertainment industry was shut down and then I came over to FanDuel. And I think it has given me a different perspective. Well, first of all, when you go through lots of different ups and downs throughout your career and in different challenges, it gives you perspective having come from different industries. At the same time, you know, I've always been a very competitive person. Growing up as an athlete, that's just part of the DNA I bring to the job every day. But there's also an element that I think for me one of the biggest things I learned during the pandemic was how to manage through ups and downs. And the reality is, we are living in a world right now that is changing so quickly and so rapidly and so your ability to navigate through that is really important.
Brewer: And then, I've watched you with people in general, all people, but especially with women, looking to actively put them in touch with new opportunities, and regardless of whether it was going to benefit you and your company at all. Talk to me a little bit about how few women are in gaming. If you go to a gaming conference, I will say, you don't have to say it. You look around, it's mostly men, and I love men and I'm happy that they're there. I also am curious about why there are not more women when we look at sports, I mean, half of the NFL fan base are women. Why aren't we seeing more women and how does that change?
Howe: You know, listen for me, this is something that I'm deeply passionate about for I think for two reasons. One is it presents an amazing intersection between what I think is a huge business opportunity, but also something that I'm personally very deeply passionate about. And I think if we can get momentum on several levels, there's a real flywheel effect in and of its own right. And so, the way we think about it is to your point, 50% -- 40 to 50% of NFL fans are women, right? How do we make a product that is more consumable? We're working with the WNBA right now, the stats from 22 to 23 are unbelievable right, over 160% increase in betting activity in one year alone. But you know, you need to have a betting product, you need to sponsor and align yourselves with, you know, with powerful leagues and female athletes. But we also have to figure out how to reach that consumer authentically, right? The product needs to be in some cases a bit more intuitive and we also need to find out the right channels. And you know, as you said, for me a big piece of it too is how do I always connect the dots between talented women in my organization and other diverse talent that could be part of what we're trying to build here at FanDuel? And I think if you get all of those dimensions, right, again, it can be a really powerful benefit.
Brewer: What does that mean? That you're looking beyond just expertise in sports, expertise in writing the odds, expertise in digital. That you think that people with different backgrounds in other areas could be useful as part of a puzzle that makes up the success of FanDuel?
Howe: Yeah, if you think about what we're doing, what we're doing is hard right, to continue to reinvent the product and the experience and make sure that you're best in class around marketing and how you're giving promotions to consumers. You need people that really understand the core betting consumer, but you also need diverse points of view right, from other industries. I always describe it as diversity of thinking. And that comes from looking at people in different industry and it comes from bringing different points of view to the table. So you know, it's something that I'm passionate about, because in the end, I know that it's actually going to drive better performance and it's also just going to drive a much more engaged workforce. At the end of the day, if I can't win the war for talent, doing what we're trying to do today and into the future is really hard.
Brewer: By the way, that effort to get more women in as part of the customer base is not happening not only at FanDuel but all across sports betting in general. Where do you think this industry is going to be in another five years?
Howe: Oh, my gosh, five years feels like a long time, right? If you think about how much has changed in such a short period of time. You know, I'd say a couple of things. One is I feel very good about the position that we're in right now. But I know we need to keep reinventing ourselves. At the end of the day, competition is a great thing for consumers. So I think you're going to continue to see even more innovation on the product front, both in terms of the assortment, right, live betting is really taking off, but also the user experience. I think you're gonna see, you know, I think we're all trying to figure out what is it beyond product and great promotional vehicles that will ultimately drive even more loyalty to the platform. But I'd also like to believe that as an industry, we will have come together and we've figured out how to grow the sector in a responsible way so that we're well ahead of any sort of regulatory backlash. A lot more to come, but it's been an amazing ride in a short period of time.
Brewer: Thank you so much for being part of CNBC's Evolve, Amy.