WITH ITS PAINT-BY-NUMBERS ARC of picked-on brainiacs triumphing over their jock tormenters, Revenge of the Nerds is not in the least bit surprising. What is surprising, though, is how affecting the final scene remains, even three decades after the movie’s release. When Gilbert, played by a pre-ER Anthony Edwards, gets up at a college football rally and declares, “I’m a nerd and I’m pretty proud of it,” ribbons of onlookers stream up to side with him and the other geeks.
I watched this movie again recently, for the first time in probably 25 years. When the band members and cheerleaders climactically marched up to stand with the nerds, and Queen’s “We Are the Champions” began to swell, I was stunned and more than a little embarrassed to find a lump forming in my throat.
It was all so satisfying, right down to the obligatory camera pan to Stan — the pretty-boy quarterback, fraternity leader, and tormenter-in-chief — sporting a look of dumbfounded chagrin. Same for Ogre, the team’s hulking, belching bruiser.
As I spent time in recent weeks inside the operation of DraftKings, the Boston-based fantasy sports behemoth that seems to have come out of nowhere, I frequently found myself thinking about Revenge of the Nerds. When that movie was released in 1984, Jason Robins was not yet 4 years old. Today he is DraftKings’ cofounder and CEO, presiding over a company that in just three years has gone from a diversion run out of a spare bedroom in Watertown to a billion-dollar-and-climbing “unicorn” startup that has defined a burgeoning industry.
In the world of “daily fantasy” that DraftKings occupies, customers pay a fee to enter daily or weekly contests, where they craft imaginary lineups using real-life athletes cobbled together from various real teams and try to win money based on how those athletes perform statistically in real games. Payouts range from milk money to more than a million bucks. DraftKings makes its dough by holding on to about 10 percent of the entry fees it collects.
Up until this summer, DraftKings was largely unknown outside the fantasy sports market. But by the start of this NFL season, thanks to its decision to carpet-bomb the airwaves with television ads, everyone from grandmothers to grade schoolers suddenly seemed to know about the fantasy sports company. Not coincidentally, the image that most people have of DraftKings is the same one the cartoonish commercials hammered home: that of sports-obsessed, Vegas-loving, backward-baseball-cap-wearing frat dudes clutching beer-splashed oversize cardboard checks as admiring women look on. To complete the fantasy vibe, the corporate partnerships that DraftKings has forged include one with Hooters.
Yet inside the company’s 250-employee-strong Boston operation, there is scarcely a dude to be found. The place is dominated by deeply analytical techies — more egghead than cheesehead. In the modern era of nerd chic, of course, the pocket protectors are gone and the taped horn-rim eyeglasses have been replaced with Burberry designer frames. But these guys call to mind the kind of razor-sharp and supremely driven grinders who left you and me in the dust in ninth-grade algebra.
The DraftKings Boston headquarters on two floors of an office building near South Station has the requisite kegs of beer on tap (Sierra Nevada and Bud Light), and workers are encouraged to unwind over a few brews after 4 on Friday afternoons. But the grinding instinct dies hard. Workers tend to carry their plastic cups of beer back to their desks so they can get some more number-crunching done.
Most employees seem to enjoy the analytical side of sports more than the games themselves. When I ask cofounder Paul Liberman which sports he played in high school, he flashes a half wince, half smirk. “I was on the math team. Does that count?”
Leading it all is Jason Robins, who managed to convert a childhood spent poring over box scores in the sports section into a career that landed him on the cover of Fortune magazine in September (edging out Taylor Swift), one month before he turned 35.
It would be easy to picture him running a more conventional tech startup or serving as a sabermetrics-minded front-office executive at a pro sports team. Instead, he has blazed a new path that marries sports and technology in a novel way. Tom Brady is not his hero. Mark Zuckerberg is.
In DraftKings’ real-life version of the movie, Robins and his two cofounders have enhanced their outsmarting of the jocks by an order of magnitude. Ingeniously, the nerds have figured out a way to build their billion-dollar company using the jocks as moving parts.
If Robins is Gilbert as CEO, then hulking Ogre is now working for him. It’s just that these days Ogre answers to the name of Rob Gronkowski (and does paid endorsements for DraftKings).
