Dream11 loses 95% revenue, pivots to AI and global sports content | Q&A – CNBC TV18

Dream11 is bracing for a dramatic shift in its business model after the government’s ban on online money gaming, which has wiped out nearly 95% of its revenues overnight. Harsh Jain, CEO and Co-founder of Dream11, acknowledged the setback but stressed that the company will comply with the law while pivoting towards new opportunities in sports content, AI, and global expansion.

Despite the sudden disruption, Jain said Dream11 has enough cash reserves to support its 800-member workforce for the next couple of years. The company will not resort to layoffs and plans to redeploy its engineers, designers, and product teams to build out new sports-focused products and services, including a free-to-play model backed by ads and sponsorships.

On the sponsorship front, Dream11 is in discussions with the BCCI and other partners to amicably transition out of jersey and title deals impacted by the ban. While most global and domestic sponsorships will be withdrawn under change-in-law clauses, Jain underlined that Dream11 remains committed to building a broader sports ecosystem in India through initiatives like FanCode, DreamSetGo, and Dream Sports Foundation.

Jain highlighted that the broader ecosystem will feel the effects significantly. The online gaming industry was spending around ₹10,000 crore annually on advertising, along with consulting, legal, and other services, and this expenditure will disappear overnight. He also pointed out that hundreds of thousands of jobs supported by the industry could be at risk.

This is the edited excerpt of the interview.

Q: Before I talk about the road ahead, I want to understand whether there was any indication given to you by the government in your meetings, in your consultations, in your conversations, that there was a growing discomfort with online, money, gaming?

A: It has been a very tough weekend, thinking about everything that could have happened and everything that has happened, it has obviously been a very big shock to deal with hearing that on Tuesday, that there may be a bill coming in which shuts down our entire business model to Friday actually shutting it down. The weekend definitely was a time to introspect and think about all of these things. There has been a growing concern over the last few years, very clearly from the government on the online money gaming sector and the growth of it. However, I believe, and I will always stand by, the fact that regulations were the way forward, which would have helped correct that growing concern, or correct any concerns, because this is something that is regulated in the US, UK, Australia, all the large markets in the world.

We were close to it as well with the self-regulating bodies (SRBs) launched by the Ministry a couple of years ago. Unfortunately, that did not materialise, and today, the industry is being banned.

Read Here | End of the Game? Dream11 prepares to shut real-money gaming arm after Online Gaming Bill

Q: I want you to clarify, because there have been rumours coming in over the weekend on a possible legal challenge. Is that something that you, Dream11 individually or the industry collectively is considering at this point in time, is a legal option, an option being considered?

A: We have always been a legally compliant company when Dream11 business model with real money gaming was legally proven, constitutionally protected, and even the Supreme Court of India approved it as a game of skill and protected by the Constitution, Article 19(1)(g) then we ran it and we scaled it. Today, the government of India has passed a law, which says that they are prohibiting online money gaming, and we will follow that law in letter and spirit and so Dream11 will not be challenging this law. If the law changes at any point, I believe there is also regulator coming in if that ever changes, we can explore those business opportunities then. However, no – this is not some place that we want to fight.

We want to focus entirely on the future and doing what is in line with our honourable PM’s vision of making India a great sporting nation and that is what I have always told the media forever, that Dream Sports, as the name suggests, is not a gaming company. We ae a sports company, we have FanCode, sports content platform, DreamsetGo, sports, travel and experiences, Dream Sports Foundation (DSF) and many more, which are all focused on sports. So, for us, going forward, we just want to focus on sports AI. I believe it is a large, large opportunity to have today. 500 engineers that are available to focus on AI as it disrupts every field, and in the same way it is going to disrupt sports, it’s going to disrupt all the different industries of sports, including performance and analytics and data and so we are going to dive headfirst into that.

Q: Now the ban is here. It is here to stay for all practical purposes, until and unless the government decides to change things. What happens now to employees? If you can give me an employee headcount to start with, and how many employees are likely to be impacted, will you have to see job losses, redundancies, what should we expect on that front?

