Stars in his eyes: Ex-TSG CEO Rafi Ashkenazi on his strategic moves in the US

Rafi Ashkenazi’s tenure with PokerStars dates back to 2013 and the pre-Amaya days when he arrived from Playtech as COO. At the helm of the business (then called Rational Group) from late 2015 when he was promoted to CEO, Ashkenazi went on to lead the acquisition of UK operator Sky Betting & Gaming, and spearhead The Stars Group’s (TSG) major US sports betting play via an industry-first, deeply integrated media partnership with Fox Sports. His swansong in the hot seat was to help facilitate Flutter Entertainment’s multi-billion-dollar purchase of Toronto-listed TSG, which completed last May.

Having now stepped back from the coalface and his non-executive position on the Flutter board, Ashkenazi lifts the lid on his strategic moves in the US and why he regrets not snapping up FanDuel before Flutter swooped in 2018 to take a majority stake in the DFS operator. Here, he speaks candidly as part of an exclusive interview with EGR.

EGR North America (NA): How did the repeal of PASPA change the way The Stars Group approached sports betting?

Rafi Ashkenazi (RA): The repeal of PASPA accelerated the plans that we had in the US. We were thinking about the US before and I can tell you that we were in discussions with FanDuel before Flutter came in. At the time, we were a little bit overloaded because we were doing the William Hill Australia and CrownBet deals, as well as the Sky Betting and Gaming acquisition practically at the same time. I was personally entertaining a discussion with FanDuel. I traveled to their office in New York, sat with their management team, and we had a very long discussion. Three times I said to my team to look at FanDuel as I was quite a big supporter of this business and wanted to acquire it even before PASPA was repealed.

My management team had a different view and eventually I saw that it would be impossible because they were so overloaded with the other deals. I do regret not buying FanDuel at the time to be honest. That’s one of my regrets because I had a very good hunch about them, more than a hunch really. I had a clear idea of what to do with the business, even if PASPA was not [then] repealed. Once it was repealed, we accelerated our discussions in the US, speaking with a few very large land-based casino groups about potential partnerships and we also entertained several discussions with media companies.

Fox was not the only media company that we were in discussions with. With the repeal of PASPA everything was essentially accelerated and I directed my management team, primarily Robin [Chhabra, chief corporate development officer] and Marlon [Goldstein, chief legal officer] to shift their focus primarily to the US, and make sure that we were securing our future and our position in the US market in between doing a land-based casino group partnership and a media partnership.

I was very much in favor of the media deal over the casino deal because I thought in the long term that would be more valuable to us. Even though land-based casino partnerships could bring multiple customers that they already have in their databases, I saw that through a media partnership you will eventually access those customers anyway and more if you just continue to be consistent. Exactly the same way that Sky Bet did it in the UK.

Rafi Ashkenazi

EGR NA: Now that the gold rush surrounding US sports betting is hitting new heights, should The Stars Group have been more agile in approaching the US opportunity?

RA: Today, when I think about it, it’s obviously a new world for TSG being part of Flutter in respect of operating in the US and working with the two sportsbook brands, FanDuel and Fox Bet, [but] I think you have a winning combination. It’s a very powerful combination and personally I don’t think there is any other combination which can overtake it. However, it’s now about executing it.

In the period before the Flutter acquisition, I think we [TSG] did that successfully. We probably should have put more effort into making sure the infrastructure for growth in the US was more established before signing the Fox deal. In a way we were taking a more conservative approach in that we wanted to find the right contract first before building the infrastructure to support it.

That could have been a slight mistake. It wasn’t really a strategic mistake but it may have cost us a few months. The business was set up in the right way to take meaningful market share in the US market. I think that they [Flutter] will still do that again, if they manage the right sort of strategy there.

EGR NA: Reflecting on your time with The Stars Group, did you leave anything unfinished?

RA: There were more media companies that I wanted to sign partnerships with within various markets in the world and there was at least one that was quite advanced when the Flutter deal went through. The other element is the payments side of things. I believe that, being such a big company that is processing billions of dollars on an annual basis, we should be able to have our own PSP license, we should be able to process our own funds and we should not rely on third-party payments businesses.

The bigger vision is essentially using the customer base that we managed to build, which was a very loyal customer base, and start diversifying into completely new sectors. That was a longer-term vision that I had and that’s what we were driving towards.

EGR NA: Can Fox Bet fit into the wider Flutter Entertainment group despite it being in direct competition with FanDuel in the US?

RA: You can drive FanDuel alongside Fox Bet or the other way around, but you need to believe in the whole concept of media and the operator/media relationship. If you don’t believe in the concept, if you don’t believe in the philosophy, then it will be very hard for anyone who’s going to run the US business to promote Fox Bet in the same way that we were planning to promote Fox Bet.

There was a very clear distinct profile between the two companies. FanDuel was geared more towards VIP customers and sports betting enthusiasts and Fox Bet was applied more towards the recreational players. It’s almost like looking at bet365 versus Sky Bet in the UK market. Can you argue that there isn’t room for both to operate in the market? Clearly, both are very successful and growing their business in a very meaningful way, especially Sky Bet, and the market is big enough to be able to run more than one brand. That’s the way I’m looking at the US business.

It’s about to become the largest online gaming market in the world, no doubt about that. It’s just a matter of time. In my view, you can absolutely run more than one brand in a market like the US. You can run more than one brand in a market like the UK and you can run with more than one brand in a market like Australia.

EGR NA: Besides TSG/Flutter, which other companies do you most respect and why?

RA: There are quite a few companies out there that we should watch. I really like GVC – I always liked the company. I know that they carry a bit of baggage historically from their prior activities but I think GVC is a great company and they have a very good future ahead of them. You can’t not adore bet365 and what Denise and John Coates are doing there is quite phenomenal, building such a meaningful, powerful sports betting house that still has such potential ahead of it. The company is growing so fast, it’s getting to a point where you don’t see where the growth is coming from. This company will simply continue to grow if they continue to operate this way.

There are other companies I like – Evolution is doing very well. I really like what Jens [von Bahr] and Martin [Carlesund] have done with the business. They’ve managed to build a very meaningful B2B business, so they’re one to watch. I have no doubt that Gamesys and Lee Fenton are a company to watch. My view of Playtech is also very clear. I think that you have a company with a range of very powerful assets and just driving the right sort of strategy with the business would really make Playtech a very meaningful and powerful player. There are a lot of other companies doing quite well in the industry regardless, but those ones would be the most immediate which spring to mind.

EGR NA: Caesars’ multi-billion-dollar takeover of William Hill is the topic du jour for the industry. Did any land-based operator approach you regarding a tie-up during your time as CEO?

RA: If you’re asking if anyone from the US land-based casino sector approached us to acquire TSG, the answer is no. They predominantly approached us to sign partnership deals and joint venture agreements. Of course, there were discussions back in 2016 when [Amaya CEO] David [Baazov] wanted to privatize the company and the board was essentially forced to start a strategic review. There were a few companies interested in us and we were being looked at by multiple companies, of which I think one or two were land-based but it was never serious. I think it was just one meeting. In any event, these wouldn’t have interested me too much because I strongly believe in online. I wanted to avoid the retail and land-based presence.

I was always quite amazed and surprised by the fact that none of the large US land-based casinos did not make a move toward online gambling years ago. It really took them a long time to wake up.  From Caesars’ perspective, there’s definitely a lot of rationale in this deal. I’ve seen what Caesars is planning to do [through] some things which they’ve mentioned publicly but, overall, I think it’s going to be a good deal from the shareholder perspective.