Robins seemed to be living the ultimate nerd fantasy until two months ago, when, in some cinematic-quality high jinks, one of his employees made a blunder that set off a furious cascade of events. Suddenly, the obscure fantasy world was at the center of a media storm, and troubling questions were being raised about whether the nerds had been taking advantage of legal loopholes and customer ignorance on their march to riches and corporate triumph.
Now they have to be concerned with a lot more than blowback from the dean or Ogre. Robins and his team now have to worry about the FBI, dozens of circling attorneys general, and the suddenly plausible possibility that their booming new industry could disappear as quickly as it arrived.
JASON ROBINS SITS AT THE HEAD OF THE TABLE in the small room labeled Revolution. All the conference rooms at DraftKings bear the name of either a team or one of the 11 sports categories that customers can choose to play on the company’s platform. Robins alternates between furiously thumbing texts on his iPhone and sitting still in his seat, looking the part of tech exec, wearing a shawl-collar sweater and keeping his hands folded in his lap and his index fingers steepled.
Seated to his right is the Rev. Richard McGowan, who teaches statistics at Boston College and whose longtime study of the economics of gambling, tobacco, and alcohol, combined with his missionary work in El Salvador, earned him the nickname “Padre de Pecado,” or the Priest of Sin.
Robins had invited the priest in for a tour on the recommendation of a friend who had taken McGowan’s classes at BC. The CEO begins by thanking McGowan for the thoughtful comments he had made about DraftKings in the media.
“I called you the ‘Uber of Gambling,’ ” McGowan notes proudly. “I should get credit for that!”
“We don’t like to use the word ‘gambling’ to describe ourselves,” Robins replies delicately. “But otherwise, it’s an apt comparison.”
It’s apt because Uber has used innovative technology to disrupt the status quo and reap rich rewards. However, from his research into state lotteries and casinos, McGowan knows as well as anyone why Robins would be so uncomfortable with the word gambling.
While sports betting is illegal in almost all states and casino gambling is allowed only in certain states and under stiff regulations, DraftKings says on its homepage that its business is “100% Legal.” That’s based on an exemption in the 2006 federal anti-gambling statute allowing online wagering on fantasy sports because they are considered “games of skill” rather than “games of chance.”
The carve-out is now wildly controversial, and how it is ultimately interpreted will likely hold the key to DraftKings’ future. Critics point out that it doesn’t supersede any state’s laws and that Congress approved it at a time when fantasy sports consisted of innocuous contests that college buddies might play for a $50 pot across an entire season. They argue that DraftKings and its competitors cagily drove an 18-wheeler through this small opening in the law to create an industry that is on track to collect $4 billion in entry fees this year alone.
Not long into the meeting, McGowan unbuttons his white clerical collar and removes it. Robins is not one to leave things unsaid. “Taking that thing off, are you?”
The Priest of Sin smiles tightly. “It’s hot in here.”
Robins is slender, has deep-set eyes, and is generally serious but occasionally flashes a wide, crooked grin. His voice is monotone, and he never seems to raise it, though he sometimes tosses off mattress-size paragraphs that can leave his interlocutors unsure about where they might jump in.
What has worried him more than the prospect of new government regulation has been his employees’ morale, he tells the priest. “They came here thinking they were building the next Facebook,” he says. “To see us get beaten up in the press, it has been crushing. Overnight, we went from people here being proud to tell anyone you work at DraftKings to suddenly you tell people, and they go ‘Whoa.’ ”
McGowan, who at 63 is twice the age of most DraftKings employees, encourages Robins to remind his team that not too long ago Facebook was taking a beating in the headlines. Most media clouds eventually pass. The Priest of Sin also weighs in on the prospect of wholesale government regulation. “I don’t see how they can regulate fantasy sports,” he says, “and not kill the industry.”
AS A CHILD GROWING UP in South Florida when it was largely a pro-sports desert, Jason Robins adopted the Major League Baseball teams that meant something to his parents: the Cubs of Chicago, where his father had grown up, and the Red Sox of Boston, where his mother had attended college. “Almost 200 years of losing,” he quips.