A: We have always said this, and we will live by it now. There are things that you say, there are things that you have to walk the talk, and we have always said that talent first. You cannot build anything without talent and so we are fortunate to be in a position where we have enough capital to accommodate our current team. While we will not be hiring aggressively in any way in the near future, we want to make sure we keep all of our team and so there will be no layoffs. We will be utilising these brilliant engineers and product managers designers, or our entire team that we have, that we have painstakingly built over so many years, we will be getting the help to build our future. And, so whether it’s all the sports AI, products and services that we want to build on, content, commerce, merchandising, analytics, performance, data, we need this team to build that out – so we will not be having any layoffs.

We will be investing in our people to dig us out of this hole. This is definitely a hole. 95% of our group’s revenues have disappeared overnight, and 100% of our profits. So the only way we believe to come out of this is by building, by rebuilding for our user base of 260 million Indians, by rebuilding with an amazing talent pool we have, by utilising the brand that people love and that we have hopefully earned a lot of trust from and building for the future now.

Q: If you can give me a little bit more colour, because, as you pointed out, 95% of your revenues disappear with this ban coming in in your words, as well as your profits. The numbers that we have are numbers for FY23 we don’t have numbers for FY24 and 25. You also talked about enough capital on the books now. What is the capital that you have on your balance sheet and if you can share with us whatever is possible in terms of revenue and profitability the last numbers?

A: You can find our numbers from the RoC, but the revenues and profitability don’t matter for the past. What matters is the cash we have on hand, and that is enough to support our current team for a couple of years and that is the runway we need.

Q: What is the cash on hand at this point in time?

A: The last reported cash was a few ₹1,000 crore in our FY23 RoC, we made some significant investments since then. However, what we are focused on is that we have enough capital to maintain our team of about 800 people on Dream11 for the next couple of years while we build out these products. Of course, we are also pivoting Dream11 model from a pay to play model to a free to play model with ads and sponsorships. We are hoping that with our scale, those ads and sponsorship money will result to something significant enough to reduce our burn.

We will also look to globally distribute the product now, instead of being India only, which can further help us to monetise our user base with our free to play model. As we build our new products and services and monetise them, we have a large distribution and a great brand, and we intend to use that to, like I said, dig ourselves out of this hole.

Q: Is there clarity from the BCCI at this point in time, that there will be no penalty involved now that you are no longer going to be the sponsor of the Indian cricket team, because I am given to understand that there is a waiver clause, but can you confirm that for us?

A: No, I think that we have been a partner with BCCI for over a decade, we were the first technology company to become an official partner of the IPL. We were fortunate enough to have one of the IPL seasons named Dream11 IPL. We then moved on to become a front-of-jersey sponsor for the Indian men’s team, which is the one you are talking about. There are only six months left of that sponsorship. It started in 2023 and it ends in about six months. We are only talking about a six month period.

There is ongoing discussions with the BCCI to mutually agree on the way forward. Nothing has been decided yet, but the change in law renders our Dream11 business plan obsolete and prohibited, so we are in discussions with BCCI as any good partnership would be to discuss a mutually agreed way forward.

Q: If I can just understand from you when you talk about a mutually agreeable way forward and that you are in conversation with BCCI, that is essentially to ensure that you do not have to pay a penalty, or is there any other item on the table up for understanding and negotiation?

A: We have to do what’s best for the Indian team and with the limited resources we now find ourselves with, given the fact that the business model no longer supports that sort of advertising and sponsorship so we are in open discussions with the BCC on all ideas possible to go forward and make sure that this partnership continues. This is the most important partnership for us. We are continuing to build a sports company in India, and as such, we want to make sure that the BCCI and we mutually agree on whatever is the way forward. We have the Asia Cup right now, we have the Women’s World Cup, and finally, the March Men’s World Cup as the three large events in the next six months of our sponsorship. We will work out something, and I will let you know.

