TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Good evening, everyone. Welcome. Happy Thanksgiving. And welcome to this special edition of NIGHTLY BUSINESS REPORT. I’m Tyler Mathisen.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: And I’m Sue Herera.
Thanksgiving as we all know is a day of gratitude, we spend it traveling to see friends and family, we eat, we watch football and we give back.
Tonight, all of the above is on our menu. We take a look at how disruptive companies have changed the way we travel, how the on-demand economy is making it easier to help those in need. And even America’s most beloved pastime, football is evolving with the rise of the daily fantasy sports. And that is our main course.
MATHISEN: So, let’s dig in. DraftKings and FanDuel are the two biggest players in that fast growing industry. And because they’ve seen lots of money flow into their companies at a very rapid pace, they have attracted the attention of lawmakers and regulators.
Things only got worse in October when “The New York Times (NYSE:NYT)” reported that an employee of DraftKings accidentally leaked proprietary information to the public the same week he won a fantasy contest on a rival site. That raised a lot of questions about the integrity of the integrity as a whole and daily fantasy sports in particular.
MATHISEN: In fantasy sports, fans choose real players to create their fantasy teams. Statistics compiled by the real players during games are then totaled to see whose fantasy team is best.
Daily and weekly payouts instead of waiting for a full season to play out are attracting customers and how. The Fantasy Sports Trade Association says 57 million people will play online this year, up about 40 percent from just last year. They’ll pay more than $2.5 billion in entry fees, a number expected to top $14 billion in five years.
So, it’s no wonder, FanDuel raised more than $360 million in its latest round of investments. Stakeholders include Comcast (NASDAQ:CMCSA) (NYSE:CCS), the parent of NBR’s producer, along with NBC Sports Ventures, Time Warner (NYSE:TWX), Turner Sports and the National Basketball Association.
DraftKings pulled in more than $420 million in its most recent round. Among the DraftKings investors are FOX Sports, Major League Baseball and the National Hockey League.
All that action has pushed the valuation of both companies, north of a billion dollars.
The sites gave many media companies a third quarter kick in ad revenue. DraftKings was a top spender on U.S. TV advertising in September. FanDuel was seventh.
But there are questions and issues surrounding the business of fantasy sports. The legal foundation of these businesses is murky at best. They exist because a 2006 federal law which was supposed to shore up security at the nation sports included a section on unlawful Internet gambling, which exempts participation in any fantasy or simulation sports games. In other words, they’re legal.
The September incident involving a DraftKings employee has not made the sites business any easier. The Department of Justice, the FBI and a number of states attorneys general are looking into the fantasy business.
Participants aren’t taking the legal challenges just lying down. The Fantasy Sports Trade Association rallied to protest the New York attorney general’s order for FanDuel and DraftKings to cease operations in the state.
But the ultimate resolution of that case and others remains to be seen. What does seem clear is that online fantasy sports betting or not, will face more scrutiny and perhaps regulation.
HERERA: And Daniel Wallach joins us now to talk more about the issues and the challenges that lie ahead for daily fantasy sports, he’s a sports and gambling attorney and partner at Becker and Poliakoff.
Nice to have you here. Welcome.
DANIEL WALLACH, BECKER & POLIAKOFF SPORTS & GAMING ATTORNEY: Thank you, Sue.
HERERA: Let’s start first of all with how big a threat you think the New York A.G.’s action is against these companies.
WALLACH: This is the state’s, this is New York state’s chief legal officer in probably the most important state in the country. So, we’re talking about a battle for the industries survival, if the A.G. is successful in persuading a New York Supreme Court that this is illegal gambling, both FanDuel and DraftKings will have to cease operations in New York and this could potentially set the stage for criminal charges on both the state and federal level.
MATHISEN: I have two questions for you, sir. One is, do you as an expert in the gambling and sports, do you think these sites are gambling?
WALLACH: It depends on the state. It depends on the nature of the contest.
Unfortunately, for DraftKings and FanDuel, New York has a very low threshold for what constitutes gambling. It is not necessary for chance as opposed to skill to be the dominant element. In New York, the threshold is only whether chance plays a material element of the outcome of the contest. And alternatively, it could still be gambling under New York law if you’re staking or risking money on the outcome of a future contingent event over which you have no control or influence.
MATHISEN: So, it depends on how the state defines gambling. And what could be gambling in New York might not be gambling in Mississippi.