He found joy in monitoring the box scores. If his father tossed him a stat question about any ballplayer, Robins prided himself on being able to field it, deploying his photographic memory and the same facility for math that would see him leapfrog grade levels in that subject. From an early age, Robins, who was also an expert chess player, had not merely been watching games, like the usual fan. Instead, he’d been consuming them.
Without realizing it, he had stumbled onto an insight that would one day make his business extremely attractive to the pro sports teams that have historically been allergic to anything blending sports and wagering. Because fantasy rosters can be assembled by mixing and matching players from every real-life team, the fantasy industry makes every game — even one between cellar-dwelling squads with zero chance of making the playoffs — interesting and important. After all, a backup wide receiver on a lousy team who ends up having a monster game can give a fantasy customer the edge that helps make him a millionaire, regardless of whether that lousy team actually wins the game.
That, perhaps more than anything, explains the explosive growth of daily fantasy. In making the real games (even the lame ones) more relevant, it has also made them more valuable to the professional teams hawking T-shirts and hats and to the media outlets selling commercials around game broadcasts. With customers caring about what happens not just with the steamrollers in Foxborough but also with the hapless squads in San Diego and Nashville, every self-respecting sports bar has no choice but to spring for the complete package of broadcasts for the NFL — and every other major sport.
The heaviest hitters in pro sports and sports broadcasting lined up to invest in either DraftKings and or its chief rival, FanDuel of New York, pouring hundreds of millions into these young firms. The cash infusion unleashed an arms race as the competitors fought for hegemony, particularly this year going into the all-important NFL season. Although the companies offer contests on sports throughout the year, the start of each football season is when the bulk of new fantasy players sign up.
Robins could have never predicted that kind of blastoff back in January 2011, when he was putting his Duke degree in economics and computer science to use doing analytics in Boston for the printing disruptor Vistaprint. That’s when a co-worker and Columbia grad by the name of Matt Kalish came to him with an idea for a startup. That was on a Tuesday. By Friday, they had roped in their co-worker Paul Liberman, a computer science grad from Worcester Polytechnic Institute. And by Saturday morning, they were setting up shop in the spare bedroom of Liberman’s town house on Maple Street in Watertown.
The three had been restless to start a business, having abandoned their previous idea to create an aggregator of Groupon and other deal-of-the-day websites. The notion to start a company offering a daily fantasy sports platform was the first one that instantly felt right. That was true even if Liberman knew next to nothing about sports and Robins’s baseball career hadn’t advanced beyond middle school. Of the three, Kalish was the only real athlete, having set a record at his New Hampshire high school running a 4:21 mile and continuing on as a member of Columbia’s cross-country team.
It had been during their long training runs that Kalish and his college teammates would distract themselves by endlessly dissecting their decisions in their fantasy baseball league. The new DraftKings venture sought to take the high that players got from their season-long fantasy leagues and offer it on a weekly or even daily basis.
As they soon learned, though, several other small operators, including FanDuel, were already offering daily fantasy sports. While Kalish was crushed, Robins took the existence of competitors as evidence that the business was viable. They would simply need to build a better mousetrap.
They’d spent a year of nights and weekends working from Liberman’s spare bedroom when their chief outside investor asked them a tough question: Why should other investors bet on this company if the three founders didn’t believe in it enough to quit their day jobs? On April 27, 2012, two months after leaving Vistaprint and on the day Liberman turned 29, they officially opened their DraftKings platform for business.
As with many startups, there were problems in the beginning, with each founder trying to weigh in on every decision. They eventually settled on defined roles, taking advantage of their different personalities. Though neither a backslapper nor a particularly charismatic speaker, Robins is an extrovert, comfortable introducing himself to people and confident before a crowd. He took on the chief executive role, lining up investors and forging partnerships.
Kalish is his opposite, a bearded introvert whose ability to disappear into an assignment allowed him to understand the customer experience with a perceptiveness that Liberman says is “like Rain Man.”
Liberman falls somewhere between them, an affable guy who thinks strategically. He insisted on building out their platform so it could be supremely scalable, which helped when their business grew much faster than they expected. Liberman describes the trio this way: If they were invited to an event attended by President Obama, “Jason would have no problem walking right up to him and talking to him. I would be at the bar talking to people there. Matt probably wouldn’t go.”
