On Thursday, Fanatics Betting and Gaming announced that it had closed on the first eight states — Colorado, Iowa, Kansas, Maryland, New Jersey, Pennsylvania, Virginia, and West Virginia — in its previously announced acquisition of the U.S. businesses of PointsBet USA.

Fanatics will operate those states as “PointsBet, a Fanatics Experience,” which will bring the number of U.S. states under the Fanatics Betting umbrella to 11, with more states to come soon.

“We are excited about what we are building at Fanatics Betting and Gaming and this acquisition accelerates our plans,” Matt King, CEO of Fanatics Betting and Gaming, said in a press release. “We have a ten-year plan that focuses on the customer and not market share.  We are going to acquire customers efficiently, allowing us to return savings to customers by investing in the customer experience at Fanatics Sportsbook and PointsBet, a Fanatics Experience.”

King will continue in his role as CEO, along with the rest of the Fanatics Betting and Gaming executive team, per the release. Jonny Aitken will continue in his role as CEO of PointsBet USA.

With ESPN Bet launching later this fall (via Penn National Gaming), and Fanatics’ app now live, it’s going to be a fascinating NFL season for the sports betting industry.

I spoke with King this week about a variety of topics, including:

• How he got started in the sports betting industry at FanDuel
• Why he believes Fanatics is different than other sports betting operators
• Advantages of being a second mover in the space
• What bettors liked/didn’t like about the beta Fanatics Betting app

BF: You’ve been in the space for a while, but didn’t start your career in sports betting. What was appealing about FanDuel back in 2014?

MK: So, I was never smart enough to know that sports betting would ever be legal in the U.S. when I joined FanDuel. The tail end of my career in finance was looking a lot at investing in media companies and you can see what was happening in terms of disruption in music and then scripted TV, and I saw two things going on.

One was how good a business sports was because we started to look at the businesses that were in the sports media world and you could just see how amazing kind of the business fundamentals of sports businesses were.

The second thing was nobody was well-positioned for what would be the inevitable changes in customer behavior around sports, right? Call it 2013-14, everyone thought the existing sports media ecosystem was going to be static and my belief at the time was that sports would see the same types of disruptions that scripted media and music had seen, it was just going to come later, just given how some of the fundamentals of the sports business work. So, I saw this as an interesting opportunity.

And what attracted me to FanDuel was it really sat at that nexus of, when you think about it, one of the biggest direct to consumer sports platforms out there. They had funded wallets from a lot of users. They had great connection to the most avid of sports fans. I just thought that was a really, really interesting kind of company as it related to sitting in the intersection of sports and disruption, and so I joined as CFO when it was small, only $20 million in revenue and ultimately kind of got on the rocket ship that was DFS in 2014 to 2015 and then ultimately the category hits regulatory challenges and we successfully navigated through it, which was a great learning experience. And ultimately I think the lesson in that was that it was a product that millions of people loved and that people really loved to play it. And the good thing about the politics at the time, we were able to actually clarify the regulatory foundation for the category and still allow millions of people to still do the things that they love to do.

I left right around the time FanDuel agreed to merge with DraftKings. There were a whole lot of reasons for that … but I never stopped loving the business or kind of the place that it played. And so a year later, after the government had shut down the merger between FanDuel and DraftKings, I had the opportunity to come back as CEO. Really the reason I came back was I loved the team and I still believed in the core thesis of this is a really interesting platform to connect sports directly to fans and that that would have utility.

When I joined as CEO, it wasn’t clear that sports betting was going to be a thing. I don’t think the Supreme Court had even agreed to hear the case. I went back because I believed in the business and believe that there was a lot of stuff that we can do on the product side.

Then Supreme Court said it’s going to hear the case and we suddenly went down this dual path of how do you innovate the core business? We put some real innovations in place, whether around free-to-play or around single-game fantasy. That got the business growing again, but then in parallel you had to think about, ‘OK, what happens if sports betting occurs’? One of my through lines as a leader and CEO has really been a focus on product, and so what I was really focused on in sports betting was, ‘How do I make sure we have the best product.’ And that led to the deal with Flutter because what that gave us was access to their global resources that allowed us to access product development and frankly accelerate our learning curve, and allowed us to launch the best product, at least in the first part of the sports betting industry in 2018.

BF: It’s fascinating as well to hear you talk about product, because for so many CEOs the focus is just the bottom line. Obviously you weren’t out of the game, but you get back in with Fanatics a few years later. What was appealing about Fanatics, which is coming at the sports betting space from a different way as an established brand? What was the important of the product path you have taken?

MK: I’ll break it down into two things. I think number one, was it really kind of goes back to my original reasons for joining FanDuel was this idea that sports fans deserve a better consumer experience. There’s a lot of reasons why it can be hard to find where you want to watch what game, it’s hard to get to the game, it’s expensive, etc.

Unlike most other consumer categories where technology has made the user experience easier, that hasn’t in sports but you know consumers want it, and expect it, because the expectations have been raised by every other thing that they do.