But that raises the other question I had, if federal law exempts these from that, doesn’t the federal statute trump the states? Isn’t there a federalism issue here?
WALLACH: Not in this particular instance. The carve-out under the 2006 UIGEA law only exempts fantasy sports from prosecution under UIGEA. And states in the section of the statute called the rule of construction, that that statute does not alter or supplant other federal laws or even state laws which regulate or prohibit gambling.
In other words, the states are free to determine the legality of fantasy sports under their own regulations. And the federal law does not trump state law.
HERERA: If they lose in New York, if this industry loses in New York, are they still viable or not?
WALLACH: It’s the difference between being a major monolith versus a marginalized player. If the daily fantasy sports industry losses New York, you could say good-bye to the sports leagues. The payment processors, the all-important banks and credit card companies, which fund and process the payments underlying fantasy sports, will become wary of continuing to participate.
So, without the support of the sports leagues or the payment processors, the industry’s survival will be in doubt.
MATHISEN: A very quick thought for you on the relationship of the professional sports leagues with these sites. It seems odd to me, because they have historically been so against anything that had the slightest whiff of gambling. They don’t even want to talk about points spreads.
WALLACH: Yes. I know, I mean, historically, the professional sports leagues have been opposed to all forms of gambling. Their players are not allowed to enter casinos and participate in poker tournaments. The word “gambling” is anathema to the professional sports leagues.
But they’ve been maintained this fiction that fantasy sports is entertainment rather than gambling. But gambling can also be entertainment. And once the New York court or other jurisdictions determine that this is gambling, you may see the professional sports leagues disassociate themselves or scale back their promotion and support of daily fantasy sports. That is one of the risks of an adverse court decision in New York.
HERERA: All right. Well, we will be watching and I know you will be, too. Thank you, Mr. Wallach, for joining us.
WALLACH: Thank you for having me.
HERERA: Daniel Wallach with Becker and Poliakoff.
MATHISEN: All right. If you doubt the impact of daily fantasy, look no further than Las Vegas. The widely popular sports contests sites are taking the cool out of the traditional slot machines and black jack tables.
But as Jane Wells reports, the big casinos aren’t sitting idle.
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Vegas has a millennial problem. Young people like to come to Sin City, but they don’t like to gamble much in traditional. So, at an industry expo earlier this fall, companies were showing off new machines which would introduce some skills based gaming into games of chance now allowed in Nevada.
But the truth is, these new games may not be enough, because many millennials preferred to spend money playing fantasy sports, which is off limits to Las Vegas.
JIM MURREN, MGM RESORT: I love sports. I love daily fantasy sports.
WELLS: Jim Murren runs MGM Resort, the alpha dog on the Las Vegas strip.
Casinos have not been able to get into fantasy sports, like FanDuel or DraftKings have because until recently, these types of games haven’t been classified as gambling. The skill needed to win overshadows the element of chance.
But you think it’s gambling, don’t you?
MURREN: Of course, it’s gambling. It’s absolutely, utterly in my opinion, gambling. Do I think it’s wrong? No.
WELLS: Regulators in some states are starting to agree, opening the door to the possibility that Las Vegas could eventually get on the fantasy sports action. And considering that no one can regulate and propagate gambling better than Las Vegas, any change would be a huge threat to FanDuel and DraftKings as they would face established veteran competition.
GEOFF FREEMAN, AMERICAN GAMING ASSOCIATION CEO: If we want to be in that business, I think our members will do very well in that business. But the key is, having clarity, making sure we all understand what is allowed, what is not allowed.
WELLS: For now, however, casinos on the Strip can only wait, watch and play.
MURREN: I love daily fantasy sports. My wife has her own league. They’re called the “Altar Boys”, by the way.
WELLS: Perhaps the altar boys in Las Vegas.
For NIGHTLY BUSINESS REPORT, I’m Jane Wells.
HERERA: Up next, you’ll never guess what some older Americans are doing to make extra money in their retirement.
HERERA: If you have somewhere to go this Thanksgiving, one way to get there is Uber. The ride-sharing app has become the poster child for the sharing economy. And perhaps it’s no surprise that it has impacted the larger economy in ways we haven’t figured out yet.
And as Kate Rogers (NYSE:ROG) reports, even older Americans are feeling the start-ups effect.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: As the American workforce ages with workers over 65 outnumbering teens for the first time since 1948, according to AARP, some retirees are finding new work in the sharing economy.
