The numbers are beginning to show that DraftKings’ metamorphosis from a daily fantasy sports operator to sportsbook-first company is moving at Ludicrous Speed. The DFS aspect of the company isn’t going anywhere, but the revenue and obviously growth potential in the U.S. is in legal sports betting.
At the ICE Sports Betting USA conference in Manhattan on Wednesday, DraftKings Co-Founder and CEO Jason Robins told Darren Rovell (who himself switched jerseys from ESPN to Action Network mid-conference) that 20 percent of the company’s business is currently being generated through sports betting. In New Jersey, where the DraftKings Sportsbook was first to market in the state in August, Robins said sports betting represents 80 percent of the company’s revenue.
In other words, the sports betting revenue being generated in just one state*, roughly four months post-launch, is currently accounting for 20 percent of the company’s overall revenue coming nationwide via daily fantasy sports contests.
DraftKings Sportsbook Already Driving 20 Percent of Company’s Revenue; Full Speed Ahead For Familiar Players As Expansion Continues
Some recreational folks may be celebrating, but public reception has been lukewarm elsewhere and in some corners downright caustic because, like the FanDuel Sportsbook launch (in retail at the Meadowlands Racetrack) in mid-July, the baseball lines offered are just dismal compared to industry standards (more on this later).
The DK sportsbook right now is in a soft-launch phase with up to 50,000 people in New Jersey supposedly eligible to download, deposit and wager. No doubt DraftKings carefully observed the rollout of the FanDuel Sportsbook and saw some backlash against their lines. As a result, it seems more likely to me that this pricing is not incompetence or disrespect for its customers … and from a business perspective may actually make sense. (Or shouldn’t be surprising.)
DraftKings Sportsbook Lines on Mobile App Are Way Out of Whack Upon New Jersey Soft Launch: Is This Clueless or Well-Calculated?
OK, so, these lines are rough, as Robert Dellafave to NJ Online Gambling explores and others have noted, when compared with the typical 10-cent baseball money lines (for example, -155 for Team A and +145 for Team B) or 15- or 20-cent lines in some cases you can see below from Las Vegas and offshore books. A look at the pricing from ESPN’s David Purdum:
So what’s the idea? Right now DraftKings is remaining in a soft launch indefinitely. This is a launch with its self-selected early adopter cohort that will give the company valuable feedback. We really have no clue if the app is available to 50,000 people or 500. I can tell you that I live in New Jersey, have played a decent amount of DFS during NFL season, and have not (yet) been invited to download.
It’s baseball season and they’ve got a one month to ramp up before football season — the Official King of U.S. Sports Betting — to figure things out technologically and also, well, test and evaluate this initial cohort.
First, just how many of its users don’t know that these prices are bad? Second, DK can see how many users bet the lines and cross-reference against their DFS histories. How many and what percentage of its users “invited” (likely MLB DFS players) will download the app are going to bet? They can then project how much of its database may download and play during football season, perhaps on -115 spread bet? The DraftKings run line pricing is more in line with industry norms. As evidenced by the dumbed-down terminology “Who Will Win?” instead of saying “money line” — they’re appealing to the recreational sports bettor. It’s possible the spread bets for football meet -110 norms and the money lines are elevated as here with baseball.
Maybe also DK can see how many of the users know the lines aren’t good and simply don’t care. In a way, playing in GPP DFS contests is akin to setting money on fire. DK may have even obtained (purchased) e-mails from offshore sportsbooks to see which of its users have deposited offshore and will bet through DraftKings against certain lines.
Point is, there’s a one-month window here during the dog days of summer/baseball when DraftKings can glean a whole lot of information in a contained environment before it really matters: that is, football season, when the MGM/Borgata app and the Caesars app and others are up and running on mobile as well.
In other words, they’re testing the upper limit. They can always come back down from these prices and probably few people will remember if they even knew in the first place. Most people not vacationing right now probably aren’t betting on the Giants-Diamondbacks.
Further, these lines aren’t being covered by the mainstream media. The major publishers will dive bomb when there’s a major event in the sports betting world, or perhaps just to offer a misinformed think piece about how legal sports betting will render collegiate sports extinct … but they’re just not getting into pricing issues.
Another number of note? Despite the FanDuel Sportsbook stumble out of the gate, it still did $3.5M handle in just nine days. During baseball season with a sprinkle of World Cup. We’ll know in a of couple weeks how they performed with handle/old over the month (in retail form only).
Sports betting inherently has an upper limit problem with revenue. DraftKings will mop up on parlays and teasers like every shop, but they’re looking to get more out of money line wagering here and in the future, evidently.
For most the folks reading here who will run away from this pricing and never come back, they probably expected you’d react that way. Best advice for everyone else, whether you’re shopping for a toaster, a car or a money line: shop around.