Transcript of Lost 95% revenues, 100% profits: Harsh Jain breaks silence on Dream 11 after real money gaming ban

[Music] Hello and welcome to this special conversation on money control. Uh we are in conversation with Har Chen, the co-founder and CEO of Dream Sports uh the company that runs the platform Dream 11. Now till last Monday we did not know of a gaming bill. Uh but between Tuesday and Friday, India got its gaming law from cabinet uh from cabinet n to Lok Sabha Nord to Rajya Sabha Nord to the present presidential ascent on Friday a blanket ban on all forms of real money gaming in India. Uh including fantasy sports v1 is a prominent player. Uh hush, thank you for talking to money control. um you know I can't imagine um what the last week would have been like because same time last Monday uh business as usual and then Tuesday gradually news started trickling in that the government is planning to ban all forms of real money gaming in India no distinction between uh game of skill and game of chance like we've seen in previous years the you know the whole debate it was a blanket ban I just want to start by asking you was this completely unexpected Did you have an inkling of the government's thinking? Because in our conversations with the government, one reason that kept coming up was societal distress, the feedback that they are getting from uh the middle and lower sections in various constituencies and MPs. But I want to ask you, was it completely unexpected for you? Thanks Chandra for having me. Um yes, completely unexpected. We had no idea. In fact, we were um you know talking to the government about the proposed 40% change, right? They were going to change GST from 28% on deposits to 40% on deposits. And I think we were still in the midst of um conversations with the government on that and reasons why that would hurt the industry far more. And I think this came completely out of left field like you said on Tuesday when the media recorded it uh reported it. And then Wednesday was the Lok Sabha approval. Thursday was Raja Sabha and Friday we all went offline with our current business model. Um and then the president signed it and it became gazetted as an act. I can't imagine you know what this would mean for an entrepreneur running such a business because Dream 11 is one of the most successful gaming platforms in India. I think FY23 you had revenues of over 6,000 cr profits of nearly 150 cr one of the most successful one of the most profitable over 200 million users. Um what was your first reaction? Obviously we were shocked that um we are being asked to shut down you know the business model is going to shut down. We do believe regulation was the correct way forward as you've been asking for many years now. Um, but we understand that this is not something that the government wants. And we've always been a law-abiding company, right? Like when our business model was constitutionally protected and approved by the Supreme Court of India as such, we ran it for the last 14 years and scaled it and were fortunate that a lot of Indians loved it. But if the government has decided that they don't want it and that they've passed a bill through parliament and made it an act um and this is the new law, we want to abide by that. And so before the president even signed it, we pulled off all our cash contest, paid contest from Dream 11 and have flipped to a free-to-play adriven business model. And now we're going to work on the future. But yes, 95% of our group's revenue even though we had fan code, dream set go, dream cricket, dream money which we had launched a few months ago. Um 95% of the group revenue and basically 100% of the profit was coming from Dream 11's current business model. But this doesn't mean Dream 11 is dead. It means our business model is dead. So we had a business model even in 2008 when we started which was not RMG. 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 taking this user base and figuring out the way forward in terms of look the problem is still there right like 260 million users have registered on Dream 11 because they love fantasy sports. They want to make a team. They want to feel like a team owner and they want to tell the world that they understand sports better than anyone else. That doesn't go away. In fact, even after flipping to a free-to-play model in the last few days, right, it's been about 3 days. We still have millions of people coming on Dream 11 to play for free because they want to compete with their friends. Now how do we find a business model through that which is acceptable to the government that we have to keep innovating and experimenting. We are looking forward to a regulator being appointed for online social games which we will now be and not online money games. Um but as a group you know Chandra I've always said this to the media for many years and now maybe um it can actually come true is that a gaming company. Yeah, that's right. You know, because you've spoken about this for so many so many years. We're not a gaming company. In fact, you know, Dream 11 also is not a simulation game. You can't just play it anytime you want. It's based on a real life match and it's a strategy contest where you pick a team and then you're done, right? Um, in the same way, we have sports content with Fan Code. We have sports travel and experiences with F uh Doom Set Go. Um now we've launched dream money which is on the fintech side. Our company's name has been dream sports. Our Indian company name was Porta Technologies Private Limited. Is Spota Technologies Private Limited which stands for sports data technology private limited right? So now we're going to focus all our energy on sports AI and you know 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, um