According to Shaun Kelley, a senior analyst with Bank of America, DraftKings could suffer a revenue decline in 2024. This would align with the challenges faced by its main competitor, FanDuel.
Kelley said one major reason for the forecast is NFL betting trends. He estimates that DraftKings' earnings before interest, taxes, depreciation, and amortization (EBITDA) could fall by as much as $80 million in the last quarter of 2024. This drop is similar to the financial pressures that FanDuel already reported.
Favorites have been covering against underdogs at an unusually high rate so far this NFL season.
Through last week, favorites have won more than 70% of the games and covered the spread in nearly 54% of matchups, one of the highest rates in the last 60 years, according to data aggregated from sportsbooks.
The NFL season has contributed to DraftKings’ and FanDuel’s results, but it's not the only reason. Other activity has also impacted DraftKings’ results in different ways.
Kelley explained in his note, "Several mitigating factors for DKNG include 1) DKNG's sponsorship of the Tyson-Paul fight with strong volumes/hold in November, 2) a +4891 pre-made parlay hitting on FanDuel in December with over 17k bets placed, and 3) unfavorable outcomes during FanDuel's sponsorship of NFL Christmas Day games on Netflix."
FanDuel raised its financial expectations twice last year. However, it recently revised its 2024 projections downward due to the NFL results. Kelley anticipates that DraftKings could encounter similar difficulties, although the extent of the impact may differ between the two companies.
DraftKings Positioned to Face Challenges
DraftKings and FanDuel are the two top sportsbooks in the U.S. and have overwhelming control of the market. However, Kelley says DraftKings is better positioned to handle the challenges of current NFL betting patterns.
In addition, according to Kelley, DraftKings structurally would have less proportional exposure to that trend than FanDuel. This may reflect different market share, demographics, and bet volumes.
Kelley believes DraftKings' strategic moves could also cushion the revenue fall expected this year. The company is launching new services, such as its recently announced subscription service, DraftKings Sportsbook+, and targeting a wider variety of customers than it previously did.
With Sportsbook+, a service introduced to the New York market, DraftKings has increased users' profit boosts from parlays at -500 odds or better on each leg. The more legs to a parlay, the higher the percentage boost available. The maximum amount you can bet on each parlay is $25.
Bettors can receive anywhere from a 10% boost all the way to 100%, depending on the number of legs in the parlay.
Following a free trial, the service will cost bettors $20 a month. New York has the highest sportsbook operator tax in the U.S., at 51%. However, the $20 fee for the free trial does not fall under this bracket. DraftKings has been looking for ways to increase revenues due to high U.S. state taxes, proposing adding a surcharge earlier in the year.
However, even with the ongoing improvements, the most critical period for DraftKings that will define how the NFL trends have affected the company’s performance will be the fourth quarter of 2024. Recovering from the losses and continuing growth in 2025 will depend on ongoing market conditions, customer engagement, and operational efficiency.