Take 69-year-old Judith Gordon in Phoenix, Arizona. Gordon read about Uber in an ad on Craigslist and was intrigued by the opportunity driving presented.
JUDITH GORDON, UBER DRIVER: I applied. I love the ad. And I was accepted, but I didn’t take the application for three months because I was in limbo, not sure whether I wanted to be a driver.
So, I had a dream, it said to me, I can make a lot of money. So, I went down, picked up my phone, and started driving right away.
ROGERS: Gordon now drives as much as 50 hours a week, calling Uber her pastime. She says she can makeup to $850 a week as driver partner.
GORDON: I do love meeting new people. Every rider is a new person with a new personality and new things to talk about, and it is actually exciting.
ROGERS: The AARP says about one-third of the American work force is now over age 50. Uber’s driver demographics aren’t far off from that stat. In a report released earlier this year, Uber said 25 percent of its driver partners are also over the age of 50.
Information about driver demographics from companies like Uber and Lyft mainly, how many drivers total they have is scant. This as lawsuits played out in California courts over whether drivers of both companies are employees or independent contractors.
For drivers like Don Eason, a 64-year-old retired entrepreneur, employee status doesn’t matter. Eason began driving for Uber nearly nine months ago. He read about the ride hailing startup in the news and was intrigued.
DON EASON, UBER DRIVER: Well, it sounded too good to be true actually. I just told my wife, I said, I’m going to drive a cab. She laughed, and she said, you won’t last a week because you hate to drive. I told her, well, I’ve never been paid for it. Let me see what happens.
ROGERS: Now, he’s hooked, driving up to 35 hours a week.
EASON: For somebody that’s retired and for times I drive, I found out the best time for me was weekdays, not at night, not on weekends. And for whatever reason, it worked for me, and I make enough money that supplements our income so that we can more vacations every year. That’s the whole gist of this — me and my wife going vacations.
ROGERS: Uber competitors Lyft and Sidecar declined to break out their specific driver demographics. But Lyft says it’s seeing an increase in drivers over 50 and Sidecar says drivers average ages 35 to 45.
For NIGHTLY BUSINESS REPORT, I’m Kate Rogers (NYSE:ROG).
MATHISEN: On now to another unexpected pairing on our holiday menu, Airbnb and Cuba. As relations between our country and the island nation thaw, many companies are looking to do business there. And as Michelle Caruso-Cabrera reports, no company has been more aggressive than the online room rental site.
MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT: These four women are visiting Cuba from Oakland, California, as a birthday celebration for Tiaja Hacks. When they tried to book a hotel, they found there was a problem.
TIAJA JACKS, AIRBNB GUEST: You can’t really use your credit card to book online —
CARUSO-CABRERA: At hotels?
JACKS: — at hotels. So that was the major challenge.
CARUSO-CABRERA: U.S. credit cards still don’t work in Cuba. So, enter California-based Airbnb, an online booking site that allows people to rent private homes and apartments. The women chose to stay at this beautifully restored neoclassical home which sleeps four, costing them $100 a night. And they paid in advance on their credit card on Airbnb.
Airbnb launched in Cuba last April and within two months had more than 1,000 homes listed, including apartments like this one from Marta Virtote. It turns out Cubans like Marta have been renting rooms in their homes for decades, because it was one of the only private sector activities permitted by the communist government.
When Fidel Castro seized power in a coup in 1959, he quickly took over every business. So, there was plenty of supply from people who wanted to make extra money legally. What Marta likes about Airbnb is she gets paid no matter what, even if the client doesn’t show up, which used to happen a lot in the past.
MARTA VIRTOTE, AIRBNB HOST: To Airbnb, it’s like a miracle.
CARUSO-CABRERA: Jordi Torres is the Airbnb executive in charge of Cuba.
Airbnb is based on the Internet. This is a country with hardly any Internet. How do you overcome that hurdle?
JORDI TORRES, AIRBNB GENERAL MANAGER, LATIN AMERICA: Cubans are really entrepreneurs and they have (INAUDIBLE) for us. And for those that don’t have Internet, they have found ways to leverage local connections to represent many.
CARUSO-CABRERA: Here in Cuba, there’s a sort of gray market for Internet access. Those lucky few that do have a legal connection to the Internet manage the Airbnb listings for those who don’t.
Airbnb says Cubans who have rented out their homes have received on average $90 for each day. It’s a huge amount of money in a country where the average salary is only $20 per month.
For NIGHTLY BUSINESS REPORT, I’m Michelle Caruso-Cabrera in Havana.