sports analytics, sports performance, uh sports merchandise. All of this is going to get disrupted by AI. And now I have 500 engineers who I can you who I can allocate to solving these problems. So yes, it's a it's a body blow. It's a knockout punch but you know you have to get up from that and keep going and we will start again to solve these problems for Indian sports fans. Let me revisit that number. Hush did you say 90% of revenues 100% of profits gone? 95% of revenues and yet you're smiling and you're calm about it. I I don't know what is going through your mind. Um you know it's been 18 years Chandra of running this we've had a lot lesser when we started out I think you know the journey when we started out we had all these amazing dreams and aspirations if you forgive the pun um and it didn't work 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 and so for two three years even though the business model was working we couldn't raise any money and we had years of rejections and then finally we were able to raise money but after a you know big series A um right at the you know doorstep our first series A investors walked away and then we had to revive the series A series B the same thing happened and then we had to find out another series B investor. So you know today when I'm comparing what we have today I'm just trying to obviously be optimistic about the future there is no way to say this is not like a knockout punch right this is obviously a huge blow to us but I have to be you know a delusional optimist about the future all entrepreneurs have to be a little crazy to do what we do and um I have to 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. So with this distribution and with this team there's very little things that we cannot do if we put our mind to it. It's a lot more than we've had in the initial days. And so you know 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. That's an important point. In fact I think Vicas was just going to ask you about that. There are reports that you know companies are lawyering up. You're saying you're not going to charge because you seem to have taken this with a lot of equinimity. You put out a long statement in the last few days. Um I think Vicas did a story that you know you're also teasing an investment FD uh and gold um deposit app over the weekend called Dream Money. That's been for a few months now and we've been um you know we had applied for like licenses all of that. that's been on for a long time. It's not uh anything new, but of course now it feels like this is what we're pivoting to, but now we're promoting it a lot more to our users. Obviously, as another business that's running today, why wouldn't you challenge it? Because some lawyers are saying this has no constitutional validity. The Supreme Court itself, you know, defined uh and gave legitimacy to games of skill. uh the government gave it legitimacy in the IT rules. They then decided to levy taxes and you know someone has taken away 100% of your profit and 95% of your revenues. Why wouldn't you fight back? 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 regulations come in which allow us to continue with that business model then the law is telling us you're allowed to do it again. Today the law stands that we're not allowed to run that business model and we will abide by that law and I think there's a gaming regulator also on the uh ambit that will get announced and will be operational. We can even ask them about different kinds of business models and if they approve any of those then we will run them. If they don't we won't. So I think we want to focus entirely on the future and not fight with the government on something that they don't want. So not challenging this in court because you want to take it forward. Hush. Uh if you're not challenging it then uh what are the next steps for dream sports then? Yeah, good question. We have the next steps is to actually prove to the media that what we've been saying for so many years is actually true. We are sports fanatics and we believe that there are an unbelievably large amount of sports opportunities in India that we can pursue. I think everyone anyone who's looked at the western world knows that you know outside of the sports tier one like Indian men's cricket team PKL ISL outside of those kind of tier one opportunities um only sports broadcasting has been solved and is global best best practice like that's like global globally recognized as something that we've done better than even the western world everything else long longtail content of sports, sports commerce, sports merchandising, memorabilia, um sports analytics, sports data, none of it. We are even close to the rest of the world and we have 1 billion sports fans. So finally um you know now I have an entire team and 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. If if the law changes tomorrow like I said we'll continue to explore that opportunity based on whatever the law tells us you're allowed to do. Okay. Okay. You recently held a town hall for employees as well, right? I mean, what what did you tell employees? I mean, are there la off in the offing I mean or are you looking at redeploying talent to other ideas in the sense? Yeah, we already have fan code, dream set go, dream cricket, uh dream money. We have a lot of talent demand internally as well. We have all these sports ideas to work on. I mean all of it because if we want to build things back up then the first thing is talent right you can't build anything without the talent pool and so I think as the first principles we said is that talent will always be protected here at all costs right we're not interested in doing any layoffs we are interested in