DraftKings CEO Lauds High Number of New York Sports Betting User Acquisitions

DraftKings CEO Lauds High Number of New York Sports Betting User Acquisitions
By Bill Ordine

DraftKings CEO Jason Robins reviewed overall financial results that are familiar to DraftKings watchers during a fourth-quarter 2021 earnings call Friday — increasing revenues and impressive customer acquisition figures coupled with growing bottom-line losses. Robins then proudly trotted out DraftKing’s early performance in the much-anticipated online New York sports betting market that opened its cyber doors in early January.

It took DraftKings New York less than 24 hours to acquire 100,000 first-time paid bettors in New York, Robins reported. To put that performance in context, Robins noted that it took 17 days to hit that same mark in Arizona; 170 days in New Jersey; 312 days in Pennsylvania, and 344 days in Indiana.

“In our first 30 days, we acquired over 300,000 users in New York, which was 2.3-times the average for our other states in their first 30 days on a population-adjusted basis,” Robins said.

There’s no question, he continued, that customers are joining his company’s platform faster in New York than in previous states. DraftKings offers online sports betting in 17 states. It also offers iGaming in five states.

In January, New York’s opening month, DraftKings was third in handle and second in gross gaming revenue among six mobile operators.

In handle, it was: Caesars New York, $627 million; FanDuel NY, $517 million; DraftKings, $378 million; BetMGM NY, $82 million; BetRivers New York, $33 million, and PointsBet NY, $31 million. For GGR, it was: Caesars, $59 million; DraftKings $30 million; FanDuel $28 million; BetMGM, $3.8 million; PointsBet, $2.6 million, and BetRivers, $1 million.

Now, seven sportsbooks are live in New York. WynnBET New York was the latest to launch on Feb. 4. Resorts World New York hopes to go live soon. Bally Bet said it plans to begin to be up and running in April.

“When the N.Y. market launched, there was some aggressive promotional media by some operators but DraftKings is committed to maintaining its disciplined approach to customer acquisition, and it is targeting a two- to three-year path to profitability for the state,” Robins said.

A two- to three-year runway to profit in any jurisdiction has been DraftKings’ mantra.

Revenue Grows in Q4; Stock Price Dives

Looking at the company’s overall financial performance, for the fourth quarter of 2021, DraftKings revenue grew to $473.3 million, a 46.9% increase over the same quarter in 2020. However, the fourth-quarter net loss was $326 million compared to a loss of $243 million in fourth quarter 2020.

Since last spring, DraftKings’ stock price has been pummeled. It debuted as a publicly traded company in April 2020 with a stock price in the low $20s. Friday, after the latest earnings report, DraftKings was hovering in the mid-to-high $17 range in afternoon trading.

Ontario on the Runway

The next betting market on DraftKings’ radar is Ontario, where legalized sports gambling is expected to start in April. Ontario, if it a were a U.S. state, would be the fifth largest by population. Notably, along with online sports betting, it also offers iGaming, meaning online casino play, which is more lucrative than online sports betting.

“There’s been a gray market there for many years. … A lot of the operators we’ll be competing (against) have already been operating there and have had time to build customer bases,” Robins said.

He noted DraftKings is not projecting the same level of market share in Ontario and in Canada, in general, as in the U.S.

“We don’t have that early-mover advantage we have in the U.S.,” he said. “We’ll approach it the same way we approach everything else we do. It’s going to analytically based, we’re going to target two- to three-year paybacks. Depending on what we see in the data, we’ll adjust accordingly. It should be a good market. It has iGaming, it has sports betting. We already have a decent-sized database of (daily fantasy) customers there.”

New York Tax Adjustment?

Returning to New York, a constant concern of the sports gambling industry there is that state’s 51% tax rate, tied for highest in America with New Hampshire.

Robins addressed the tax rate during the earnings call saying: “There’s been some chatter of New York considering, in its upcoming legislative session, of adjusting the tax rate down. The approach we’re taking is wait-and-see on that. If that happens, depending on where it lands, we’ll adjust accordingly. And if it doesn’t happen, we’ll adjust accordingly. … “

“The New York customer acquisition has been so efficient and the early-player cohort results have been so strong, we’re hopeful that with an appropriate tax rate it can be a very profitable market for us. But if not, we’ll make the appropriate adjustments to make sure it meets the two- to three-year payback and that it's a very profitable market for us in the long run.”

An influential New York lawmaker wasn’t optimistic there will be any quick tax relief.

"Anything is possible in Albany," said state Sen. Joe Addabbo Jr. in a call to EmpireStakes.com on Friday afternoon. "There have been no significant talks on tax rate in the legislature. The numbers released over the last couple of weeks have been astonishing, but as I have always said sustainability and providing a great product is the key. We will evolve and stand on the ready to make sure that happens."

What About Florida & California?

Two other huge markets, California and Florida, remain on DraftKings’ agenda but Robins had only the now-familiar observations regarding the No. 1 and No. 3 states, respectively, by population.

In California, Robins said, his company continues to work with other online gambling operators to push online sports betting with tax dollars going to address homelessness and mental health issues.

In Florida, Robins reviewed the failed effort by DraftKings and others to get a referendum question on the ballot in November that would have broadened the online sports market there. A petition that was required for the initiative to get in front of voters failed to get enough signatures, and Robins blamed the constraints imposed by COVID-19 and a tight timeframe.

He said DraftKings is exploring all options to make sure Floridians eventually get an opportunity as soon as possible to participate in a competitive sports wagering market. It appears another opportunity won’t come until the 2024 vote.

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Contributors

Bill Ordine was a reporter and editor in news and sports for the Philadelphia Inquirer and Baltimore Sun for 25 years, and was a lead reporter on a team that was a finalist for the Pulitzer Prize in Breaking News. Bill started reporting on casinos and gaming shortly after Atlantic City’s first gambling halls opened and wrote a syndicated column on travel to casino destinations for 10 years. He covered the World Series of Poker for a decade and his articles on gaming have appeared in many major U.S. newspapers, such as the Los Angeles Times, Chicago Tribune, Miami Herald and others.

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