The DraftKings founders galloped ahead with a go-big-or-go-home approach, inking partnerships with teams like the Patriots, outfits like Major League Baseball, Major League Soccer, and NASCAR, and media giants Fox Sports and ESPN. Although still not profitable, the company has raised $600 million, including investments from the owners of the Patriots and the Dallas Cowboys, and acquired two smaller companies.
Thanks in large part to the ad blitz at the start of this year’s football season, the company increased its customer base from hundreds of thousands to several million. They were on their way.
THE DAY THE FANTASY WORLD was overtaken by clouds, Jason Robins was in London. The New York Times reported on October 5 that DraftKings employee Ethan Haskell had won $350,000 by placing second in a contest one week earlier on rival FanDuel and that Haskell had access to proprietary information about players. Critics cried insider trading.
In fact, the news about Haskell had already been chewed over for days on a fantasy stats site called Rotogrinders, where Haskell had previously worked. The issue had come to light after Haskell accidentally posted the proprietary player data on DraftKings’ site. The company said it had already conducted an internal investigation that found the data had played no role in Haskell’s huge haul that week. (A subsequent third-party investigation said internal time stamps showed he had obtained the proprietary data 40 minutes after the deadline had passed for locking in his FanDuel lineup.)
Still, the Times report took off. Robins and his communications chief, Sabrina Macias, tried to contain the fallout from London before concluding they needed to fly home. After being out of communication for the seven-hour flight, they arrived in Boston to find the story had gone viral. Soon, the company received inquiries from federal law enforcement, and found media crews camped outside the office. Haskell, a friendly, thickset young guy, had to move out of his house temporarily to escape the attention.
The story stoked suspicion, prompting questions about the unregulated new industry. While employees of DraftKings and FanDuel couldn’t enter their own companies’ contests, why was it common practice for them to compete on their rival’s platform? Suggestions of clubby collusion intensified when journalists dug up the results of a McKinsey & Co. study on fantasy sports for Sports Business Journal from earlier in the summer. In the first half of this year’s baseball season, the analysis found, just 1.3 percent of people playing daily fantasy sports took home a stunning 91 percent of the player profits, and 85 percent of players on average lost money.
While the study strengthened the fantasy world’s “game of skill” argument, it painted a devastating portrait of an industry where the vast majority of players were serving as unsuspecting minnows for a tiny population of highly skilled sharks. In many cases, the sharks were using complex algorithms and automated computer programs to devise lineups and bet big on a flood of contests every day. Just the suggestion that some of the sharks might also be insiders, leveraging their access to valuable information to make big money playing on each other’s sites, produced a wave of indignation.
One month after the story broke, Robins sits on the stage of an auditorium at UMass Amherst, fielding mostly friendly questions from business school associate professor Charles Johnson before a crowd of more than 300 students. Asked about the McKinsey study, Robins delivers the company’s honed rebuttal, arguing that the best players are naturally going to win the most money, just like only a small percentage of golfers have the skills to compete on the professional circuit for huge purses. “That doesn’t mean that someone can’t go enter an amateur tournament at their local country club and do well,” he says. He touts customization tools DraftKings offers to allow inexperienced players to play in a “kiddie pool” and block out skilled players they might not want to face.
Rather than seeming chastened, Robins emphasizes his ambition to create the world’s first truly global sports platform, starting with DraftKings’ planned expansion into the United Kingdom by year’s end. (The firm has about 50 staffers in New York and London.)
The long line of students and future job-seekers waiting to meet Robins after his talk includes a guy named Steve Jones. He boasts it was his question at an earlier Babson College conference that had elicited an off-the-cuff comment from Paul Liberman that foreshadowed a world of trouble for the company. Robins continues to shake Jones’s hand, but a look of discomfort passes over his face. “Ah,” Robins says, “the infamous Babson question.”
During that conference, one week before the Ethan Haskell controversy erupted, Liberman had said, “We have some people who make significantly more money off of our competitors’ sites than they do working for DraftKings.”
Both DraftKings and FanDuel quickly imposed restrictions prohibiting their employees from playing on competitor fantasy sites. Liberman admits the new policy is necessary, but argues that’s only because of “optics.” He laments having to deny employees an outlet they’re passionate about. “It’s like you work at a ski lodge because you love to ski. And then you’re told: If you want to continue to work at this ski lodge, you can no longer ski — anywhere.”