building with that talent to dig ourselves out of this hole like by just getting rid of good talent. How will you ever come out of the hole? Then the only way to come out of this and uh deal with 95% of your revenue being gone is to actually build new products that you can monetize in the future, right? And that will always start with talent. So no, all the talent here is safe and you know we will need them as we build the future of this company. Um that's very reassuring to hear hush but is it practical because where are you going to get the will this come from your reserves the acruals I mean I'm just trying to understand where will the cash come in order to be able to sustain this operation considering you know your main business line has disappeared. So thankfully we we do have the um cash reserves to at least run operations for a while and maintain this talent pool. We have we have a runway of a couple of years and that's more than enough for us to prove out it's Chandra compare this like a series B company right if you look at a series B company not a series A because series A is almost like just at the idea stage we already have more than a series B company has. We have capital, we have the people, we have the user base, we have a brand and we have some entrepreneurs that are a little more battle scarred than even before, right? So um the way I would think of it like if I was an employee of this company is that would I join an exciting series B company which has all these advantages and capital and can assure me that they have this for the next couple of years and if anything works then our distribution modes allow us to widespread distribute this overnight and hyperscale So given that it's always a calculated risk for every single person involved, right? Is this does this riskreward pay off? I'm hoping it does for everyone here involved. Right. Hush, do you think gaming companies um overlooked the societal risks and distress that were coming from money- based gaming? uh because you know we've been talking to people who say that they know of house helps uh maids drivers uh police constables who have run up debt on uh platforms like Dream 11 poker platforms ramy platforms and so on. Do you think the industry underestimated the level of stress? Because government officials we've been speaking to say that they were very confident that you know this is something that's impacting all political parties, all political constituencies based on the feedback they're getting from the ground. Um did companies not sense this enough? Because there have been reports time and again about the societal risks that this is posing um in a country like India. So Chandra, I think that look, I can speak about our data. I can't speak about other companies whose data I don't have and I can say that we've clearly reported that fantasy sports because of the nature of it is not you can't play it again and again and again and again anytime you want. It has to 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. Um, and 99% of our user base had never won or lost more than 10,000 rupees in their lifetime. So, it very much was the popcorn to your movie, right? It was a sports fan engagement tool. I can't speak for the rest of the gaming industry without because I don't have the data. But I think in in any scenario I think regulations would be the way to go to solve this problem because banning it will obviously give rise banning anything not just this industry. Banning anything gives rise to a black market more right because if people want to do something they don't have a choice other than to go to a black market. I believe the government is going to come down very heavily on the black market um for this as well. But right now from what I can see, I read an article today morning that showed that uh the black market has gone on a advertising blitz, right? Yeah. But I'm sure the government's going to come down heavily on them. Um I think the way forward would be regulation. You regulate it. You can limit like like Tamil Nadu. Tamil Nadu has you know recently launched regulations where they had time limits, KYC, money limits. I think that would make sure that the good operators continue make sure that the games are meant for engagement and you know fun and don't cross limits which and you know create problems for people and the government would continue getting its $2 billion $3 billion of tax revenue and it wouldn't give rise to a larger black market but like I said that's in the past the Germans made his decision. We have a new law. We will abide by that. We are not going to challenge it. And we're going to focus squarely on the future of this company which is in sports AI and um you know especially focusing on the creator economy. We've seen some amazing things within the creator economy system on Dream 11 for fantasy sports. So many people if you go to YouTube and type dream1 team you will see millions of videos of people helping other people make a better team that doesn't go anywhere even if it's a freeto-play game like the fantasy premier league for EPL has this entire creator economy and that is completely free to play so we believe out of this 260 million user base that had registered for our earlier business model. We still believe a large chunk would like to come back and still play fantasy sports with their friends and family and colleagues just to prove who knows sports better and so we are still going to continue down that journey and at a group level invest a lot more in sports AI. Can you give me a sense of what sort of discussions are you having with your investors and uh are you kind of do you have to raise another round for your second innings per se? Yeah, I know you said second