DraftKings CEO reveals adjusted New York strategy amid 51% tax rate
Jason Robins suggests US sports betting firm targets “most profitable” recreational-based players over so-called bonus hunters
DraftKings CEO Jason Robins has revealed the US sports betting heavyweight will not aggressively target the New York mobile sports betting market when it opens later this month.
Speaking at a Canaccord Genuity Group investor summit, Robins referenced the presence of the Empire State’s 51% tax rate on GGR as a potential deterrent to significant marketing spend, suggesting this would make generating profit an uphill battle.
“I think that high tax rates certainly favour at-scale operators because the fixed costs are buried in a lot more top-line revenue,” Robins explained.
“I also think that you adjust, so we’ll run less promotions. We’ll spend less long term on marketing. Early on, we’re going to approach it the same way with a two-to-three-year path to profitability.
“Nothing’s going to change in terms of the playbook but the individual sort of numbers will change. Over time, it’ll be pretty similar in terms of profitability to other states.
“We’ll have to see what New York does long term, there could be changes in tax rate over time, or obviously prepare for anything that happens,” Robins added.
The DraftKings CEO affirmed his belief that many Empire State bettors would travel to neighbouring New Jersey or Connecticut, where tax rates are substantively lower and that New York legislators could look to amend theirs to keep sports betting revenue in state.
In a hugely controversial statement, Robins also suggested the US sports betting heavyweight favours recreational players over more professional profit-hunting sports bettors.
“This is an entertainment activity,” Robins said. “People who are doing this for profit are not the players we want.”
“There is definitely evidence that players download and trial multiple apps but then focus on one,” Robins continued.
“But the ones that don’t are the ones you don’t want anyway. They are the bonus shoppers and bonus hunters. That’s less than 10% of the audience. They are not the most profitable customers,” he added.
The comments provoked a heated debate across Twitter and could have influenced a drop in DraftKings share price, which slipped to $34.55 at the close of yesterday’s trading on the Nasdaq.
A part of me understands the comments. This is entertainment and something I believe it fully. However, the line wasn't Professional … the line was FOR PROFIT.
What you are telling the public is that you are marketing to them to lose. This is a pretty big mistake imo…
— Matt Perrault (@sportstalkmatt) November 30, 2021
Addressing DraftKings’ recent failed attempt to acquire BetMGM part-parent company Entain, Robins suggested that while DraftKings had ambitions to expand globally, it had only pursued Entain out of a “duty” to assess all options.
However, the DraftKings CEO affirmed his belief that only the right sort of M&A opportunity would compel the firm to expand globally.
“We want to be global one day, but it’s going to take a very high bar for us to say, ‘let’s go do something else’. It would have to be an opportunity where we feel the asset we’re getting is essentially on autopilot,” Robins explained.
“It would have to be something where we don’t have to focus too much attention, because we really need to focus all of our attention on the US and Canada. The likelihood of that happening is probably not high, but you never know.
“It’s our job to take a look at everything and then be disciplined when it comes to making decisions,” Robins added.