The chief executive officer of DraftKings Inc. says they have a new online sports betting product coming soon that could cause customers to lose more often than on straight wagers but enjoy themselves nonetheless.
DraftKings CEO Jason Robins said Friday during the company’s third-quarter earnings call that the Boston-based company plans to unveil a new sportsbook feature during their investor day on Nov. 14.
That product, Robins said, meets their dual objective “of being great for the customer and holding better than the average.”
Can you take me higher?
The comments were in response to a question about the company’s sportsbook hold, or the percentage of money wagered that it retains after paying out winning bettors.
For the three months ended Sept. 30, DraftKings’ structural sportsbook hold was north of 9.5%. This was better than the company expected “as we continued to improve our parlay mix and optimize our trading capabilities,” Robins and his chief financial officer, Jason Park, wrote in a letter to shareholders.
Asked if there was a limit for that hold rate and what tradeoff there may be between a higher win percentage and the long-term value of customers — because if users keep losing they may just stop playing, and then DraftKings gets nothing from them afterward — Robins said it’s something the company will always be balancing.
“And it's almost a tricky question to think about in that sense because it really depends on where you're getting hold increase from,” Robins said. “If you continue to create products that the customer wants, and that have demand that have higher hold, then that can do a great job, I think, of continuing to raise your hold. And I think on the other side of it, if you're raising hold by either forcing people into things that they really don't want or making your pricing worse than the market, I think that that's obviously potentially going to have a negative impact on [a customer’s long-term value].”
Robins then mentioned the new product in the works, which DraftKings hopes will be both enjoyable for customers and profitable for the company. The CEO went on to say if DraftKings does see anything that is affecting long-term value, the company would “try to turn the dials accordingly” to correct that negative impact.
“That's really what the team is focused on,” Robins said. “Hold is obviously a variable, promotions are a variable, but retention is the most important variable … and I think that hold is something that, again, it's a little tricky because it depends on how you're doing it. But I do think there's a lot more room for upside there than not.”
To a place with golden streets?
This all begs the question then: What is the new feature DraftKings will announce on Nov. 14?
A higher hold suggests longer odds for the customer but also a greater potential payout for the bettor. Given the long history and popularity of lotteries in the U.S., another “jackpot”-type offering is something users may welcome.
“I think there’s an element of people want to risk a little to win a lot,” said Joe Asher, president of sports betting at technology provider IGT and the former CEO of William Hill U.S., during the Global Gaming Expo last month. “The jackpot mentality that’s been ingrained in the culture of this country for a long time … I think that sort of thing continues and will continue to be appealing to the player.”
When in doubt: parlays
One user of X (the former Twitter) screenshotted and posted on Monday a trademark application by DraftKings for "DRAFTKINGS PROGRESSIVE PARLAYS."
The filing is dated Oct. 31, and the goods and services attached to the word mark are "[b]etting and gambling services in the nature of interactive real time gambling, namely, sports betting, transmitted via a global computer network and via mobile phones, PDAs, and portable electronic game systems.”
Parlay innovation has been one of the driving forces for increased sportsbook hold. Furthermore, the same-game parlay has been a particularly potent way for sports betting sites to win more from their customers while remaining popular with those users.
At any rate, whatever DraftKings rolls out next week will be closely watched, especially as the operator’s financial results are trending in an investor-pleasing fashion.
JMP Securities analyst Jordan Bender wrote in a note to clients on Friday that “bridging the gap” between DraftKings' current hold levels and the approximately 12% win rate boasted by the same-game parlay specialists at FanDuel “seems fairly achievable” over the next year.
“The product pipeline should be a focus [at the Nov. 14 investor day], highlighted by the CEO making reference to the unveiling of an upcoming sports product,” Bender wrote. “Second, the company will discuss the earnings power of its cohort of players and the earnings coil associated with each to drive contribution profit.”
