The chief executive officer of DraftKings is bullish about the outlook for his company, saying a more mature market will translate into a higher hold for the bookmaker.
Speaking at a Goldman Sachs Travel and Leisure conference on Monday, DK CEO Jason Robins argued that the company‘s long-term growth strategy is paying off and that he expects his company to gradually improve its profit margins in the rapidly developing market for online sports betting.
"As the market matures the win rate should go up," Robins said. "When you're in an earlier stage environment it's not the worst thing in the world if you're giving people a couple of extra winning experiences out of every ten instead of trying to maximize how much margin we're taking.”
Addressing an audience of investors, whose expectations regarding margins run counter to those of bettors, Robins explained that the new business model for his and other sportsbooks involves aiming for a higher hold over time.
"You can push margins higher but it's a question of how we do that,” Robins said. “That's the tricky part. It's using data where you see that you can take a little more margin here and it's not going to reduce the customer experience or cause attrition."
Robins intends for DraftKings to accomplish that goal by "getting smart at eliminating the sharp action... and making sure we have a high parlay mix" due to the immense popularity that online bettors have shown for parlays across the industry. The CEO of the Boston-based company cited favorable data in this regard.
"We've been pushing [a high parlay mix] since we migrated [onto DraftKings' new SBTech platform],” he said. “It’s only been eight or nine months, but every quarter the parlay mix as a percentage of total bet mix goes up."
Flying high
DraftKings has been one of the online betting industry's highflyers in recent years, known for its intensive marketing efforts and aggressive rollouts in states with legal sports betting.
For Robins, institutional investors are now pushing DK and its competitors to place greater emphasis on profitability rather than market share.
"Now it's all about profitability and that's caused the industry as a whole to focus more on it,” the CEO said. “What's worked for us well is that we haven't changed our playbook which we think thrives in this type of environment. We've stayed disciplined even when there was some undisciplined behavior on the part of our competitors.”
Robins was unequivocal in his estimation of DraftKings' prospects: "We feel right now we're in the best position we've been in since sports betting started in the U.S."
Future growth prospects
During his investors' chat, Robins was keen to draw attention to the increasing penetration of online betting across the U.S.
The CEO cited the passage of legalization legislation in Maryland, Ohio, and Puerto Rico as examples of how states are rushing to get into the wagering business. Ohio has already set Jan. 1, 2023, as its launch date with Maryland to follow.
"Just those states alone would bring the total U.S. population to 46% penetration," Robins said. "[It] is really cool to see that we're getting close to 50% considering that we don't even have the three largest states on board yet. So naturally, those states will be a really big part of our focus starting with California which is about 12.5% of the population. If legislation passes there in November then we're looking at a 2023 launch."
