MC interview: “Lost 95% of revenues, 100% of profits, but remain a delusional optimist”: Dream11 founder Harsh Jain on real money gaming ban

Watch the video interview: Lost 95% revenues, 100% profits: Harsh Jain breaks silence on Dream 11 after real money gaming ban

He is now focusing on leveraging Sports AI to expand into sports commerce, analytics and merchandise, capitalising on the company’s 260 million-strong subscriber base. Jain also brushed aside talk of a legal challenge against the ban, saying he had no such plan.

EDITED EXCERPTS:

Was the real money gaming ban completely unexpected? Did you have an inkling of the government's thinking?

Harsh Jain: Yes, it was completely unexpected. We had no idea. In fact, we were talking to the government about the proposed 40% GST change. This came completely out of left field.

Dream11 is one of the most successful and profitable gaming platforms in India. What was your first reaction?

Harsh Jain: Obviously, we were shocked that we were being asked to shut down. The business model is going to shut down. We do believe regulation was the correct way forward, but we understand that this is not something that the government wants. And we've always been a law-abiding company.

So, before the President even signed it, we pulled out all our cash contests, paid contests from Dream11 and have flipped to a free-to-play, ad-driven business model. And now we're going to work on the future. But yes, 95% of our group's revenue, even though we had Fancode, DreamSet Go, Dream Cricket, Dream Money, which we had launched a few months ago, and basically 100% of the profit was coming from Dream 11's current business model.

But this doesn't mean Dream11 is dead. It means our business model is dead. So, we had a business model even in 2008 which was not RMG (real money gaming). We pivoted through many such business models before finding one in 2012 which was RMG. And we scaled it. So, we will have to get back to using this user base and figuring out the way forward in terms of.

We are looking forward to a regulator being appointed for online social games, which we will now be and not online money games.

So now we're going to focus all our energy on sports AI and the way AI is going to disrupt every industry, it's also going to disrupt sports.

We have sports content, sports commerce, sports fan engagement, sports analytics, sports performance, sports merchandise. All of this is going to get disrupted by AI. And now I have 500 engineers who I can allocate to solving these problems.

So yes, it's a body blow. It's a knockout punch. But you must get up from that and keep going. And we will start again to solve these problems for Indian sports fans.

You said 95% of revenues, 100% of profits gone. And yet you're smiling, and you're calm about it. I don't know what is going through your mind.

Harsh Jain: It's been 18 years since I started running this. We've had a lot less when we started out.

And then we had to run a social media agency on the side just to make money to get Dream 11 to stay alive and find a business model. When we found the RMG business model, nobody believed it. We had years of rejections. And then finally, we were able to raise money.

This is obviously a huge blow to us. But I must be a delusional optimist about the future. All entrepreneurs must be a little crazy to do what we do.

And I must look at what we have today to do what we want to do right now. We have 260 million users. We have a brand that's loved and trusted by a lot of people. We have an amazing talent pool with us. And we have some capital that will help us get to product market fit for a lot of the ideas we are pursuing now. And so, I don't want to live in the past. We just want to focus on the future, which is why we're not even going to challenge this ban.

Why wouldn't you challenge it? 100% of your profit and 95% of your revenues is gone overnight. Why wouldn't you fight back?

Harsh Jain: Because I think the government has made it very clear that they don't want this right now. Now, if for whatever reason, the law changes or (different) regulations come in, which allow us to continue with that (current) business model, then the law tells us you're allowed to do it again. Today, the law stands.

I think we want to focus entirely on the future and not fight with the government on something that they don't want.

If you're not challenging it, then what are the next steps for Dream Sports then?

Harsh Jain: We are sports fanatics. And we believe that there are an unbelievably large number of sports opportunities in India that we can pursue.

In terms of long tail content of sports, sports commerce, sports merchandising, memorabilia, sports analytics, sports data in none of these are we even close to the rest of the world. And we have 1 billion sports fans. So finally, now I have an entire team of people, of sports fans, who will work with me on these problems. And we will deploy all the capital we have in solving those problems.

You recently held a town hall for employees. Are there layoffs in the offing?

