DraftKings does not want sports betting customers trying to turn a profit as it tries to build out a sustainable business model, according to its CEO.
That was the message Tuesday from DraftKings CEO Jason Robins, who told a Canaccord investor summit that sports betting is entertainment first and foremost.
“This is an entertainment activity,” Robins said. “People who are doing this for profit are not the players we want.”
Recs only?
Robins also said the company is not looking to acquire customers who may shop around for prices and bonuses.
“There is definitely evidence that players download and trial multiple apps but then focus on one,” Robins said. “But the ones that don’t [stick around] are the ones you don’t want anyway. They are the bonus shoppers and bonus hunters. That’s less than 10% of the audience. They are not the most profitable customers.”
The message will not be surprising to customers. But it is also important to investors who are increasingly focused on profitability and exactly how much customers are worth.
DraftKings stock still drifting
Despite the call, DraftKings stock continued to tick lower Tuesday, last trading at $35, down more than 50% from its peak.
Robins tweeted on Monday that “haters” should “check back in 2025.”
Stick or twist?
Rival operators like WynnBet have cut marketing spend, saying that the current acquisition costs do not make sense. DraftKings, however, maintains its own economics stack up.
“We are still seeing very high lifetime values (LTVs),” Robins said. “In DFS, it took three or four years before we saw a drop off in LTVs, certainly by year five. And we adjusted customer acquisition costs accordingly. I think you’ll see the same thing here.”
Early adopters are more likely to be keen players and therefore have better LTVs.
Robins said New Jersey is already profitable and other individual states would be within two or three years.
What else did we learn from DraftKings call?
Robins reiterated his previous comments that DraftKings could make money from New York sports betting on a similar two-to-three year payback trajectory as other states. He suggested that promos and odds could be worse in the state, however.
“We will have to see what New York does long term,” Robins explained. “There could be changes in the tax rate. But if not, we will adjust accordingly. Maybe the best players still go to Connecticut and New Jersey because they get a better deal there.”
New York could be tempted to tweak its tax rates if that is the case because Sen. Joe Addabbo Jr wants to keep that cash in-state.
New York not a trendsetter
Robins also downplayed the idea that other states might be tempted to follow New York with an onerous tax rate. California for one, has the proposed tax rate already written into the ballot initiatives. DraftKings backs the initiative with a 10% tax rate.
As for the other states?
“There (have) been some copycats but it is not common,” Robins said. “We have not seen other states copy the in-person registration requirement from Illinois, for example.”