Liberman, who grew up in Cranston, Rhode Island, says the most off-base impression of Draft-Kings is that the company is run by a bunch of slick gamblers. Prior to starting the company, “I had never even stepped foot in a casino,” he says. “The three of us have computer science degrees. We’re a bunch of dorks that wanted to build something cool.”
Yet at least some of the image problem is self-inflicted. Think of all those assaultive TV ads with the thick-necked dudes and the voiceover of “This giant check is no mirage, no myth, no fool’s gold. It is our trophy.” And think of the company’s eyebrow-raising partnerships, not just with Hooters but also with the World Series of Poker. Although the founders had no prior experience with professional gambling, some members of the DraftKings team do.
While the company goes to great pains to describe itself as a “game of skill,” its marketing efforts to attract new customers have often sent the signal that anyone who plays has a shot at becoming a millionaire. Of course, there’s a phrase used more commonly to describe a contest where any player can bring home a million bucks: a game of chance.
THE FIRST FRIDAY IN NOVEMBER begins with a meeting in the wide open third-floor space housing DraftKings’ engineering and IT teams. Throughout the crisis, Jason Robins has been upping the frequency of these all-hands meetings to keep the staff informed. Standing alone, in front of a framed jersey of Houston Rockets guard James Harden, he assures the group looking back at him that he’s confident the regulation flap is going to work out fine.
Making the staff feel invested in the operation has been a goal of the founders from the start. “Every employee has equity of at least several thousand shares,” Matt Kalish tells me. “They’ll all make good money if everything continues to go well.”
Just after noon, Kalish and 13 staffers crowd into the Revolution conference room. It’s a meeting of the Product Operations Team, whose members decide on the pricing and structure of the company’s various contests. Today the focus is on setting the size of the entry fee, top prize, and total guaranteed prize pool for the coming week’s signature NFL Millionaire Maker contest.
If the TV commercials suggest a super-chill, bros-will-be-bros vibe at DraftKings, this meeting underlines the reality that no decisions around here get made without voluminous amounts of data. The PowerPoint slides are packed with financial modeling figures. The talk is all about monetization (“how to change the attrition curve”), with a sprinkling of millennial vernacular.
The goal is to encourage the highest number of entries for the “mill maker.” Unlike a concert, a DraftKings contest that “sells out” immediately is a failure, because the company will have left money on the table. A contest that’s sized just right fills up just before kickoff, but not in such a last-minute rush that it strains the company’s servers.
After two hours of mind-numbing number-crunching, the group disbands without a decision. The team won’t pull the trigger until Sunday, setting a $20 entry fee for a contest with $5 million in guaranteed payouts and a $1 million top prize.
THOUGH IT HUMS WITH ACTIVITY, the DraftKings office is often library-quiet. The noise level rises, though, during its busiest two-hour stretch of the week, from 11 a.m. to 1 p.m. on NFL Sundays. That’s because DraftKings allows customers to tweak their lineups right up until kickoff.
It’s the job of the company’s fraud-prevention team to ensure players have legitimate credit cards, aren’t trying to scam the company in some way, such as creating fake accounts to take advantage of DraftKings’ refer-a-friend bonus program, and aren’t attempting to play while in one of the handful of states prohibiting daily fantasy sports. (The company recently found itself having to address allegations that it took in nearly half a million dollars — a figure it disputes — in contest fees last year from players in states where fantasy is banned.) Players who get flagged as scammers get shut out, and that often sends them to the online customer service team.
Overseeing the “customer experience” operation is a 25-year-old bearded guy in a Patriots hoodie, sweat pants, and moccasins. Jeremy McAuley says he typically works seven days a week, so comfy clothes are a must.
When he joined three years ago, no one had heard of the company. “Thanks to DraftKings,” he says, “I was able to buy a house at age 23.”
On a typical Sunday, McAuley’s customer service team will receive upward of 15,000 e-mails. He’s got nearly 30 workers on the clock right now, assisting everyone from first-time players trying to figure out how to lock in their fantasy lineups to regulars who hit a snag entering multiple contests. Around noontime, he shows me the queue with more than 400 e-mails waiting to be handled.
