The Rivalry That Changed Sports: How DraftKings and FanDuel Reimagined the Fan Experience

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By Andrew Cohen

DraftKings and FanDuel were once little known fantasy sports startups that overcame near ruin to become the biggest players in the mobile sports betting revolution—and now they’re the subject of Billion Dollar Fantasy, a book that traces their entrepreneurial journeys and once bitter rivalry.

Just how far have these companies come? The NFL recently signed its first official partnership with DraftKings while FanDuel’s presence in New Jersey has the Garden State poised to overtake Nevada as the nation’s sports betting capital. Along the way, there was an FBI investigation into questionable business practices by DraftKings and FanDuel, a blocked merger, the New York attorney general banning DraftKings and FanDuel, and a $750 million advertising war between the two.

The book’s author, Albert Chen, is a senior editor at Sports Illustrated who conducted interviews with several founding members of DraftKings and FanDuel to get the inside story. Billion Dollar Fantasy is available on Amazon and has been optioned by TriStar Pictures, creating the potential for a movie or TV series. SportTechie recently caught up with Chen to get his thoughts on the book and how he sees the sports betting industry continuing to evolve in the U.S.

SPORTTECHIE: When did you decide to write a book on this topic?

CHEN (pictured right): It started during September 2015, during the first few weeks of football season. As Trevor Noah put it on The Daily Show at that time, you couldn't turn on your TV without seeing a zombie, a Kardashian or a fantasy football ad. And that was because these two companies, DraftKings and FanDuel, were on TV every 90 seconds with commercials. It was pretty insane how, for a moment in September 2015, they were the two biggest TV advertisers in all of America. Bigger than AT&T and Geico and Warner Bros. That to me was always when it became a massive story.

SPORTTECHIE: You documented history with this book, but it also reads like updates on current events…

CHEN: I was very much writing this book as events were unfolding. The heart of the book is the origin stories of the two companies. But if these two companies are dead in 2016, which seemed like a real possibility with all the attorney generals that were ruling against them and shutting them down, I don't know that people would want to read a 350-page book about two companies that no longer exist. So even though a lot of the book takes place before 2015-2016, I didn't know what the book was going to be until really 2017. I did a lot of the writing in 2018 as I kind of saw what the ending of the story was going to be like.

SPORTTECHIE: The book covers how states were banning DraftKings and FanDuel because they considered daily fantasy sports to be gambling, which at the time was illegal. But 13 states now have legal sports betting. How did that change happen so rapidly?

CHEN: There is probably a separate book to be done on the achievement of the companies and the industry, and how they were able—with this sort of state-by-state effort—to get bills passed to legalize daily fantasy. People will look back on that as something that was really remarkable. There were all these big questions about the legality of the businesses. And now here we are in 2019, about a year after the Professional and Amateur Sports Protection Act [PASPA] was struck down by the Supreme Court. That paved the way for sports betting to be legalized across the country. So in that moment, these two companies were permitted to exist not just as daily fantasy companies but as sports gambling companies. That’s going to be a large part of their business going forward.

SPORTTECHIE: Is there a central theme to your book?

CHEN: It’s really focused on the groups of founders at FanDuel and DraftKings. Those two companies, which really could not be more different, went head to head in sort of a pretty insane war to win the market. The five founders at FanDuel who came from the U.K. and started their company in 2009, they were not fantasy players at all. The FanDuel CEO, Nigel Eccles, was not a sports fan at all. They were going head to head with this company in Boston, DraftKings, which was founded by three co-workers in Boston. The DraftKings CEO, Jason Robbins, is a super fantasy sports geek. What makes it so interesting is the decisions made by these people really shaped not only this kind of crazy story in 2015 and 2016, but also potentially the sports gaming industry as a whole. Those decisions are what I really get into.

SPORTTECHIE: What else did you uncover as some of the key contrasting elements between DraftKings and FanDuel?

