DraftKings is setting its sights on profitability, and CEO Jason Robins says that focusing on a higher sports betting hold over time is one of the key strategies for beating out the competition.
Robins spoke at a Goldman Sachs conference last week about DraftKings’ plans for the future.
“For the last couple of years, market share was what we got asked about,” Robbins said. “Now it’s all about profitability.”
“As the market matures, the win rate should go up. I think that when you’re in an earlier stage environment, it’s not the worst thing in the world to give people a couple of extra winning experiences, rather than trying to maximize how much margin we’re taking.”
But as sportsbooks move toward a focus on profitability, Robins says, that focus needs to change. He says he wants to focus on sustainability, disciplined strategy and monetizing new users as quickly as possible.
How Is DraftKings Planning To Improve Profit Margins?
Robins mentioned a few different strategies for increasing DraftKings’ profit margins. One focus is to limit sharp action or high-volume bets by elite users. The other is to increase the use of parlays.
FanDuel has outpaced DraftKings in hold rate, mostly due to its hugely popular Same Game Parlays.
“What we’re not looking to do is take money from people by forcing them into bets they don’t want,” Robbins said. “What we are trying to do is get smart at limiting the sharp action, and then also making sure that we have a high parlay mix because people like that. Every quarter, the parlay as a percentage of the total bet mix goes up.”
In DraftKings’ Daily Fantasy, they succeeded at increasing their profit margins simply by choosing to make them higher. The trick, according to Robins, is to “do that at the right time and in the right way.”
“When I say the right way, [I mean] in a way where it’s not degrading from the customer experience. It’s not going to reduce the customer experience or cause any attrition.”
Is DraftKings Really Aiming For Fewer Sharps?
Robins has come under fire in the past for his comments about what type of user DraftKings is targeting.
“This is an entertainment activity,” Robbins said at a conference in November 2021. “People who are doing this for profit are not the players we want.”
He later said he could have “chosen his words better,” but the DraftKings focus on higher hold fits with the idea that the sportsbook would like to see a higher win rate for itself.
Sharps – players who make sports betting a means of profit – can cut down on a sportsbook’s hold.
It seems Robins is interested in balancing competitive bets with odds that give them an edge over those super-bettors.
Do All Sportsbooks Want To Increase Hold?
Well, not necessarily.
Other sportsbook CEOs have made the opposite case, saying that good win rates for users can increase retention and therefore profitability over time.
Rush Street Interactive CEO Richard Schwartz made this case at the same conference where Robins spoke last week. However, Schwartz was addressing online casinos, not sports betting.
“Online is a hyper-local community. People play often,” Schwartz said. “So we set a strategy of making the odds favorable for players. Because it’s about retention of the players, and making sure they have a long experience playing with you. You don’t want to burn out a customer. You want them to be with you for five years rather than two months.”
How Does The Future Look For DraftKings?
Ultimately, Robins gave a positive outlook for the future of the company – which makes sense at an investor-focused conference.
He was responding to concerns about shaky DraftKings stock and negative profit margins. DraftKings stock is down significantly since December 2021, though it has a slight boost in early June.
AP Photo/Charles Krupa
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