innings. I didn't want to confuse, but this is more like a third innings. This is a this is more than the test match, right? Like we had our first innings before RMG, we had our second innings in RMG. But yeah, just jokes aside, I think that uh 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 hypers scale them, yes, then we'll need to raise capital. Fortunately, we have like an amazing set of investors with us who I'm sure would support us and would want to tap into any opportunity that we find product market fit in given our distribution advantage and given what we can do. Um, you know, honestly, I compare this like it's like the it's like in sports, right? We compare everything to sports. If you lose a World Cup final, at that moment, it's like the end of the world. But if you ask most of those players one or two days later, they'll be like, you know what, we're getting back to practice because there's a next World Cup coming and that's the one we're going to win. That's what our Indian team did in um the T20 World Cup final in 2023 which we all saw 10 matches in a row and then 11th match gone right and then we came back in 2024 and won it. So we have to take inspiration from those kind of things and come back. So and hopefully our investors like the BCCI will believe that the same team will be able to win again. Talking about PCCI, um a senior official has been quoted today saying they've ended ties uh or decided to end ties with Dream 11. Uh I I think you know you came on board as the lead sponsor sometime in 2023. Um what happens to that partnership? Because I mean Dream 11 was sort of synonymous on the jersey of the Indian cricket team. What what happens to that? Um we've had an amazing relation with BCCI spanning like I would say almost a decade right from the first time we became an OP official partner for um IPL I think we were one of the we were the first if not one of the first tech companies to ever do that right and after that we've been fortunate to have uh the IPL naming rights for your dream 11 IPL Um, and then now we were we became front of Jersey sponsors. We became front of Jersey for a bunch of IPL teams. 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 under the same um agreement. 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. I can only say that there is no decision that's been reached yet. But these are discussions going on about how do we mutually agree on the way forward. We want to maintain a great relation with the BCCI. They are arguably the most important sports body for us and um even for fan code, for dreams go, for dream cricket, for all our businesses going forward. We hope to continue being a great partner for the BCCI and so we will have our discussions with them and see where that goes. Nikas, how important is uh Dream Game Studios in your uh going forward? I mean you have Dream Cricket which is very good uh as a game. Uh so how what's the plan there? Is it trying to create a FIFA for India in the sense I mean and do you plan to acquire more studios going forward? Yeah, I think Vicas we have to be open to every opportunity now. Um look as long as it's sports we're open, right? So we have to look at 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 do and work on them deeply. Um we already have dream cricket so like by like we won't pick up because that'll compete with it but we would want to invest in dream cricket more and grow it more aggressively. I think that the world does not have a FIFA equivalent of a cricket game for the mobile especially and that's something that I think India would be proud and would fit right into our honorable PM's vision of making India a great sporting nation and a gaming superpower. Both of those would meet in having an online social game that's come out of India for the whole world. um you know just has freeto play and high engagement and teaching a lot more people about cricket. Okay. How does fintech fit into your entire ambitions with sports? Uh sure. Yeah. It doesn't it doesn't that's something that we saw that uh that's the only one thing that we've done I think in our history which doesn't fit in because we saw some problems there and a lot of our users believed in us deeply and said that hey you know I love your brand can you help me also like manage my money and I think given the fact that our distribution was largely across India there was an entire strata of society that needed financial literacy. So if you can see 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 um and the whole point is financial literacy and getting people to understand okay 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 actually go and solve right um harsh on the practical and operational side of things um you know h are banks supporting you have they put any freeze on current accounts are they seeking declarations that you have ended all RMG before continuing their business relationship with you because if you look at the fine print of the government order, it also says that uh you know payment service providers, banks should not work with any form of uh money based gaming companies. So any issues there in salary disposal, running the business, so on and so forth. Not that I have heard of. No, none for us because as of Friday morning, even before the bill became an act and gazetted, um we are no longer a real money gaming company. We no longer classify under the act. And so I think that act stops banking um organizations from working with companies that after the act is in place continue to provide an online money gaming service. that is not us. Any regrets about what you could have done differently to avert this order, this ban? Um, yeah. I think look, going back in time, I think the industry could have worked harder to come together and self-regulate even more. If you see about six months ago, we even got together and launched a code of ethics across all the three different large organizations which was actually self-regulating. But um maybe it was a little bit too late. We were all waiting for a regulator to come. But maybe we should have been harder on ourselves to actually regulate this as an industry and not just waited for the government to appoint a regulator. And is this going to be a write off for your investors because I think 2021 you were valued at $8 billion when you had raised that $800 million round. So what are the likes? What are your investors telling you at this point? And you know this is coming months after you actually decided to flip back to India in preparation for a potential listing here. You flipped back to India. 