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DraftKings CEO upbeat about US market despite offshore betting

DraftKings sports betting news

DraftKings Chief Executive Officer Jason Robins waxed positive on his company’s direction and the broader sports wagering market in remarks given on Monday at the Goldman Sachs Travel and Leisure Conference. However, he noted that some major sports bettors continue to bet offshore.

During a discussion with Stephen Grambling, a Goldman Sachs gaming and leisure analyst, Robins concedes that the regulated sports wagering sector has shifted its focus from total addressable market (TAM) to profitability.

“Now it’s all about profitability. So I think that’s caused the overall kind of industry to focus more on it,” said the DraftKings boss. 

“What works for us well there is, we haven’t really changed our playbook and we think our playbook actually thrives in this type of environment. We’ve stayed disciplined even when there were some, I would say, undisciplined behaviors happening with competitors.”

Most analysts and investors are not hesitant about critiquing DraftKings for what looks to be an ever-lengthening path to profitability. In other circumstances, it’s expected the sportsbook operator won’t break even until 2024 or 2025 on an earnings before interest, taxes, depreciation, and amortization (EBITDA) level. This is one of the reasons why the stock has dropped three-quarters of its value in the last year.

Customer acquisition costs (CAC) – a widely watched industry statistic – was mentioned by Robins, who noted that the longer DraftKings runs in a certain direction, the lower those expenses become. He added that the recently completed acquisition of Golden Nugget Online Gaming (GNOG) could result in some similar efficiency.

Professional bettors have chastised licensed online sportsbook companies, such as DratKings, for restricting or prohibiting their actions when it comes to customer acquisition. Robins, on the other hand, is bullish that DraftKings will be able to gain traction with such bettors.

“The propensity to switch to legal market, some have, but a lot haven’t. And I think that’s going to continue to happen over time. So some of the biggest bettors are still pushing their action offshore,” he said.

New Jersey is a landmark for operators since it is the most established sports betting market in the United States, with the exception of Nevada. Some have already earned profits there, and it is largely regarded as the benchmark against which newcomers to the live and legal sports betting arena are evaluated.

In that vein, Robins notes that several of the emerging states are ramping up faster than projected, and online casinos remain a crucial growth driver.

“Arizona is always the great example we give, that just really surprised us in how quickly it ramped, and how fast the adult penetration was developing,” he mentioned.

“Another thing I think that’s been pleasantly surprising to us has been the continued growth, even well into the iGaming market in New Jersey. In 2020, New Jersey grew triple-digits.”

The GNOG acquisition is said to have propelled DraftKings to second place in New Jersey iGaming market share, although Robins has not yet confirmed this. He did point out, nevertheless, that the agreement might pay off in terms of expanding the company’s client base and cutting customer acquisition costs. 

The CEO of DraftKings said GNOG’s client base is older, has a higher percentage of females, and has more slot players.

“So that’s really, I think, going to allow us to increase our focus on broadening to the entire iGaming market, as opposed to maybe the 50% that we were reaching well and then doing just okay with the other 50%,” he added.

In terms of new sports betting jurisdictions, Robins mentioned Maryland, Ohio, and Puerto Rico, with Ohio set to go live next January.

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