HERERA: So, how is the sharing economy impacting the overall economy?
Gary Burtless, a senior fellow with the Brookings Institution joins us now.
Gary, good to have you.
Let’s start first of all with that overall theme, really. How is it affecting the U.S. economy?
GARY BURTLESS, BROOKINGS INSTITUTION SR. FELLOW: There’s no doubt it’s been a good deal for a lot of consumers who are trying to buy services like car rides from point A to point B. Room stays somewhere, often places where hotels don’t serve them very well.
So, it’s great for the consumers, and I think it’s probably pretty good for the people who want to provide services through this form — this new form of doing business.
MATHISEN: Uber has been controversial in many large cities, they have existed largely outside of the regulatory framework that governs taxicabs and livery drivers and limousines and so forth. Is it inevitable that these companies, whether it’s the ride sharing or the apartment sharing are going to come — become subject to more regulation?
BURTLESS: Oh, I’m sure they will. First of all, a lot of communities have taxes on very similar services, like hotel rooms or motel rooms. And they’re going to want to collect similar kinds of fees I think from Airbnb renters. So, yes, there is going to be — and there’s going to be suspicion, are the drivers well-qualified and so on?
But the fact of the matter is, a lot of these services are new or are providing services that were previously unobtainable or very inconvenient to obtain for people who wanted to go a particular place or who wanted to rent a room.
So, it’s also a new kind of a service. Whether it’s a big part of the economy is another question entirely. I think that capital valuations of some of these countries suggest it may be huge or profitable. But it’s not a big slice of the service economy yet.
MATHISEN: Is there a down side to this? I get the upside certainly, what about the down side? Is there one?
BURTLESS: I think the down side might be that it is easier to regulate employers of wage and salary workers to ensure that those workers have some protections on employment insurance protection, workers compensation and so forth. And independent contractors who work through Lyft and Uber are probably not going to receive that kind of protection.
Up to now, I think there are plenty of people who want to provide that service, even without those protections. But, nonetheless, if this really becomes a big way to deliver these kinds of services, we have to worry about the worker welfare.
HERERA: On that note, Gary Burtless, thank you so much for joining us tonight, Gary.
MATHISEN: All right. Coming up, how one start-up is hoping to fix a $175 billion problem, food waste.
MATHISEN: Well, maybe you noticed that Thanksgiving did cost a little more this year. According to the American Farm Bureau Federation, the average cost for 10 is a little over $50. That’s a 70 cent increase from last year, the priciest it’s ever been.
To me, 50 bucks for 10 is a bargain any way you look at it, Sue.
HERERA: I think so, too, Ty.
Well, the on-demand economy seems to have touched every industry, and food is no exception. When you think of take out perhaps, greasy pizza or Chinese food comes to mind, but one D.C.-based start-up is hoping to give that image a makeover.
Kate Rogers (NYSE:ROG) is back and she has our report tonight from our nation’s capital.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Forget greasy pizza or Thai food. Start-up Galley is out to prove takeout doesn’t have to be unhealthy.
Alan Clifford and Ian Costello, former Living Social employees, wanted dinner to be fast, cheap and good for you.
ALAN CLIFFORD, GALLEY: We have a team of chefs you ask see around me today. They’re making options from scratch. You can go on our mobile app or Web site, choose what you like, and then in a 30 minute window or on-demand, we’ll deliver it out to you, ready for you to do one quick finishing step in a microwave or oven, and pouring a dressing or a sauce over it, and then it feels and has the consistency of a home cooked meal, without doing any of the shopping, cutting, cooking, et cetera.
ROGERS: The service launched in January 2015, and is now serving D.C. as well as Baltimore and Bethesda, Maryland. Prices range from $10 to $14 a meal and include delivery and tip.
In less than a year, Galley has gone from two co-founders cooking and delivering every meal, to a staff of more than 70, preparing hundreds of healthy meals like this every day.
And the appeal to investors: less costly overhead.
IAN COSTELLO, GALLEY CO-FOUNDER: When you think of a restaurant, first of all, the cost are a lot higher because you’re actually having physical property, physical real estate that people are coming to. And because you’re in a physical space, that geographic area that you conserve is limited.
But Galley can serve the entire city every day, without having that physical space. So, you win on both sides.
ROGERS: In the future, they’re looking to expand locations and offerings. The duo say they’re seeing double-digit growth each month, and that their new lunch option is growing even more quickly than dinner did.