Two floors below, Liberman sits in the glassed-in network operations center, below a wall plastered with six flat screens, each one displaying numbers-dense dashboards that collectively report how well the site is performing.
Just on this one NFL Sunday of November 8, Liberman says, tens of thousands of players will join DraftKings for the first time. So far this morning, before kickoff in the New England-Washington game, the dashboards register no snarls: Pages are loading quickly (in the range of 80 to 100 milliseconds), there are 165,000 requests going to the site every minute, and at this point, just nine errors. When ESPN airs not a commercial but a content “integration” segment highlighting DraftKings’ lineups, the dashboard registers a significant spike in users.
If DraftKings’ back-end operation provides an unusual technological prism for viewing the Patriots’ performance, the company’s digs at Gillette Stadium offer a pretty terrific conventional view.
Later that same Sunday afternoon, as the Pats are rolling their way past the Redskins, I walk with Matt Kalish down the stairs connecting the two floors of DraftKings’ luxury corner suite at Gillette. It’s the only two-floor corporate suite in the stadium, and the 34-year-old Kalish is here today with his wife and daughters, ages 6 and 3.
Seats in the lower level of the luxury box are largely used as perks for DraftKings employees. But the upper level is the domain of the company’s most important customers. The task of schmoozing falls to Jon Aguiar, the company’s head of VIP services and a former professional poker player from Fall River. He strolls the top floor wearing a DraftKings hoodie as dark as his hair and beard, making sure the most important players are happy. Aguiar tells me the high-rollers tend to have one thing in common: They’ve been successful in their careers, whether as stockbrokers or lawyers or entrepreneurs, and they all crave the “intellectual stimulation” of doing lots of research, ponying up lots of cash, and then having the resolve to trust their guts.
Craig Szeman agrees with that assessment. He’s a divorced dad who has brought his young kids with him to watch the Pats from the luxury seats on a beautiful Sunday afternoon that also happens to be his 52d birthday.
Having taken early retirement from his job as a portfolio manager, Szeman got involved in daily fantasy about two years ago. He found the game employed many of the same muscles that had made him successful in finance. “I used to do arbitrage relative-value investing, looking for mispriced securities,” he says. “With DraftKings, I’m looking for mispriced assets.”
Szeman won’t say how much he puts up, but acknowledges it’s substantial money. He devotes several hours a day to building his fantasy lineups, usually five times a week, across several sports, and football is always his biggest play. He insists anyone who understands the fantasy sports world knows the allegation of “insider trading” is nonsense. “But whether or not it’s gambling, that’s a fine line,” he says, adding that the same could be said about the stock market.
“You can get lucky, but you can’t make money over time based only on luck,” he says. “You need skill and hard work.”
When I return home after the Patriots’ win, my 10-year-old daughter asks me where I’ve been. I tell her I was at the game, reporting on a company called DraftKings.
I’m surprised she’s heard of it, since she has zero interest in football or any other pro sport. She says she’s knows about DraftKings from “all their commercials.”
“Do you know what they do?” I ask.
She nods her head and says: “Imaginary football.” The phrase makes me chuckle, even if it’s really no weirder than fantasy football. Then she says something else about DraftKings, with a certainty that catches me off guard: “It’s gambling. And that’s bad.”
Two days later, the attorney general of the state of New York issues a potentially devastating ruling that essentially says the same thing.
ON THE MORNING OF NOVEMBER 10, just hours before Attorney General Eric Schneiderman announces his bombshell decision ordering DraftKings and FanDuel to end their business in New York, the DraftKings team in New York gets tipped off about it by one of the company’s media partners.
The founders feel blindsided. They had braced themselves for tough new regulations, but they never seriously contemplated an existential threat.
Jason Robins is out of town, and he confers by phone with Paul Liberman, Matt Kalish, and other members of the executive team. They agree they’ll need to bring in some heavy legal firepower, among other reinforcements. New York is important to DraftKings for both its high profile and the fact that residents of the state have spent an estimated $100 million in entry fees with the company this year alone.