Q: You are essentially saying that there is no end to this partnership, because you are talking about the possibility of continuing this partnership, perhaps in a different shape, given the ban as far as online money gaming is concerned, as well as the restrictions on advertising and so on and so forth. However, you are essentially saying that you hope that your partnership with the BCCI for each of these tentpole events will continue?

A: No, what I mean is a partnership as a company with BCCI, for example. Fancode has a lot of live streaming for sports events and cricket events in India. DreamsetGo organises a lot of tickets and experiences for watching IPL or cricket matches. We have a large partnership with BCCI that goes beyond just the front-of-jersey, and we plan to continue. We have to figure out a way to transition in an amicable way with BCCI from the front-of-jersey, when and how that will happen. We are still in conversations with them.

Q: You have got a whole host of other IPs that you are involved with as sponsors. Whether it’s the ISL, it’s the title sponsorship of Super Smash New Zealand’s domestic T20 League, there’s a long list, what happens to all of those properties, all of those IPS as well now and of course, individual cricketers as well?

A: Almost all of them have a change in law contract built in and so we will have to withdraw from all our sponsorships and all our brand endorsements across the world because of this change in law.

Q: You will have to withdraw from all your sponsorships as well as all your individual endorsements on account of the change in law and of course, I would imagine that you will have to look at each of the contractual obligations as you move forward. Do you worry, though on account of contractual obligations and liabilities because you are having to pull out, or are there waiver clauses built in, built to each of these contracts?

A: So, whether it comes to our entire business model or to every single partnership we have, we will always continue to work on the spirit as well as the letter of the law. As far as individual contracts go, we will abide by contractual agreements. If there is a contractual agreement that states that due to a change of law, there is a force majeure, we will abide by that. If the force majeure covers it anyway, we will abide by that.

I believe that all our legal agreements cover this clause, and as such, we will have to withdraw from all our sponsorships and endorsements. Because we need to start the Dream11 business model from scratch, and hopefully one day, we will be able to pivot and find a new business model for Dream11 with sports engagement to work on these partnerships once again.

Read Here | ‘We will not challenge the law’, confirms Dream11’s Harsh Jain; won’t lay off our people

Q: Another clarification that I wanted from you, because this is a matter that has been subjudice. It continues to be at the Supreme Court at this point in time, the GST issue and a massive bill that had been sent by the government to gaming companies like yours. In the Dream11 case, it was about ₹28,000 crores in terms of GST notices. We are waiting for the Supreme Court’s verdict on this matter. However, can you lay out for us what would the statutory dues be on account of GST and other taxes to the government?

A: Nothing changes there, because even if the business was running fully, there would be no way to pay that GST retrospective bill. Because even the principal amount, like you said, was something that none of our companies, no company in the industry, not us for sure, could pay. The entire industry’s bill was about two and a half lakh crore, I believe, and that is something that simply renders the whole industry to go straight to NCLT, and that just continues.

In fact, it has gone to a heightened degree because in the earlier instance, with a business model that worked, you would still have some inherent value, even if you went to NCLT. Now there will be none of that either. That is the only thing that changes. But in terms of legality, nothing changes there. The retrospective tax case that’s going on that we will all be willing to hear the judgement of, if found against the industry, all the companies would anyway, end up in bankruptcy. If found for the industry, then the companies that are left today will continue, like us, to rebuild and pivot into something for the future that is not online money gaming.

Q: $8 billion in valuation, India’s first sports unicorn, you have a marquee set of investors, and I am sure that you have had conversations with them over the last few days, since this law came into being. Now, as you plan this pivot, harsh as an entrepreneur, as someone who is facing an existential crisis, there is no other way to describe it- what is the thinking at this point in time? What have you communicated to your investors, and how soon will you start work on this pivot?