CHEN: To this day people still confuse the two companies. Some people think that they're one company and don't understand that DraftKings and FanDuel are two separate companies. But what's so fascinating about how things evolved is that when DraftKings came along, their strategy was very much, We're going to raise a lot of money and we're going to spend a lot of it on acquiring customers, and we're going to catch up to FanDuel.

FanDuel existed three years before DraftKings came along. FanDuel had a very efficient approach that they were going to grow this industry and acquire customers at a moderate rate that sort of makes sense. And that whole thing was just completely blown up when DraftKings came along and changed FanDuel's strategy.

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FanDuel was less willing to push the envelope in terms of getting into games that were more in the gray area of what might be construed as gambling. They were staying away from golf and NASCAR and daily fantasy games that DraftKings was like, We're going to be all about this stuff, we're going to keep pushing. It kind of goes to this larger concept of when you're growing a company in the early years, let's play things a little fast and loose and really accelerate things and grow, grow, grow.

I think FanDuel got caught up in that as well in terms of just deciding that they were going to raise a lot of money and spend a lot of it very quickly. So it was a mentality of, Let's get that big billion-dollar valuation and then start hurtling towards that IPO. So FanDuel got caught up with that but they had a very big lead at the end of 2014 season where some would argue that they could have been a lot more aggressive. It's very simple, the difference between the two companies is that DraftKings was just hyper-aggressive and FanDuel was, at least in the early periods, much more cautious.

SPORTTECHIE: What sort of traveling did you do to report this story?

CHEN: I traveled to Edinburgh, Scotland, where FanDuel was founded. I traveled to Boston, where DraftKings was founded, and did a lot of interviews in person. I traveled to Colorado a couple of times to try to learn what it’s like to be a daily fantasy professional. There are a lot of players in Colorado who are very successful at playing fantasy games. Then I went to a number of events known as live finals hosted by FanDuel specifically in Las Vegas and California. The book is really hyper-focused on five or six main characters, but I talked to a lot of former employees on background and current employees whose names don't appear in the book, because it was just so important to get their perspective.

SPORTTECHIE: How does your book cover the planned merger attempt between DraftKings and FanDuel, which was blocked by the Federal Trade Commission in 2017?

CHEN: I was very happy as a writer when the merger was playing out because it was kind of a neat ending to the story. These two companies that hate each other come together and realize they need to come together for the good of the industry—and to survive. When the discussion started happening, a lot of it was purely out of the fact that they just needed to share costs. The legal costs alone were just absolutely astronomical. As I was reporting the story, it was almost a foregone conclusion that these two companies would merge. And they were already telling me names of the theoretically merged company, what people's positions would be, how they’ll have offices in Boston and New York, and so-and-so will be CEO. It was all planned and laid out. Then the FTC got in the way and banned this for reasons that had to do with the fact that this merged company would have had 90 percent of the market.

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But what was so funny is that these two companies that hate each other—and these two CEOs that were really at each other's throats—were having meetings together and talking about this bright future that they were going to have together. DraftKings CEO Jason Robbins was going to be the CEO of the merged company. Nigel Eccles, the CEO of FanDuel, would've been the chairman of the board and all of the positions after that were pretty much close to settled. And then everything was blown up.

SPORTTECHIE: Where does the relationship between DraftKings and FanDuel stand today?

CHEN: I think both companies realize that they can both coexist. They don't have to kill the other. There's no one at either company right now that thinks that the other company is a direct threat to their business. They know that they can coexist because there was this larger play at the sports betting market. It's not so much about daily fantasy. In fact, if you look at where things are headed, the daily fantasy part of the business is becoming smaller and smaller and it's all about their play toward sports gambling, which is so massive that it's clear both companies see this as something where they can coexist.

Now do they both want to be number one? Yeah, absolutely. And that's where the rivalry is—who's going to be number one? What's so interesting is that a year ago it seemed like DraftKings had the upper hand. But through football season last year, especially with the rise of mobile sports betting in New Jersey, FanDuel really had an extremely successful football season where now they have the upper hand going into the 2019 football season. FanDuel is in a really good position right now and it's just a matter of how things are going to change through this current football season.