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 from my investors so far there's a lot of shock. There's um obviously a lot of shock right you're sitting somewhere outside India and like from a Monday when everything's fine to a Friday you've already shut down the business model there is shock and um I think people are still making peace with that shock and getting over it. So far I think our talks with all our investors have just been f focused on the future. What is the future for us? Where are we going which we already discussed today and um yeah that's about it making peace with what what has happened today their personal write downs and write you know how they value the company. I think each investor will have their own value that they'll attribute to it. You can ask them that Vikas uh couple of companies are also exploring international markets right US and other markets per se are do you have any similar ambitions or you you're still going to be India only in the sense in terms of products no I think I think we will have to explore the international markets but I wouldn't I would not jump to that first I still want to be India first just not India only. Yeah. Right. Like the ad model that we've launched on dream will have now freeto play fantasy sports with ad model. The ad model would have a very low ceiling of monetization in India. Mhm. But once that's if that works in India, I'd want to open it up to the rest of the world because there are cricket fans everywhere and would want to play for free and the ad rates are much better in western markets and so I think we'll be open to it but we'll always be India first and we'll always be making India. I'm not interested in having offices worldwide and you know our HQ will continue to be in Mumbai even after all this you don't wish damn I should have been based in the US or Dubai no why they're Indian this is home what has been the response from other entrepreneurs you know Sanjep Pikchandani for instance said that this is what resil Brilliance is is all about, entrepreneurship is all about. But what have you been hearing from the other entrepreneurs? Is there also a sense of fear that we're running this business for 16 years and then one fine day anything can happen and you know that's the uncertainty you have to live with in India. Is is that going through their minds at all? Yes, of course. So look, there's no there's no way of hiding the fact that people are very shocked at the speed at which this decision was taken. Um but I think every entrepreneur looks at it differently. Some people will look at the opportunity forward. Some people will think have regrets about the past. Some people will jump straight into problem solving. Some people will utilize their uh any other diversification they already have and double down on that. So I think some people will move abroad. You know everyone will have a different reaction to this. So I can't speak about anyone else. I can just tell you we are here to build a great Indian sports company. Okay. As we wind up uh Vicas any closing questions from your end? Um, nothing else actually. Yeah. Hush. Um, I just wanted to, you know, get your perspective. Who was the first person you called when you heard about this? Who has been your anchor or go-to person in the last week to kind of, you know, just tide through this? Was it an investor? Was it your parent? Was it your co-founder? Was it someone else? A friend perhaps who helped you? My wife. I think she's uh I mean she was the first person we've been married for 15 years and we were dating for eight years before that. Wow. So you know we've been together she's seen three innings of Dream 11. I mean she was there before we even had before I had the idea for Dream 11. So obviously she'll be the first one and you know family is what gives you strength to then come back from this and deal with this. Obviously my co-founder and my team here are integral parts of being you know giving us that strength and then optimism for the future. The investor support is extremely important because that can become very difficult in these times. But the first person would always be my wife and my parents have been like extremely supportive and you know always my parents, my sister, my family. I mean those are the people that's why it's family right they are here when the chips are down not just when things are going well. On that note, um Harsh, I just want to wish you uh the very best and all strength to your team because I I can't imagine the nerves of steel one would need in you know such a scenario but you know you're you've shown a lot of strength and I just want to thank you for giving us time and for being candid on what's next for Dream 11. But here's wishing the third innings of Dream 11 the very best. Thank you for talking to us. Thanks a lot Chandra. See you in our next third innings. [Music]