Harsh Jain: We're not interested in doing any layoffs. We are interested in building with that talent to dig ourselves out of this hole. The only way to come out of this and deal with 95% of your revenue being gone is to build new products that you can monetize in the future, right? And that will always start with talent. So, all the talent here is safe.

That's very reassuring to hear. But is it practical? Because where are you going to get the money from to keep operations going? Will you dip into your reserves?

Harsh Jain: So thankfully, we do have the cash reserves to run operations for a while and maintain this talent pool. We have a runway of a couple of years and that's more than enough for us.

Do you think gaming companies overlooked the societal risks and distress that were coming from money-based gaming? Because we've been talking to people who say that they know of house helps, drivers, even police officers who have run up debt on platforms like Dream11, poker platforms, rummy platforms and so on. Do you think the industry underestimated the level of stress?

Harsh Jain: We’ve clearly reported that fantasy sports, because of the nature of it, you can't play it again and again, anytime you want. It must be based on a real-life match. Our ticket sizes were always very small. So, our ticket sizes were on average about 51 rupees or 52 rupees.

And 99% of our user base had never won or lost more than 10,000 rupees in their lifetime. It was a sports fan engagement tool. I can't speak for the rest of the gaming industry, because I don't have the data. But I think in any scenario, I think regulations would be the way to solve this problem. Because anything gives rise to a black market.

I think the way forward would be regulation. Tamil Nadu has recently launched regulations where they had time limits, KYC, money limits. I think that would make sure that the good operators continue.

Can you give me a sense of what sort of discussions you are having with your investors? And do you have to raise another round?

Harsh Jain: I think that we have enough capital now to sustain our headcount and our people for the next couple of years. But if any of our new business ideas work and we want to hyperscale them, yes, then we'll need to raise capital.

A senior BCCI official has been quoted today saying they've decided to end ties with Dream11. What’s the way forward?

Harsh Jain: We've had an amazing relation with BCCI spanning almost a decade. But I think now all of that was based on a business model. And with that business model being impacted by a change in law, we are going to all our partners and saying that we don't have the ability to continue our marketing budget because the business doesn't exist anymore.

But I think with the BCCI, it's very clear that we will only do something with mutual agreement. And those are discussions going on right now.

How important is Dream Game Studios for you going forward? I mean, you have Dream Cricket, so what's the plan there? Is it trying to create a FIFA for India?

Harsh Jain: We must be open to every opportunity now. If it's sports, we're open but we also don't want to do 20 things. So, we're going to pick up five things that we want to focus on and work on them deeply.

How does Fintech fit into your entire ambition with sports?

Harsh Jain: It doesn't. Our Dream money proposition is also not about like investing large amounts of money. It's about getting people started with the habit of investing. And so, it starts as low as 10 rupees, right? And the whole point is financial literacy. And getting people to understand, OK, invest every day, invest a little bit. And over time, it does compound and really benefit. So those are the areas we're tapping into and seeing where problems exist in India, which we have a, you know, which we can use our distribution and our goodwill to go and solve.

Any regrets about what you could have done differently to avert this ban?

Harsh Jain: I think the industry could have worked harder to come together and self regulate even more. Maybe we should have been harder on ourselves to regulate this as an industry, and not just waiting for the government to appoint a regulator.

And is this going to be a write-off for your investors? And this is coming months after you decided to flip back to India in preparation for a potential listing here.

Harsh Jain: Yeah, we flipped back to India, which wasn't the best timing now in hindsight, because we had to pay those taxes based on certain value to America. And after 95% of our business is gone, that value changes, obviously. But I think at least for my investors so far, there's a lot of shock. And I think people are still making peace with that shock and getting over it.

A couple of your peers are also exploring international markets. Do you have similar ambitions or you're still going to be India only in the sense in terms of products?

Harsh Jain: I think we will have to explore the international markets, but I would not jump to that first. I still want to be India first. It's not India only.

Who was the first person you called when you heard about the ban?

Harsh Jain: My wife. We've been married for 15 years and we were dating for eight years before that. She was there before I had the idea for Dream 11. So obviously, she was the first one.

And family is what gives you strength to then come back from this and deal with this.