Trading places: How ASX plans to use its European roots to crack the US fantasy market

A rich pantheon of firms have already made the leap across the Atlantic headlong into the US market, with more undoubtedly set to follow. The latest of these is an old hand in Europe, Paddy Power and his new startup business American Sports Exchange (ASX), which is aiming to bring a new kind of sports trading and social game to US sports bettors. The firm has attracted more than €1.5m in crowdfunding-based investments in two oversubscribed funding rounds. Here Power discusses how a European mindset and attitude might help the fledgling business carve out a niche in sports betting’s most competitive market.

EGR North America (EGR NA): The US is already a crowded sports betting market populated by several big operators, how do you plan to enter the market and what is ASX’s key differentiator?

Paddy Power (PP): Yes, the US is a very crowded market, it’s growing fast and there is a lot of consolidation, but I think there is plenty of space in the market for innovation and new products. Everyone is very interested in anything new and engaging which works and adds value, and now it is like all the media companies are almost trying to become betting companies and all the betting companies are trying to become media companies. It is just a bit all over the shop at the moment. It’ll settle at some stage but at the minute it’s in something of a state of constant flux. One of the scariest things would be how the hell do you come in and even make a ripple in a market that big? I totally get that and that is one of the things you worry about. That is why the Hype Accelerator programme has been so important for us, because it has given us access to Sinclair media to DAZN to big franchises themselves, to leagues, where you are in partnership discussions with these sorts of people. You are very small and very early stage and you are trying to develop pilot schemes and get them to buy into the vision and come along with you, but they’ve committed to doing that by being a part of and supporting the Hype scheme. So, we are going to a listening willing audience. We are not banging on the door and saying, ‘Hey, look at what we’ve got to sell,’ which is really is a much better place to start from. The one problem with that strategy, as a partnership strategy, is that it can play into their timelines. We are obviously in a rush here. We really want to go because we are an early company and momentum is everything. We’re just all busy doing as much as possible so with this in mind you don’t want to be playing to somebody else’s timeline. We are also pursuing a straight-to-consumer strategy too which all just helps get to the next stage. This is all just a big race to get us to the next funding round, which is just about building metrics and proving the concept and re-proving the concept. It’s about being able to then put a value on it properly, get some proper forms behind it, and then develop it from there. As a lot of the bigger companies spend some time on developing their own products, they are in a rush and they’re growing at such a pace, sometimes it’s easier if we come to them with a proven plan. They do not have to start from scratch. We will come along and say, ‘Well, we’ve proven this, and we can scale it in such a way.’ I think that is a big opportunity for us and for lots of other companies too, because that is where these massive companies are looking for products and tools all the time and they can’t develop them all themselves.

EGR NA: What qualities are you looking for in a US partner?

PP: I suppose things like industry-leading, having an open mind, a good idea of where they want to be, what they want to be like, and anything which provides us with an opportunity to scale because we are only going to do well if our partners do well. We are going to be the engine behind their success so we are only as good as the partners we’re hopping into bed with. We’re only as good as the scale we can get and the number of players we can get on the platform. All those things are done with the help of partners, and so we just want somebody active and someone who can allow us to grow and scale our business.

EGR NA: What is the one question asked by potential US partners about ASX and how do you answer it?

PP: Most of them first are from partners trying to get their head around the difference between this [ASX] and general fantasy, because we see ourselves as the sort of next generation of fantasy because of the nuanced differences between ASX and other fantasy games. It is a good thing that there are a lot of similarities between the two types, because we’re talking to an already educated audience, potentially. At the same time, we feel like we are adding value to the fantasy concept, more bang for your buck in that you can trade right the way through the game. So, most of the questions are around that type of thing, the differences, and around how it’s integrated into various systems. We are trying to remain as platform and partner agnostic where we can and have people from various different platforms playing within ASX. There could be cross revenues derived that way as well for various partners. So, there’s big opportunity there.

EGR NA: Where do you see the biggest areas of potential expansion for ASX in the US?

PP: I think the kind of stats-heavy US sports are the ones which are most suited to the ASX model. For me, the more information there is, the more fluctuation there will be and so I hope the more engaging and exciting it will be. Hopefully if we can get the major media companies or the big leagues to bite, I think that they will not be disappointed as the opportunity can be huge. At the moment, we are in talks with NASCAR, the ATP, the PGA, and some of the big leagues and the model is all about the power of the collective. It is like Metcalfe’s Law, if we can get to a certain stage in this process, it just becomes an inevitability, but that is the hardest part of the process for a startup and something that would be a crucial scaler for the business.

EGR NA: What is the eventual endgame for you in the US market?

PP: When you are watching financial news and you see the Bloomberg ticker go across the bottom of the screen, for me the endgame would be the ASX ticker featuring under sports broadcasts. I want it to become the gold standard for the value of a player on the virtual exchange where the ASX values move across the screen. It should become embedded in the US, agnostic with regard to player and platform. I would like it to be recognized as the gold standard way to evaluate expected performance and to put a value on actual achieved performance.

EGR NA: Social betting products have traditionally floundered in the UK market but flourished in the US market. Based on your experience, why do you think this is?

PP: I do not know. Fantasy sports in the US has been so successful and so powerful and maybe some of that came because regular sports betting was not allowed until very recently. It could be a cultural thing because in the US there is a lot more prevalence of things like stocks and shares buying by regular punters rather than just the elite. Everything is a bit more social from that perspective and I think that is a cultural difference that is quite significant. Additionally, I think that maybe the right conditions have not existed in the UK market. It’s probably more likely now that a social game could succeed more than it would have five or 10 years ago because technology is just so much better than it would have been back then. We all have fantasy football groups and we already play this sort of social game. It is not necessarily a betting game, but it is a game for prizes, and that’s quite popular in the UK. As the technology improves, combining the two will become far more appealing because it’s more engaging, and that engagement is key in gaining players and technology is key to that engagement. There is no reason why a social betting game could not work in the UK. Maybe the timing was wrong way back when or maybe that was why fantasy prevailed in the US, even when the technology was not top notch because there was no other option.

EGR NA: International regulators have somewhat toughened their stance towards gambling regulation over the last two years in areas including advertising, RG, and product development. Are you worried that US regulators will go down the same path as they get more experienced at regulation?

PP: I’ve no doubt it will happen. With responsible gambling and things like that the journey will be quicker and the operators will get there much faster. It’s been described as a gold rush in the Wild West, but it’s not. You’re talking about huge companies which have things like reputational risks and not just for that reason, they want to be in it for the long term. Operators will be responsible and the regulations, hopefully when they are set down, will start from a foundation of responsibility. For me, it’s much better now than it might have been in the past in terms of regulation, but I do agree that there will be tightening of these standards and there will be issues. I’ve no doubt, it’s completely outside of our control or any other operator’s control, so you just kind of roll with it and make sure that you’re compliant. We will just do what we have got to do in terms of getting ourselves in the space, but at this stage we’re not even a drop in the ocean yet. We’ll do what we need to do in terms of licensing etc but I won’t worry too much about the environment of the whole industry yet.