Professional Bettors, Stay Away
Robins’ speech did nothing to alleviate investor fears as to when their investments will become profitable after the quarterly earnings season showed the biggest three in the sports betting industry are burning cash at high speed.
“This is an entertainment activity. Players who are doing this for profit are not the players we want,” Robins said, explaining that the players who download multiple sports betting apps and then do not stick with one as per the generally observed industry model are the “bonus shoppers and bonus hunters” that are “not the most profitable customers.”
The clear emphasis on recreational sports bettors rather than those who do it for profit stirred a flurry of heated comments across social networks while DraftKings stock continued to fall and is almost 50% down from its peak.
New York Should Tweak Taxes
On the subject of the upcoming official launch of online sports betting in New York, Robins told investors DraftKings would be limited in its marketing spend as the higher state tax is affecting the operator’s bottom line and generating a profit becomes a challenge.
Singling out the 51% tax rate implemented by the Empire State as a potential deterrent favoring “at-scale operators,” Robins noted that DraftKings will run fewer promotions and “spend a less long-term on marketing,” considering its marketing approach “with a two-to-three-year path to profitability.”
“Nothing’s going to change in terms of the playbook, but the individual sort of numbers will change. Over time, it’ll be pretty similar in terms of profitability to other states. We’ll have to see what New York does long term. There could be changes in tax rate over time, or obviously, prepare for anything that happens.”
DraftKings CEO Jason Robins
To put under pressure New York legislators to amend the tax level even before the official launch, Robins highlighted that residents of the Empire State have neighboring New Jersey and Connecticut, two jurisdictions that offer much lower state tax rates and hence enable operators to offer better deals to bettors.
On the subject of the failed acquisition bid for Entain, DraftKings CEO noted that while the company has strong ambitions to expand into international markets, it would do so only with the right sort of opportunity, yet it will assess all options.
Pointing to the inevitable fact that DraftKings will expand into global markets one day, Robins noted “it’s going to take a very high bar” for the company as the asset it will acquire should be essentially running on “autopilot” to allow the focus of the business to remain on the US and Canada.