DraftKings’ Founders Say Profitability Depends On Rollout Of States Legalizing Sports Betting

SobokReditors of Draftkings Paul Lieberman, Jason Robins and Matthew Kalish.

The company’s three cofounders see vast potential for growth as more states legalize sports betting, but they say the industry is still at the bottom of the first inning.

Fourteen months after going public via SPAC in the middle of the pandemic, TRAFTKINS Daily Fantasy and Sport s-tariffs is riding a wave of rapid growth as more U. S. states legalize gambling or consider related legislation. Draftkings, which nearly doubled its revenue to more than $600 million by 2020, plans to surpass $1 billion this year. Three company employees cited "great momentum in the industry" and high customer growth as sports ratings develop in the U. S. But as more states legalize sports gambling, the competition for market share and new customers -- especially from companies like its main competitor, FanDuel -- is sharpening.

Despite its rapid growth, its market cap approaching $22 billion is not yet profitable. The company's net loss for 2020 was $844 million, and about $325 million for the quarter before March 2021. It is not expected to be profitable for at least several years. The company's masters are optimistic about the huge potential of the American sports betting market, but acknowledge that ConceptKings' long-term profitability depends on the extent to which states legalize sports betting.

"We don't know in how many states and under what conditions the company will launch," 40-year-old general manager Jason Robbins told Forbes, Zooming from his Boston home. "I think what gives us confidence, and what gives investors confidence, is that we've been profitable in New Jersey, the state that has been around for the longest."

Last year, Draftkins' total revenues came from both its online sports newspapers and igaming (gambling at online casinos, such as slot machines, poker, etc.) and sports fees. ) The company said its New Jersey revenue grew from $85 million in 2019 to more than $150 million in 2020 and is on track to exceed $200 million in 2021.

DraftKings operates sportsbooks in 14 states and has an average of 1. 5 million monthly paying customers who participate in its online sportsbook, iGaming and daily fantasy services. As the sports betting industry is still in its infancy in the United States, the company is pursuing a rapid growth strategy and plans to increase marketing spending in the near future. If DraftKings expands into more states and continues to maintain its 20-30% market share, it could generate $2. 9 billion to $4. 3 billion in annual revenue from the online sports betting market.

DraftKings currently operates in 14 states.

DraftKings' promotions have increased by more than 330% in 2020, but they have felt pressure in recent months. In May, DraftKings reported first-quarter profits that far exceeded expectations, but traders were somewhat spooked by the company's increased advertising costs: however, the company's profits tripled year over year to $312 million, while sales and marketing expenses rose four-fold year over year to about $230 million in the quarter. In the second quarter, the company's promotions fell by nearly 14%.

"If we had released the same performance data three months ago, the market probably would have reacted differently," Robbins says of the company's recent dilemma. But he and his co-founders remain optimistic about future opportunities. What we're seeing is inflation causing a faster rotation from the highest-growth promotions to the highest-value promotions," Robbins says. "Plus, we can't do anything about what the Fed wants to do with interest rates."

Wall Street analysts are largely optimistic about DraftKings' future. Despite "rising Ebitda costs" and "lower-than-expected cash flows," DraftKings still maintains "an attractive continued upside position, supported by its unique customer acquisition advantage," according to Morgan Stanley researchers.

The company entered a new recovery phase in May 2018, when the Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA), effectively ending sports betting across most of the United States. DraftKings, originally designed as a daily fantasy sports platform, was ready to roll. "We were ready to roll," Robbins said. He and his associates spent much of their resources on sports betting and its possible legalization in several states.

Draft Kings announced in 2018 that the United States' first online sportsbook was launched in New Jersey in New Jersey, two years later, but has not announced its numbers. With the longest operated state, Draftkings told investors that other sportsbooks would usually take two to three years to be profitable.

Since the Supreme Court demolished the Paspa law, 21 states and Washington have legalized sports gambling, and a larger market has been opened for Draft Kings and its same industry. In the first quarter of 2021, Virginia and Michigan were legalized sports gambling, and several states are considering bills. Draft Kings estimates that if it is 100 % legalized, the US online sports betting market will be $ 22 billion annually.

