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DraftKings: punters on tap
15th May, 19:41Gamblers in the US are bored. With professional sports shut down by the coronavirus pandemic, sports-betting sites are having to get creative to keep punter interest intact.
Enter DraftKings. The Boston-based gaming and fantasy sports company paints with a big brush. Without major sporting events, it now offers bets on outcomes for everything from Russian table tennis to darts tournaments. TV shows are also fair game. It has been running free to enter contests on Survivor and Top Chef. For politics junkies, there was even a tournament about the last Democratic debate. "What will Bernie Sanders say first, millionaire or billionaire?" (Spoiler: millionaire).
Against the odds, the strategy is working. DraftKings on Friday reported a 30 per cent jump in first quarter revenue to $88.5m year on year. Both monthly unique users and average revenue per punter rose. Having a captive audience helped.
Still, losses more than doubled to $68.7m. DraftKings says that reflects the cost of growing its presence and market share. Following a 2018 Supreme Court ruling that paved the way for states to legalise sports betting, DraftKings has spent heavily on adverts and technology to enter any new markets.
Investors, though, wager that these moves will yield long-term gains. The share price of the original blank-cheque vehicle has nearly tripled since its reverse merger with DraftKings was announced in December. Investors include Disney and George Soros's Quantum Partners investment vehicle.
It is on a roll. Morgan Stanley reckons US sports betting could generate close to $7bn in revenue by 2025. DraftKings enjoys a first-mover advantage. It is a pioneer in US sports-betting and has an edge on online and mobile betting. In New Jersey -- which has emerged as the country's new sports betting capital -- the company took in around $86m in sports-betting revenue last year. But the battle for punters is getting fiercer. Betting operators such as William Hill, MGM and 888 Holdings are all jostling for a slice of the business.
There is no such thing as a sure bet. But DraftKings looks well placed to benefit from the liberalisation of US sports betting.