A: We started work on the pivot the day we heard about this law. Immediately, we had to react and be ready for the worst-case scenario and that’s the way we started, and we have been brainstorming on the way forward. We have been fully transparent with our investors as always, and they have been fully supportive of us as always. We have faced a lot harder conditions, I don’t want to sound like delusional, but I believe all optimists, all entrepreneurs, have to be these optimists that just go on believing even when nobody would, and that’s a little bit of the craziness that makes us do these kind of things and struggle for many years to build something. But you have known me for a while, and you have known our story, and we have had a lot lesser when we started out, we had no money, no capital, no belief, no brand, no employees. However, we still built from there.

When we, failed from there, we built a servicing arm to augment our Dream11 and keep it alive while we figure out a business model. When we found a business model on Dream11 for years, we had rejections for anyone to invest and so we have had a lot worse. We have to remember those times and be grateful for what we have built so far, and be grateful that today, this is definitely one of the darkest times for us, and has a very deep implication, and we are in a hole.

But, we are in the hole with an amazing team of people, with an amazing set of investors, with some capital in the bank that can keep us going for the next few years, with a brand that is love and trusted by a lot of people, and at a time where AI is going to disrupt everything, and I have 500 engineers available and ready to deploy on building the next generation sports AI company from India for the world. So yes, I may be a bit delusional. Yes, I am an eternal optimist, and we have to find a way to put the past behind us and focus squarely on the future, which is why we will not be challenging this law that the government has put into place. We will be law-abiding. We will focus on the future and just restart and rebuild for India’s sports vision.

Q: In this aspiration of now building a sports AI company from India for the world, what are you going to prioritise? What will the focus be, and give me the next steps in building on this aspiration?

A: The first step is always, what is the user problem that we are solving? And I like to think about the fact that you have to start from first principles – what is the user problem? Is it a large problem, and why are we uniquely positioned to solve it? Essentially, what is your right to win? So I think that is where we’ll start.

We have an amazing user database. We know a lot of their problems through these 18 years of running Dream11 and at a time earlier where we were running this large company and didn’t have time to focus on some other problems that opportunity cost now is gone. And we can focus entirely on the problems that we have loved to have worked on for many years. Now with AI, more than ever, the Speed and execution of trying out new ideas and iterating becomes faster than ever. So I think that we have a lot of ideas, for example, sports coaching. There is no reason why, in today’s world, we cannot have a sports coach on a mobile phone.

For hundreds of millions of Indians who play sports in India, they don’t have access to a coach. But today you should be able to, with AI, build a coach on your mobile phone, because every Indian, thanks to all our telecom operators, has a mobile phone with a cheap data plan. If they can use that device to replace and become an AI coach, just imagine what can happen to our sporting nation. These are very simple things that you just need the will, the capital, and the talent to build out, and if you do a great job, this is a market that is available worldwide. This is one such idea, but there are many that we are working on and chiseling down because we also do not want to work on 20 ideas. We want to chisel down to the three to five large ideas that will solve very deep, rooted user problems that we can work on.

Q: My understanding is that approximately ₹20,000 crores was processed in monthly gaming transactions. Can you take us through what the picture was like? Specifically, as far as Dream11 is concerned? What are we talking about in terms of monthly transactions going through payment gateways like Razorpay, etc? Who will be the fintechs that will be most impacted because of a lot of these UPI transactions?

A: I don’t know fintechs are really impacted, apart from volumes, because most of this was UPI, like you are saying, I think about 95% or more was UPI. A very, very small part was credit or debit, maybe more than 95% really. So I don’t think, apart from volumes, that would impact any of the other P&L of large fintechs today. But there was a ₹20,000 crore tax revenue that it will disappear overnight.

I believe there is a large ecosystem that is impacted with our advertising. The industry was spending about ₹10,000 crores in advertising every year, along with services like consulting, legal, etc. and that ₹10,000 crores will be gone from the ecosystem in spends. There are also a couple of lakh jobs that these companies, that our industry supported, those will be in danger. There is substantial second-order problems that will be created and I just hope that as a country, we are able to recover from that quickly and easily enough, and we hope to do our part by creating new products and services that can replace this in a way that continues to work with the government’s vision.

