00:00It's an interesting partnership, and I think that's where we should start.
00:03How much does this move the needle for you?
00:06You know, we've talked in the past on this program, Jason, with you about the integration
00:09of the live sports event and the broadcast with the betting activity.
00:15Your big picture goal with this deal.
00:20Well, first of all, ESPN is a, you know, iconic brand.
00:24It's, you know, by far the biggest name in sports in the United States,
00:28and they have an incredible portfolio, an unmatched portfolio of sports content, influencers, talent.
00:34So it's really, you know, for us, just the greatest partner you can have when you're in the space we're in.
00:41And Jimmy Pitaro runs it, really understands and I think values the sports betting space
00:47and understands that the customer overlap is high,
00:49and it's important that they engage their customers by being partnered with somebody like DraftKings.
00:54So really excited to embark on it.
00:56We've been partners with them many times in the past, so it's familiar territory.
01:00We know all the people there, and we're looking forward to working together.
01:02And you add that to our deals with NBCUniversal and Amazon and, you know, others,
01:07we have an unmatched, I think, presence across the sports landscape over the next several years.
01:13Prediction markets.
01:15Wednesday night, we were with Robin Hood at their in-person earnings call.
01:20That was wacky.
01:20Don't know if you consider that.
01:22But the month of October, massive volumes for them.
01:25You're being super thoughtful about predictions.
01:27I understand that.
01:28And you have a clear strategy.
01:30My question has always been how much a growth in a nascent predictions market cannibalizes other offerings that you have.
01:39I think very little.
01:41If you look at the UK, for example, exchange-based betting is about 5% of the total pie.
01:47So, you know, that's probably about right.
01:49And I think a lot of it is largely incremental because there are market makers and others that are not present on traditional sports books that generate a lot of the volume.
01:58So I think it's very much an incremental opportunity for us, and that's why we're so excited about it.
02:03We acquired RealBird, and we're also looking to, you know, enter the market sometime in the next couple of months.
02:09What's interesting, Jason, is investors, analysts out there called out on the actual earnings script talking about how marketing expenses, higher sales expenses did eat into the results.
02:22And they call them also some ugly outcomes when it comes to the sports games for that you can't control.
02:27But what about the expenses you're going to have to have on the predictions markets?
02:30Well, we do plan to make some investment there.
02:34We mentioned this on the call that we're going to be more, I think, conservative in terms of the paybacks we're looking for, just given how nascent a space it is and the fact that, you know, it's unclear kind of how this will all play out.
02:46But we are going to make some investment there, first, of course, in getting a product developed and making sure that that's, you know, the best in class.
02:53You can't win.
02:53And we've always said this product is the most important thing.
02:56You can't win if you don't have a great product.
02:58And then, you know, assuming that the numbers check out, we'll spend marketing accordingly.
03:03We're going to be very data driven like we always are and everything.
03:05We will test into it.
03:06But we did want to make sure as we guided that we were thoughtful about giving the team some space to be able to accelerate spend if the numbers look good.
03:13And therefore, the guide did pull back rather than uplift going forward, Jason.
03:19But you say it's conservative.
03:20You talk about an incremental opportunity from predictions.
03:23And I'm really interested as to how you make sure this doesn't cannibalize what you already have out there.
03:28You've talked a lot about how this might actually make more states accessible to sports betting, because at the moment you can get 50 states with this predictions market.
03:35But what you've got, 25 at the moment for your offering.
03:38And you're about to have and you also have D.C.
03:40And then you're adding Missouri.
03:40Yeah, I mean, I think you're exactly right that this will hopefully lead more states to decide that they might as well legalize sports betting.
03:50It's I think predictions are a powerful talking point for that, because, you know, same as the illegal market, same as anything.
03:56In this case, it's regulated.
03:58But the bottom line is it's activity that's already happening in the state at some level that they are not directly benefiting from and regulating.
04:06So I do think that will motivate some states.
04:08But for us, really, the cannibalization thing isn't a huge concern.
04:12We haven't seen that happen, not just here, but as I mentioned overseas, where there's long established.
04:18I mean, it's not a brand new thing like it is here.
04:20There's been predictions in sports exchanges around for decades in the U.K., for example.
04:25So we feel like there's pretty good data out there to show that head to head, the traditional sports betting product is a much far superior product for customers.
04:33Jason, you said that this is the most bullish you've ever felt about the company's future.
04:40What are the underlying trends, data points, behaviors of your customers that give you that conviction?
04:46And why do you have it now that you didn't have previously?
04:50Well, I think if you take a step back, you know, it really starts with the progress that we've made over the last few years in the position we put ourselves in.
04:58Remember, two years ago, we weren't even profitable.
05:00Three years ago, we had nearly a billion-dollar adjusted EBITDA loss.
05:04At that point, you know, we were getting killed in the market because people thought we were going to run out of money and go out of business.
05:11We really buckled down.
05:13We grew revenues.
05:14We managed costs.
05:15And, you know, just a few years later, we've had over a billion and a half swing.
05:19So I think that shows that we are in a great position.
05:22But also, more importantly, now we're in a position to play offense.
05:25We are profitable.
05:26We have scale.
05:27We have the best product in the market.
05:29We have the absolute best partnerships and presence across the media landscape.
05:33We're about to launch sports predictions, which I believe represents a huge incremental opportunity for us.
05:39So a lot of really exciting things going on.
05:41And the only real negative on the quarter was the sport outcomes.
05:44I think all the stereo over predictions is kind of nonsense.
05:47But the really only negative sport outcomes, that's a temporary thing.
05:50That's not something that has anything to do with the fundamentals of the business.
05:53So, you know, the next challenge is kind of a beautiful country.
05:55So, you know, the one of the biggest things are interesting.
05:59So, I think that's a very positive thing.
06:01So, you know, the most important thing.
06:02So, in the first place, I think the most important thing is happening.
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