When DraftKings released its 2020 second-quarter financial results on Aug. 14, CEO Jason Robins went out of his way to laud its Colorado sportsbook for a stellar early start.
For years, Robins explained, Colorado has been a strong market for the company in daily fantasy sports. It stands to reason, then, that DraftKings had high hopes for the Centennial State when the company launched its Colorado sportsbook on May 1. DraftKings was one of four sportsbooks that launched on the date, along with FanDuel, BetMGM and BetRivers. Thus far, DraftKings appears to have met Robins’ expectations with its metrics in Colorado.
“Colorado has always kind of punched above its population size,” Robins said on DraftKings’ second-quarter earnings conference call. “So we’re not surprised. It has been very strong on the sports betting front.”
Pent up demand from the return of sports
Despite the impact of COVID-19, DraftKings reported pro forma revenue of $74.9 million for the three-month period ended June 30, down slightly from revenue of $82.9 million over the second quarter of 2019. The company, though, saw its revenue grow sequentially with the return of pro sports, as June revenues increased 20% on a year-over-year basis. With the return of Major League Baseball, the NBA and the NHL, the momentum accelerated in recent weeks, Robins added.
“There is clearly pent-up demand that is compounded by a truly unique sports calendar,” Robins said.
DraftKings did not disclose the company’s financial results in Colorado for the three-month period.
The company continues to devise unique promotions in an effort to acquire customers. Last week, DraftKings offered a first-of-its-kind crowd-funding promotion for a seeding round matchup between the Denver Nuggets and Los Angeles Lakers. For every $1 bet on the contest, a customer received a free bet that grew by $1 for every 1,000 customers who bet on the game. DraftKings customers received $74 each in free bets after more than 70,000 bettors nationwide placed a wager on the contest.
While DraftKings and other Colorado sportsbooks may take a hit with the postponement of the Pac-12’s fall football season, the loss could be offset through added betting options from the atypical sports calendar. The Big Ten also postponed its fall calendar. Next month, DraftKings plans to offer lines on all four major North American professional sports — a first for September. Both the NBA and NHL are currently finishing out their delayed seasons in “bubbles,” MLB had its postponed Opening Day in July and the NFL plans to kick off the regular season on Sept. 10 with a Thursday Night Football game before its first full Sunday on Sept. 13.
DraftKings CEO Jason Robins says the company's outlook assumes there will be no revenue from college football betting. Optimistic about pro football, he thinks that the NFL will benefit from seeing how baseball, basketball and hockey manage their seasons. https://t.co/nWbHrUsXtc
— CNN Business (@CNNBusiness) August 14, 2020
Marketing and advertising budget
As DraftKings continues to expand in Colorado, keep an eye on the company’s marketing spending habits. Following its mobile debut in Colorado in May, DraftKings added a temporary retail sportsbook last month at the Mardi Gras Casino through its partnership with Twin River Worldwide Holdings. The company is aiming to unveil its permanent book around the start of the NFL season.
A byproduct of the pent-up demand for sports betting, Robins noted, is that DraftKings has seen a strong response rate from its marketing and advertising campaigns. Robins reminded Wall Street analysts on the call that it costs about three times less to run an advertisement on a national basis (i.e. a DraftKings commercial on ESPN’s SportsCenter) than it does to purchase an ad for a local market. As DraftKings moves into new states, the company may be able to refine its marketing strategy in Colorado while it reduces advertising expenses elsewhere.
“When we get to the point where we’re north of 33% of the population that has online sports betting, we’ll be able to shift into national,” Robins said. “Then as each additional state adopts sports betting, it should just get more and more efficient.”
Some local Colorado teams are expected to generate considerable betting interest as the NBA Playoffs and the NHL’s postseason heat up. At DraftKings, the NHL’s Colorado Avalanche have odds of 5/1 to win the Stanley Cup, representing the second choice behind the Vegas Golden Knights. In NBA betting, the Nuggets have odds of +2200 to win the 2020 NBA Championship, the fourth choice among teams in the Western Conference.
“We’re very excited about the potential to continue to grow in Colorado over the long term,” Robins said. “We think it’s going to be a great market for us.”