Q: Advertising, of course, is a big one. How much were you specifically, you said for the industry, the spends was about ₹10,000 crores. For Dream11, what was the ballpark number in terms of your annual advertising budget? Secondly, and I think that’s the more important one, because in your statement that the industry put out, you talked about significant job losses running into lakhs, something that the government of India, the MeitY Secretary disputed in his conversation with me. You are saying that you will not cut any jobs, you will not lay people off at this point in time. But what is the real estimate as far as industry is concerned?

A: Our advertising spends are about ₹1,000 crores, but it was very volatile based on the sporting calendar, because in a year, if you have the World Cup and the IPL, if the World Cup is a T20 World Cup, or an ODI World Cup, or a Test Championship, it used to change quite significantly. That would be a good average for you to know recently. In terms of jobs, for the 400 companies very, large portion of them would have to shut down, and those jobs will truly be gone. I know a lot of the large players today that have already announced laying off a large amount of people in their organisations. Fortunately, for us, like I said, we already have portfolio companies and have diversified away from gaming. Because I have always told you, we’re not a gaming company. We have been a sports company from the day we were born.

The name of the company was Dream Sports. The name of the Indian entity was Sporta Technologies Private Ltd, which stands for Sports Data Technology Private Limited. We are fortunate to have those sports businesses to deploy our people into, and a lot of sports opportunities to work on. But there will be an overwhelming majority of these 400 companies who will have to shut shop, and that’s the truth.

Q: We have heard from some of your peers, who are now looking at the possibility of looking outside of India altogether. What happens to your India plans? You said you want to now build a sports AI sports company from India for the world. However, where does this leave the dream for India, so to speak, if I could call it that. And more importantly, you recently domiciled in India, I would imagine, with the hope of eventually going public, those dreams now put away?

A: Yes, I can say that that wasn’t, a lot of entrepreneurship is about timing, and that timing wasn’t great, in hindsight, because we did pay our taxes to the US to re-domicile in India. But at the same time, we have to look at this as a very long-term play. We are here to build a long-term sports company that would want to always have domiciled out of India. I have no regrets about things that we have done in the past. We had already started diversifying significantly outside of Dream11 because even in FY25, we had flipped over after, I think, five or six years of being profitable. FY25 was our first year to report a loss and already knowing that because of the GST quadrupling, if you remember, in October 23, the government changed the GST laws and GST tax rate and quadrupled it for the industry we went from a profitable company to a loss making company. So, we are already investing in diversified opportunities outside of online money gaming, so I think that’s something that we will continue doing.

Many other companies are looking at global opportunities, and they will have opportunities there, maybe in gaming. For us, it is plain and simple, we want to solve for sports in India first, and then globally, expand those to cricket markets, football markets, target the world’s largest two sports and then take it from there.

Q: I am going to end by asking you, I am sure you have had conversations with your team, and these can’t be easy conversations to have. But where are you finding strength from at this point in time? Have there been any conversations that you have had, anyone that you have specifically reached out to in this difficult period to try to hand hold you out of it?

A: You find strengths from all your friends and family, and we have had an outpour of outreaches from WhatsApp friends and family to our users. We have had 1000s and 1000s of emails, and it is almost hard to keep track of saying that we love fantasy sports. Please do not shut it down. It is not about the money. We just want to keep playing. We are so happy to see that we have seen that even after we shut down our real money gaming model on Friday, over the weekend, we had millions of people logging in and playing fantasy sports, free to play, just free to compete and engage on a sports match they love.

Millions of people have been coming in every day, and that gives us a lot of belief and hope for the future to rebuild from scratch and give them that fantasy experience. The greatest support will always come from home, from my family, and from my wife. She has been there from day one. We have been together for 23 years, and she was there before Dream11 and family gives you the strength to continue.