What appealed to me about Fanatics was it that was really the only platform out there that was in a position to make the fan experience materially better with technology, and that’s largely because to your point there’s an existing footprint and also frankly the trust and relationship that it has with the leagues and team owners, that are ultimately the gatekeepers to the entire sports ecosystem.

What was unique about Fanatics is that they have an endemic sports brand. It’s a brand that people associate with sports, but it’s sports broadly defined. It’s not just a brand associated with sports gambling. The business had built the infrastructure and relationships necessary to deliver the next-generation fan experience and it had the brand to do that. So what Michael [Rubin] and I both got very energized about was this idea of building a digital sports platform.

How do you truly start to knit together the pieces of the fan experience, and then at every step of the way say, ‘How do I make that better?’ My attraction to Fanatics was in many ways the same as my original attraction to FanDuel, it was this idea of, ‘How do you deliver a better experience’?

And then as relates to within the gaming vertical what we’re doing, I think the big reflection was how many tradeoffs you have to make to pursue a first-mover strategy. And you were in it, right? Those early days it was like, get live in a state and the most important product feature is simply being available. In the same way you kind of build tech debt, you can build product debt over time and it’s just unpicking some of those decisions along the way .. which aren’t necessarily decisions but are sacrifices made at the altar of speed.

When you think about it, in most digital categories, the person who is first isn’t the ultimate winner. I could Google plenty of headlines about how Yahoo! led in search and it was dominant in search until Google came along. The reality of a lot of the reason [for that] is that if a first mover defines the category, a second mover is able to look at the existing category structure and say, ‘How do we do something different? How do we do something better?’ And can take the time to do it.

So ultimately, a lot of what we’ve done is really look at the industry as it’s developed. Frankly, there’s a lot of parallels to how sports betting has developed as compared to DFS, which both have interesting lessons, and we’ve just applied those lessons to say, ‘How do we build a product that’s better than what’s out there? How do we build features and functions that people come to expect from other consumer technology categories and build them in sports betting?’

One thing is true, which is if you ask people how satisfied are you with your sports betting app relative to how satisfied you are with your banking app (Venmo, Netflix, etc.), people are structurally less satisfied with their sports betting app than they are other consumer technologies. Therein to me lies the opportunity, which is how do I deliver a sports betting experience that is on par with the best of consumer technology and that, frankly, requires a little bit of disruption and innovation along the way.

BF: We have had $250 billion in legal sports betting handle since PASPA was repealed in 2018, so product will help but we know people are going to bet on sports.

MK: We think we can innovate both on product as well as the loyalty proposition. The other thing people are very conscious of is that it’s a very transactional or promotional category. One of the examples I use a lot is credit cards. I would argue everyone out there is Capital One, right? Which is, here is your low, zero interest balance transfer offer that will get jacked up in the future, and that’s what acquires the customer. Nobody’s really been able to be American Express … you don’t become an AmEx cardholder because of the offer you get up front, you become an AmEx cardholder because you want to be a member, you want the rewards.

We think we are uniquely positioned with our ecosystem to deliver a set of rewards that are super compelling to people and will differentiate us.

BF: One of the interesting things is that you have been, intentionally like you said, slow to market and a second mover. Was a merger/acquisition always on the table for market access … or did the PointsBet deal come along and it made sense?

MK: Within the first, call it 3-6 months of starting this, we developed really strong convictions about what was the business model we wanted to have and what was the product we wanted to have. And so what we did from there was really looked at every M&A opportunity – of which there were a lot – and looked at it through the lens of, ‘Does this actually accelerate what we want to do’? Because there was plenty of stuff that was like, ‘Oh, well, we can do this, but that would change what we wanted to do.’ And that didn’t make sense, so we didn’t feel the need to do anything in M&A because we had a lot of confidence in what we were doing organically.

Market access is a commodity, right? We were doing market access deals today that are less expensive than the deals that were originally done in the industry, so the market access wasn’t a big deal. What it was really about was there was some hard cost savings since they had already paid license fees that we didn’t otherwise have to pay, and they had some very interesting trading technology that would really allow us to accelerate what we already wanted to do on the trading side. Which is why our ultimate tech stack is going to effectively be the front end we had been building as Fanatics plugged into the trading tech stack PointsBet had acquired in Banach. We think that combination will allow us to get to the end point we’re looking to get to much faster.

BF: So, what states will Fanatics be in this Fall and what’s a rough timeline?

MK: I’d reframe the question a little bit. If you look at the pro forma Fanatics plus PointsBet geographic footprint, we’re largely in almost every state that is of material size. We’ll look to round out the edges of that, but fundamentally we’re everywhere that matters and to start, that will be four states with Fanatics and 11 states with PointsBet. From a legacy branding perspective, we’ll migrate to our future state tech stack, so more and more of those states that are currently operating under the PointsBet brand will flip to the full Fanatics branding.

What we are doing in the interim, though, every state that we can (which will be most of them) will operate the PointsBet brand as PointsBet: A Fanatics Experience. So, in the same way that we operate the NFL Shop as a Fanatics Experience, we’ll operate PointsBet that way. And really what that means for users is that they’ll see richer rewards, right? So, our thesis of loyalty matters, we want to be the most rewarding sportsbook, we can translate that to the PointsBet side, even while it operates as PointsBet the brand. We’re really thinking about it as one company with two brands for this football season while we migrate all under one brand.