When the AG’s decision is released in the afternoon, it could hardly be more devastating. In announcing his cease-and-desist order, Schneiderman says, “Daily fantasy sports is neither victimless nor harmless, and it is clear that DraftKings and FanDuel are the leaders of a massive, multibillion-dollar scheme to evade the law and fleece sports fans across the country.”
Liberman can’t get past the word choice — “scheme” and “fleece” — as though New York’s top law enforcement official were equating their tech company with some Nigerian-prince e-mail scam. He steps in to lead an all-hands meeting, admitting to the crew “this sucks.” But he stresses they’ve got a strong case and will fight hard. Making sure the UK launch goes well couldn’t be more important, he says. The implication is clear: In the event they lose lots of players in New York, picking up a slew of new ones in London will surely help.
In the days following the New York bombshell, business goes on at DraftKings, but with more of a bunker mentality than before. Some staffers get pulled off the fun stuff — such as developing new contests — to lend a hand with crisis management.
A couple of employees resign. Liberman says he’s not sure if those departures are the result of normal attrition, but he knows the cloud hanging over fantasy sports can’t be helping.
With the heat on and a phalanx of consultants and law and public relations firms enlisted, some cracks appear in the DraftKings’ message. But the founders insist there is no daylight between them. Liberman says the three haven’t had a major argument in more than a year.
The trio stress resilience. “We are not going to go down with one punch” is how Kalish puts it.
But a week after the New York decision, even with high-powered attorney David Boies lined up to lead their legal fight, a less defiant and more fatigued Robins appears to be taking the whole ordeal personally. “We think we’re on the right side of things,” he says. “Right doesn’t always win out.”
Tellingly, they continue to resist the kind of reappraisal that one might expect this far into the crisis. For guys who are so deeply analytical, they sometimes project the same numbers-don’t-lie intransigence that has found GMs in real-life baseball holding firm to their computer-generated projections of player performance despite the reality on the field.
When I ask the founders if, in hindsight, they regret the assaultive ad buy that made even my 10-year-old daughter associate DraftKings with gambling — an ad buy that their own CFO, Tim Dent, admitted to me “put a target on our back” — they demur. “I don’t have any regrets about the results in terms of delivering new players,” Kalish says, pointing to the huge spike in signups those commercials helped generate at the crucial start to this NFL season. “That was great.”
And when I ask Robins if, as head of a company that must distance itself from even the word “gambling,” he’d been wise to partner with the World Series of Poker, he refuses to fold. “We’ve always tried to advertise in places where we get a group of customers that fits,” he tells me. “Poker, like DraftKings, is predominantly male and is a game. So I’m not going to say I regret that. I think people vilifying us because of the way we advertise, it’s just off base.”
Liberman acknowledges that the marketing blitz, combined with the crazy growth and big-name partnerships, put DraftKings squarely in the public eye. I wonder if there has been any grousing among the staff about Ethan Haskell, because his mistake in posting proprietary information triggered the autumn of troubles. Liberman says no, “and I wouldn’t stand for it if there was.” The story about Haskell’s error “might have been the straw that broke the camel’s back, but none of this was about Ethan.”
On the morning of November 19, Liberman is in his office when another big decision from another attorney general ripples in. He calls up the live broadcast of a news conference from Maura Healey, announcing a raft of new regulations she plans to impose on the daily fantasy industry in Massachusetts.
When the conference ends, Liberman clicks out of his browser and flashes a relieved smile. Healey calls for raising the minimum age for fantasy players, from 18 to 21, and for new mandatory disclosures that let players know who the professional sharks are and how low average net winnings are. She also calls for an end to daily fantasy contests based on college sports. “That’s a tough blow to us,” Liberman says, “but we’ll work on it.”
Overall, though, he’s pleased. “She put together some tough controls,” he says. “But as of today, the people of Massachusetts can play this game, and that’s fantastic for us. We hope that other states follow this.”
“A year from now,” he says, “I hope we look back on it and say this was a defining year for the company.”
I ask what the over-under is on DraftKings being in a better place by the end of 2016.
“Very high probability that we’re in a good spot,” he says. “Does it mean we lose some states? Maybe. But we’ll figure out how to make things work.”
With that, he excuses himself to return to the floor, where he and his team will need all their skill to work their way out of this crisis. Leaving things to chance, after all, would be a gamble.
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