Key Takeaways from DraftKings Investor Presentation

Key Takeaways from DraftKings Investor Presentation

DraftKings CEO Jason Robins and the company’s executive team held an investor presentation and Q&A session Tuesday to discuss the company’s past performance and future prospects.

Here are some of the salient/sort-of interesting takeaways:

  • In projecting a North American online gambling market at “maturity,” DraftKings assumes that 65% of the U.S. population will have access to Internet sports gambling; 30% of the U.S. population will have access to iGaming (casino games), and 64% of the Canadian population will have access to both mobile sports betting and iGaming. Robins declined to predict which of the Big Four states (California, New York, Texas, Florida) that do not currently have online sports betting will adopt it but conceded that one or more would probably have to get there to get to 65% nationally.
  • DK projects its total revenues at market maturity at $5 billion to $7.3 billion.

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  • State tax rates do have an impact on the average customer. Pennsylvania has one of the highest (some would say most onerous) tax rates on sports betting at 36%, and Robins said that the DK’s promotion spend in Pennsylvania (read that as perks for customers) is lower in the commonwealth because of the tax rate.
  • In what should distress the industry at-large, sports betting customers who are gambling on the illegal market are not migrating to legal sports betting websites (which is an oft-cited rationale for legalizing sports betting). Robins attributed that reality to inherent “stickiness” of the first-mover phenomenon. As the first-to-market sportsbook, the illegal books remain the betting destination of choice for their customers. Those bettors are “already comfortable” and “they don’t want to change”, Robins said. One of the few things that could change all that is stronger enforcement, he noted. Better and more innovative betting products might also help, DK co-founder Matt Kalish added.

Importance of First to Market Noted Again

  • Again, being first to market is important. For instance, DraftKings entered the New Jersey iGaming market five years after online casino gaming was legalized and Jersey is one DK’s lowest performing iGaming states.
  • Speaking of iGaming, that’s where the lion’s share of revenue is and will likely remain. In other words, internet slots, blackjack, roulette, baccarat, video poker does and likely will continue to produce more revenue than sports wagering (in the neighborhood of about 60% to 80% more revenue).
  • DraftKings’ ability to harvest information about its customers and then use that data to encourage more betting is impressive. Using factors such as games-of-choice, bankroll and average wager, DK cross-markets its various products to customers using their preferences. DK also makes it more convenient to multi-task while wagering using screen “slide” functions for smart phones that allows customers to move, say between a football game and a blackjack table, in a split second.

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  • Robins said he believes that a consolidation of market share/revenues is likely. He used Michigan as an example where the state allowed all nine operators to launch simultaneously (even though DK was set to go earlier) and in that case, there is a large disparity between the top operators with the lesser operators forming a long trailing tail.

Still Bullish on DFS

  • While some have predicted the demise of daily fantasy sports because of greater legal sports betting, DK remains bullish on DFS, citing significant growth in 2020.
  • Robins noted that the online wagering industry has been waiting for eSports to break out and 2020 showed promise.
  • Live game betting, aka in-play betting, is expected to grow substantially. Such betting makes up 75% of sports wagering in the UK and is far lower in the U.S. market.
  • Under the heading of: Who knew? Of the dozens of sports partnerships that DK has with pro sports teams and leagues, included in that number is Major League Eating (the league logo is a fist holding a fork — no joke). Uh, gimme that Joey Chestnut giving the 6.5 dogs.

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