DraftKings CEO: New York's 51% sports betting tax manageable; players who bet for profits not a priority

The 51% tax on revenue of the new mobile sports betting market in New York isn’t a concern for DraftKings, CEO Jason Robins said on Tuesday. The executive of the gaming giant spoke at Canaccord Genuity 2021 Digital Gaming Summit, in which he said the company is positioned to turn a profit in the state.

DraftKings is among nine operators recently recommended for mobile licenses in New York, but the unusually high tax rate -the country’s highest- has been seen as a hefty price to pay by many. However, Robins doesn’t seem to find a problem in this.

“Australia has a 43% tax, and it’s one of the most profitable countries for a lot of the operators there,” the CEO said, according to Sportico. “I think that high tax rates certainly favor scale-operators because the fixed costs are buried in a lot more top-line revenue. I also think that you adjust, so we’ll run fewer promotions. We’ll spend less long-term on marketing.”

Additionally, Robins claimed people who bet on sports for profit are “not the kind of players” DraftKings wants. He described the company’s offering as an entertainment product, more focused on casual players than serious players.

The CEO explained that players tend to focus most of their play on a single app, even if they originally try out a number of different operators. The ones that don’t are called bonus hunters or “odd shoppers,” and make up less than 10% of the audience. They are “the ones that you don’t really want,” said Robins, as they tend to be less profitable.

Another point the CEO touched upon was sports volatility. When asked how DraftKings could insulate from swings, such as September’s NFL favorites performing abnormally well -which is typically bad for sportsbooks-, Robins cited the growth of its iGaming product and its new NFT marketplace. These are two verticals where profit does not depend on the outcome of games.

The executive also discussed the likelihood of an acquisition in the near term, saying it’s “probably not high, but you never know.” When asked about DraftKings’ overseas ambitions -the company held talks with UK-based sports betting giant Entain earlier this year, which ended in October- Robins said the business wants “to be global one day,” but explained the company is currently committed to winning in the US and Canada markets.

Robins also discussed advertising in the US: as more states legalize sports betting, national campaigns are to become more frequent. But that presents a problem. DraftKings operates under the assumption that the lifetime value of its customers starts to drop four years after the state goes live, indicating aggressive marketing spending should slow down. However, national ads complicate the picture, as they could be up in both new states and those four years in.

As a result, Robins said the company will have to get “pretty sophisticated on the modeling side” to figure out the best-resulting blended customer acquisition costs, and how to think about the “local versus national” mix.