COSTELLO: Whenever people think about food, we want them to think about Galley. So, whether it’s breakfast, lunch, dinner, whether it’s early or late, whenever during the day, they can get a Galley meal.
ROGERS: For NIGHTLY BUSINESS REPORT, I’m Kate Rogers (NYSE:ROG) in Washington, D.C.
MATHISEN: Well, besides making it easier to order in or get around, technology is also being used to help people in need. Tonight, we’ll introduce you to two entrepreneurs who have thought up a business solution to an all too common problem, food waste.
Their start-up helps to redirect discarded food to aide the fight against hunger.
MATHISEN (voice-over): Roughly 40 percent of all the food in the United States goes uneaten. Most of the extras end up in a dumpster or a landfill.
ROGER GORDON, FOOD COWBOY FOUNDER: We need another food bank in Kansas.
MATHISEN: Roger Gordon, Barbara Cohen and Roger’s brother Richard are doing something about it.
ROGER GORDON: Richard is a trucker and sometimes had a shipment rejected by the receiver because the eggplants were too dark or the carrots weren’t straight enough, what-have-you. So, he’d call me and I’d look for a church or food bank to take it.
MATHISEN: He didn’t find many takers though. Richard Gordon has been driving big rigs for 30 years. He spoke to us from his truck in Virginia, via Skype.
RICHARD GORDON: This produce doesn’t last long. You have to keep it moving.
MATHISEN: There isn’t much time when fresh food becomes available and many truckers offload in the wee hours. Restaurants close up late at night when most non-profits are closed.
ROGER GORDON: We start to think, well, if you could build an app to get people to food, maybe you could build an app to help food find people.
MATHISEN: Their app called Food Cowboy gives for-profit food distributors a way to communicate with non-profits looking to help the needy and vice versa.
BARBARA COHEN, FOOD COWBOY CO-FOUNDER: We’re right on the frontier. I mean, we’re really are. We’re doing something that hasn’t really been done.
MATHISEN: Barbara Cohen’s expertise in public health, nutrition, and hunger issues help the Gordons craft a big style app that’s palatable to non-profits.
COHEN: Food Cowboy is an air traffic control system for food that is coming in from a donor and going out to a recipient charity.
The business community holds the food. So, creating a system the charities can use that replicates the way the businesses think creates a better match.
ROGER GORDON: Can we get an 18 wheeler into your parking lot?
MATHISEN: Recipients pay Food Cowboy 10 cents a pound, less than half their normal delivery charges. Larger donors, C corporations, get a tax deduction.
But smaller businesses like family farmers and local restaurants have fewer guaranteed incentives. To grow, Food Cowboy is depending on changes to the tax code.
ROGER GORDON: Try to explain to a farmer why Section 17a3 of the tax code and Congress may grandfather you in, that that’s not enough to create a permanent change in behavior, which is what we need to do if we’re going to solve hunger in America.
MATHISEN: Changing behavior takes time. But it happens. Recycling turned out to be more than a fad. In a year and a half, Roger Gordon says more than a thousand truckers downloaded the app, and Richard Gordon says drivers like it.
RICHARD GORDON: There’s no going out to payphone. There’s no turning up and pay for. With the app, we can find these food banks with 50-mile radius instead of driving it into another state or another city.
MATHISEN: Newer non-profits like Nourish Now in Maryland’s Montgomery County are bringing change to the system, chilling fresh food with its own refrigeration unit, but also warming up to a more business-like approach.
BRETT MEYERS, NOURISH NOW FOUNDER AND EXEC. DIR.: If you get the text, you get that phone call, you get that mobile application to work, you go ahead and rescue the food. The food is going to bad, you’ve got to get it soon enough, save it, give it to people in need.
MATHISEN: If Food Cowboy is successful, the days of too late to donate could be numbered.
ROGER GORDON: The idea is to grow this, to make this a systemic solution. We’re trying to change the way two systems work.
MATHISEN: Food Cowboy hopes to make it easier for everyone to donate. They just rolled out a program called limo for the leftovers, for a dollar per guest, they’ll send an uber SUV to pick up unserved leftovers from a catered event with more than 250 people.
HERERA: Good for them.
MATHISEN: Great story to hear on this Thanksgiving evening.
And thanks so much for watching this special edition of NIGHTLY BUSINESS REPORT. I’m Tyler Mathisen.
HERERA: I’m Sue Herera. Enjoy the rest of your holiday, and we will see you tomorrow.
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