I was annoyed my entire Christmas break because one of my many, unnecessary streaming services was bugging me about an expiring credit card.
Such was my annoyance that I refused to update my info out of spite. My subscription has now lapsed and I have no plans to renew it, even with my new credit card. Let that be a lesson for you big media companies: no one ruins my holiday but me.
Having thought I put that personal bugaboo behind me, I was jolted on Friday to see the news (first reported by Sportico) that DraftKings has launched an online sports betting subscription service, starting with users in New York.
DraftKings Sportsbook+ will run bettors $20 a month (after the free trial) and provide them an unlimited amount of "'Stepped Up' Boost Tokens" they can use on parlays and same-game parlays. The max wager for said parlays is $25 and the maximum boost you can get is 100% for an 11-leg monstrosity.
Well, this is a new one: DraftKings has launched a sports betting "subscription service" (DraftKings Sportsbook+) for $20/month. A sub offers "Unlimited 'Stepped Up' Boost Tokens" for parlays. Available in NY only for now.
— Geoff Zochodne (@GeoffZochodne) January 3, 2025
h/t @Sportico pic.twitter.com/8JSh4gRq17
I’ll be honest with you. My initial reaction was WTF? Why this? Why now? Why, well, generally?
Are we not all paying for the privilege of online sports betting with the money we wager? And are we not already doing that on a consistent basis? There must be thousands of people engaged in an unspoken parlay subscription plan already, who consistently construct and lose SGPs. So would anyone pay another $20 monthly to boost a bad bet?
But I had to take a step back and breathe. Maybe I was bitter because of my brief spat of subscription-based and self-inflicted mental warfare over the holiday.
There is inarguably a large population of bettors who love parlays, and who love parlays of $25 or less, so the customer base for this could be big. Maybe some of these bettors are smart and see an edge.
And maybe there is also a population of bettors out there who view parlays as a hobby, or works of art they assemble with care and treat like their child. For them, $20 a month for larger hypothetical returns on their children may make sense. And, perhaps for some, only the finest SGPs will do, and a parlay subscription may function as a status symbol.
“We are excited to present select, eligible customers in New York with the opportunity to try DraftKings Sportsbook Plus – a premium subscription service that offers participants up to a 100% profit boost on all winning parlays," a DraftKings spokesperson told Covers. "The subscription service was designed to offer our customers an enhanced fan experience, creating more excitement and value to our extensive parlay offering.”
So, despite my suspicions, let’s assume some bettors want this. Well, they have got it.
Make it make sense
However, if you put yourself in DraftKings’ shoes, this all makes a lot more sense. If successful, DraftKings Sportsbook+ represents a new source of recurring revenue. It also nudges bettors toward parlays, a higher-margin product because people lose them more often than straight bets.
DraftKings’ decision to offer its subscription service in New York to "select customers" offers a few more hints about what it’s doing here. For starters, it suggests DraftKings is just trying this out. Maybe it won’t become a permanent or widespread thing. Also, New York has a 51% tax rate for online sportsbooks, which is the bane of operators’ existence. Finding an additional way to ease that financial burden makes sense, too.
There is a question about how this subscription revenue is going to be classified and taxed, I suppose. Is this gaming revenue subject to New York’s 51% levy on online sportsbooks? Is it some kind of other income that is taxed at a different rate?
I reached out to the New York State Gaming Commission and they said DraftKings did run DraftKings Sportsbook+ by them and that the regulator approved. A spokesperson for the commission also said the subscription fee is not subject to the state's 51% tax rate for online sports betting revenue but that the wagering the subscription plan produces would be.
So, the subscription plan could help firm up the floor on DraftKings’ revenue. That revenue can be subject to volatility at times because of the nature of the sports betting business.
Sometimes bettors get hot and win, and when that happens, it means less revenue for a sportsbook. That happened earlier this NFL season, when DraftKings revised its guidance for 2024 “due to the impact of customer-friendly sport outcomes.”
Favorites kept covering. And it forced DraftKings to brace investors for less. For instance, DraftKings lowered its 2024 revenue guidance to a range of $4.85 billion to $4.95 billion from $5.05 billion to $5.25 billion. Still a lot, but less.
Now, if DraftKings users are giving the company an extra $20 a month, those financial figures could be a bit more consistent and unsurprising. It would also prompt players to place more parlays, which are already helping to stabilize the online sports betting business. Instead of an online sportsbook solely living and dying by the final score of a game, operators can better protect themselves these days with SGPs that are stuffed full of props.
“The increased product offerings, like player props, and improvements around operations are now protecting gaming margins to the downside more than ever, as margins for parlay have only been below one standard deviation once in the last two years, with five instances in the two years prior,” Citizens JMP Securities analyst Jordan Bender wrote in September.
So, a parlay subscription makes sense for DraftKings, which showed last year, with its since-scrapped plan for a “gaming tax surcharge” in higher-tax states, that it isn't afraid to try something different.
It's the economy, stupid
This is also the world in which we live now, as consumers in a “subscription economy.”
We subscribe so we can watch sports and movies, we subscribe so we can listen to music, we subscribe so we can get food delivered to our doors.
Some sports bettors already subscribe to services that provide them information and analysis to help them make their bets. Some bettors even subscribe to services that make their picks for them. Now they can subscribe so their $25 parlays are boosted.
DraftKings’ plan suggests it would like it and its customers to become part of the subscription economy. Again, it makes a certain amount of sense for a business to nudge customers in this direction.
But does an SGP sub makes sense for bettors? Furthermore, who gets to subscribe and who doesn't?
"Only individuals who directly receive from DraftKings an offer to subscribe to the Service are eligible to subscribe to the Service," the terms and conditions state.
So there are questions. But a turbulent year for DraftKings’ bottom line probably prompted it to ask some questions of its own. DraftKings Sportsbook+ looks like one of the answers.