"We are in the first and second half of the first stage in terms of state legalization," said Paul Riverman, a c o-founder of the company, the company's Global Technology & Product Product. 。

More and more states are considering bills to legalize sports betting.

Draft Kings, founded by Robins, Leberman, and Matthew Karish in 2011, created a team of professional players fighting in a specific league and played with each other, and the points based on the actual results of the players. Won as a platform for Daily Fantasy Sports, which provides prize money as an incentive.

This idea was directly born of the three c o-founders' passion for this field. Working at Vista Print, a marketing company near Boston, quickly became a friend and immediately acknowledged each other's entrepreneur spirit. The three, who worked in a vacant room in Leberman in Water Town, Massachusetts, began to raise and gain money and eventually agreed with ESPN, MLB and NHL. < SPAN> Draft Kings announced in 2018 that it launched the United States's first online sportbook in New Jersey in New Jersey, but has not announced its numbers. With the longest operated state, Draftkings told investors that other sportsbooks would usually take two to three years to be profitable.

Since the Supreme Court demolished the Paspa law, 21 states and Washington have legalized sports gambling, and a larger market has been opened for Draft Kings and its same industry. In the first quarter of 2021, Virginia and Michigan were legalized sports gambling, and several states are considering bills. Draft Kings estimates that if it is 100 % legalized, the US online sports betting market will be $ 22 billion annually.

"We are in the first and second half of the first stage in terms of state legalization," said Paul Riverman, a c o-founder of the company, the company's Global Technology & Product Product. 。

More and more states are considering bills to legalize sports betting.

Draft Kings, founded by Robins, Leberman, and Matthew Karish in 2011, created a team of professional players fighting in a specific league and played with each other, and the points based on the actual results of the players. Won as a platform for Daily Fantasy Sports, which provides prize money as an incentive.

This idea was directly born of the three c o-founders' passion for this field. Working at Vista Print, a marketing company near Boston, quickly became a friend and immediately acknowledged each other's entrepreneur spirit. The three, who worked in a vacant room in Leberman in Water Town, Massachusetts, began to raise and gain money and eventually agreed with ESPN, MLB and NHL. Draft Kings announced in 2018 that the United States' first online sportsbook was launched in New Jersey in New Jersey, two years later, but has not announced its numbers. With the longest operated state, Draftkings told investors that other sportsbooks would usually take two to three years to be profitable.

Since the Supreme Court demolished the Paspa law, 21 states and Washington have legalized sports gambling, and a larger market has been opened for Draft Kings and its same industry. In the first quarter of 2021, Virginia and Michigan were legalized sports gambling, and several states are considering bills. Draft Kings estimates that if it is 100 % legalized, the US online sports betting market will be $ 22 billion annually.

"We are in the first and second half of the first stage in terms of state legalization," said Paul Riverman, a c o-founder of the company, the company's Global Technology & Product Product. 。

More and more states are considering bills to legalize sports betting.

Draft Kings, founded by Robins, Leberman, and Matthew Karish in 2011, created a team of professional players fighting in a specific league and played with each other, and the points based on the actual results of the players. Won as a platform for Daily Fantasy Sports, which provides prize money as an incentive.

This idea was directly born of the three c o-founders' passion for this field. Working at Vista Print, a marketing company near Boston, quickly became a friend and immediately acknowledged each other's entrepreneur spirit. The three, who worked in a vacant room in Leberman in Water Town, Massachusetts, began to raise and gain money and eventually agreed with ESPN, MLB and NHL.

In 2015, DraftKings and FanDuel engaged in an aggressive marketing battle to attract new customers. Both companies came under the scrutiny of then-New York Attorney General Eric Schneiderman, who accused both companies of false and deceptive advertising and claimed that daily fantasy games constituted illegal gambling under state law. A settlement was eventually reached in 2016, with DraftKings and FanDuel agreeing to pay a $6 million fine and revise their marketing practices. "We cut marketing costs and our growth in daily fantasy sports slowed," Robbins recalled of the failure.

After several failed attempts, DraftKings finally managed to get FanDuel to come to the negotiating table in late 2015 for the long-awaited merger talks. The two companies reached an agreement, but the deal eventually fell apart in July 2017 after the Federal Trade Commission and the attorneys general of California and Washington challenged it for being anti-competitive and monopolistic.