SPORTTECHIE: In September of 2015, DraftKings employee Ethan Haskell won $350,000 in a FanDuel daily fantasy contest. This set off suspicions of insider trading concerns and the FBI launched an investigation in October 2015. How did FanDuel and DraftKings allow their employees to play each other’s fantasy games?

CHEN: In retrospect, what you have is another case of these companies growing so fast that they didn't look closely at a lot of details. Employees playing daily fantasy games is absolutely insane, but the way it happened was these companies started out so small that when you're a company with six to 10 employees, if one of them is playing on one of the other sites it sort of makes sense for them to find out what the other company is doing to learn more about the products and learn more about the business. That was the mentality and the reason why it happened at the beginning. And just very simply no one had time to really look at it again when they were suddenly a company with 400, 500 employees.

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One of the board members at one of the companies would go into a meeting and scream about how excited he is about winning on his site and everyone looking around, saying, Don't you understand how terrible that would be if you won the million-dollar prize?

Once the alleged scandal [with Haskins] hit even people within the companies were looking closely at it. It was even to their surprise how many employees were playing. They decided that it was a bad idea and some people actually left because they were making more money making playing daily fantasy games than they were at their job at FanDuel and DraftKings.

SPORTTECHIE: What sort of integrity concern do leagues have when it comes to legalized sports betting?

CHEN: All of these leagues, whether it's the ATP or WTA tennis or the NBA or Major League Baseball, they have very sophisticated detection companies such as Sportradar that can detect abnormalities and events that raise flags. The integrity of the game is a big [betting-related concern] because technology has allowed for insane betting. In New Jersey, you can not only put money down on whether the Mets are going to win tonight, but you can also place bets on events in every inning, and balls and strikes. The ease with which you can do this is a little bit frightening. You can put thousands of dollars into an account and you can bet thousands of dollars with just a few swipes on your phone. That to me will be the big story going forward.

In daily fantasy alone, a player told me that he had maxed out all of his credit cards, then opened up five more credit cards and maxed them all out. He suddenly had a great bankroll but essentially lost half of it over one weekend playing daily fantasy games. We're talking about thousands and thousands of dollars. For these companies to not limit the amount of money that you can put in gets to how they just grew so fast and were so focused on acquiring customers and becoming legitimate that they really sort of overlooked the finer details of the business that got them into trouble.

SPORTTECHIE: As yearly TV ratings have dropped for American sports leagues across the last decade, do these leagues need to embrace betting in order to continue to profit?

CHEN: It's been obvious to everybody except for maybe the leaders of the leagues that they've benefited more than anyone from fantasy sports and gambling. We're not talking about just now, but over these last few decades. The NFL has benefited tremendously from fantasy sports and from gambling, but at the same time Roger Goodell comes out and talks about how he's against it. As the sports media landscape is changing, it's obvious that fantasy sports and gambling—which is kind of becoming intertwined and sort of all the same—is going to be a big part of how these leagues remain relevant and continue to make money. We can all see that attendance is going down, and viewership is going down as people are consuming sports differently. That is potentially very worrisome for these leagues, so fantasy sports and gambling is sort of the future.

SPORTTECHIE: How do you see the sports betting landscape evolving, and where do DraftKings and FanDuel fit into that space?

CHEN: With the leadership in place at both companies now, they are very well positioned to be the two leaders in the sports gambling space going forward. Now I say that knowing there are new players in the space. Over these last few years, these two companies have acquired millions and millions of users who have habits that can very easily translate to sports gambling. Maybe the larger question is: As betting becomes more mainstream, does an Amazon or Netflix or Facebook get into the sports gambling space? It seems sort of preposterous right now, but if this thing is as massive as a lot of people think, then it probably does make sense for them to at least be a part of it in some way. We're talking years and years down the road, but we're going to get there sooner than people think.
