The Scene
This is an excerpt from an interview with OutKick founder Clay Travis on the Mixed Signals podcast from Semafor Media. Listen to the latest episode here and subscribe wherever you get your podcasts.
Clay Travis: Let me go to the business side. As a lawyer, I had been expecting that sports gambling was going to be legalized. And when it was, the only time I’ve ever been to the Supreme Court was for the arguments over whether New Jersey could legalize sports gambling, basically, should it be a federal law or should individual states under federalism have the opportunity to make their own choices.
Supreme Court 63 says, “Hey, New Jersey can legalize sports gambling.” Everything changes almost overnight. I knew that we were going to have a really good business when it came to the gold rush of sports gambling. I didn’t realize it was going to be as good as it was. And so, very rapidly, OutKick got into the affiliate model with sports gambling.
Ben Smith: And this is just flood of marketing advertising from all these apps, right?
Flood of dollars, flood of dollars. We were either the best or second best affiliate that FanDuel had anywhere in the country. It was us and Pat McAfee. We were getting paid if the three of us had been out for beers in Nashville, my hometown where OutKick is based, and I would’ve turned to you back in those days and I would’ve been like, “Hey, go to FanDuel.com/Clay and make a bet.” And I would’ve gotten from the two of you $350 each for starting new FanDuel accounts.
Now when you’re getting that money, doesn’t that make you nervous? I mean, I just feel like whenever there’s a transaction like that, that means they are just taking in so much revenue, so much profit from your loyal readers. I mean, doesn’t that make you a little queasy?
A couple of things on that. I’ve always been in favor of sports gambling. I mean, I would hope that some people would win money against FanDuel and DraftKings as opposed to, but I mean to me it’s not a dissimilar to walking into a casino. You understand that the house typically has built this entire casino because by and large, they do pretty well against you. But it doesn’t mean that you can’t go in and drop 50 or 100 bucks and feel like you had a good night, if that makes sense.
Yeah. For sure.
So, in my mind, I’m always thinking, “Hey, you know what would make the game a little bit more fun? I can watch a game and if I’ve got 50 or 100 bucks on it. Unlike golfing or unlike going out to dinner, or unlike going out to a movie, I can watch and enjoy the game and I can actually make a little bit of money on the way that I’m choosing to be entertained.”
So, this thing continues to grow. Every state is its own battleground. I immediately said, “Hey, this is going to be like when Prohibition ended. Every different state is going to be its own battleground and they’re all competing for market share.” It continued to build. We were making millions and millions of dollars. And right before we sold on Super Bowl Sunday 2021, on that day alone, we made $2 million from FanDuel.
That’s incredible. And so, do you think, I mean ultimately the valuation, the value, the commercial interest in sports media was driven really by gambling?
Oh, hugely. I mean, again, we hit it better than almost anybody else did. We made $2 million on Super Bowl Sunday. We would’ve continued to make millions and millions of dollars, but at some point, those companies, DraftKings, FanDuel, they’re going to hit economic reality. They’re going to have the market share that they want. Wall Street’s going to start saying, “Hey, you guys got to start showing us some profit.”
So, I knew that gravy train wasn’t going to last forever. So, that affiliate models going to continue, but it’s going to diminish. You could go the Barstool route like Dave and those guys decided, “Hey, we’re going to be the book.” This is a big multibillion dollar swing. Our audience, we’re going to be the book. I kicked the tires on that idea. That obviously failed for them, but they did fine.
Why didn’t you go that route?
Well, first of all, people don’t realize how hard it is to get an affiliate license in every state.
It’s through a regulated industry.
Oh, I mean, you’re getting fingerprinted, you’re passing background checks in 30 different states, and I just didn’t think we had the ability to compete with the billions of dollars that FanDuel had and DraftKings had. And remember, those guys were smart because they already were on phones because of daily fantasy.
So, I thought it was going to be super challenging to try to do what Barstool did. I admire the swing from Penn Gaming and thinking, “Hey, this is a more affordable way to create a sports book through loyalty with media companies.” And I think there’s value in that, but I think it was hard to compete.
And when I looked at the marketplace, we weren’t going to have billions of dollars. And I think whether it’s ESPN or SI, a lot of brands tried to create their own books and it didn’t work because they didn’t have the money. Heck, Wynn didn’t have the money to compete at a high level. Caesars decided that the stakes were too high for them, and they’re a pretty decent sized business.
So, third option was sell. And Fox had a relationship with FanDuel, which was our biggest affiliate. I was obviously on Fox Sports. I took less money to sell to Fox because I thought the partnership made sense more for us because I didn’t just want to do sports gambling. And so, there at that time, we sold in May of ’21, there were sports gambling companies bidding more, but I thought the fit was better at Fox. I like Fox Sports. I was getting to know the Fox News side. And so, we sold in May of ’21.
And you sold for how much?
I don’t think we’ve officially been allowed to say.
I think it’s rumored to have been about $100 million. Is that right?
That’s not a crazy rumor.
Listen to the full interview on the Mixed Signals from Semafor Media podcast here.