BF: Fanatics is interesting because of the unique value proposition you can offer. Is the goal to have a two-lane highway in terms of driving people from betting to collectibles? Vice-versa? Or does it not matter if they’re in the Fanatics ecosystem?

MK: We look at it more as, ‘What does the fan want to do?’ We look at FanCash as the currency of sport. That’s a currency that should allow you, whether you want to use it on collectibles or free bets or use it on merchandise, you can use it how you want, and you can earn, every time you do business with us as Fanatics probably you should earn FanCash. And so that’s kind of the underlying loyalty currency, but we think of the ecosystem as, our job is to make each individual experience better. Make the merch buying experience better, make the betting experience better, make the collecting experience better and then make it very easy for people to kind of move throughout that ecosystem. But then largely let people do what they want to do. We believe that if we deliver a better experience, you know, we can kind of nurture fans to do more over time, but this isn’t about shouting at them, ‘Hey, if you’re a sports bettor you should become a collector.’ We want to make it super easy for somebody who has an interest in being a collector to learn about it and have an on-ramp into the hobby. But ultimately our job is not necessarily … we don’t view our job to push them there.

BF: What are some of the biggest advantages you’ve had as a second mover?

MK: Some of it is we can do things cheaper because of doing it a second time. I think the second thing is, there’s just … you have a lot more knowledge about, you know, KYC and different steps of the process and how do you make that more seamless. So you make the process as frictionless as possible. And then you can also focus on the things you know consumers want, right? We know consumers want their bets easy to find, they want the app to be fast, and so having knowledge about … better kind of insight and visibility to what the end point is, just allows you to build it kind of in a more of a purpose-filled way.

I’d say the other big thing that we’ve done is because we went slower, we effectively skipped the step of using third-party technology. So, if you think about like every major sportsbook, they launched with, whether it was GAN and IGT or Kambi, or somebody else, and then they spent 12-18 months, you know, putting a new platform in place when they realized that third-party technology was limited. What we did from Day 1 was we bought our own source code. Now we just said, we’re going to make this ours, and we’ve kind of built on the back of that. So we’ve effectively skipped one massive step which was that kind of initial launch with a reliance on third-party tech.

BF: What were some of the points of feedback people really liked with the app in the beta process? What were some things maybe they didn’t like and you improved? What are some other points of differentiation for the Fanatics betting app?

MK: One, people love FanCash. The concept tested really, really well. The idea that they earn FanCash every time they bet is something that has resonated really strongly with fans, frankly above even my expectations. And my expectations were pretty high.

We rolled out great new search functionality. I think there is a hypothesis in the category that people don’t necessarily really want to search for what they’re looking for, which I just don’t believe to be true. I think there’s a narrative in the industry that’s like, ‘Oh, well there’s so much inventory and it’s all about aggregation and blah blah blah,’ and the reality is that Google managed to organize the world’s information and just gave you a search bar. Problems have been solved before. The reality is search is hard. When you peel back the layers and talk to consumers, if you give them a bad search experience that is worse than no search experience. So what we did from Day 1 was really invested in our data architecture and a number of other layers of technology that will enable us to have a world-class search engine. And we think that’s what consumers want. But it requires real investment that I don’t think has really been done in the category before.

And so in ours, you search for a player in MLB for instance, we’ll show you all of the player prop markets right there and allow you to navigate directly to that player prop. It becomes super easy because ultimately, the consumer truth is that people want to be able to find what they want to bet on fast and we think search is a great example of how we can help do that in ways that haven’t been done before yet.

BF: If we simplify sports bettors in three categories – casual bettors, professionals and VIPs – how are you appealing to each of those groups and why would customers who might already have a DraftKings or FanDuel app choose Fanatics?

MK: Ultimately, we view it as we need to win people’s business. So at every level of the process, we need to be better. I think we have a unique proposition both at the casual level and the VIP level. At the casual level, we can ultimately run a different business model because we can look holistically at that customer’s value and be able to reward that customer. I think for some casuals, the existing brands are intimidating. They’re viewed to be for sophisticated people and I think we can deliver both a product experience and a brand accessible for fans, so I think we have some unique advantages for casuals.

At the VIP level, we think the real differentiation is the experiences and holistic reward program we give to people. It’s the same reason Wynn’s VIP service on the Strip, they delivered a better experience for VIPs, again at every step of the process using some assets, and we think we can do the same thing for sports bettors. Obviously some of the casino-driven brands have done something similar, but we think that a sports-oriented rewards program can be really compelling to a big subset of VIPs.

One of the things that we can do is just because we have such scale and access to memorabilia is like, you said you’re a Twins fan. If you make a bet on the Twins to win the World Series and the Twins win, I can send you a piece of signed Twins merchandise, right, that I just have off the shelf. Those are the types of things that we can do at scale that ultimately we think a win-win and a true differentiator in the category because no one else can really do that, other than on a one-off basis.