DraftKings Earnings Call: Southern State Push Ahead, eSports Will be ‘Huge Category’

A lack of major sports didn’t hurt DraftKings during the second quarter. Gamers simply found new things to bet on, said DraftKings CEO Jason Robbins. Speaking during Friday’s second quarter earnings call, Robbins pointed to the company’s sports betting launch in Colorado and Illinois, as well as iGaming in West Virginia as key drivers. But beyond new markets, gamers also just found new interests. June revenue was up 20 percent over the same period in 2019, despite a lack of MLB, NBA or the NHL. Top NASCAR races, Robbins said, which traditionally had been a niche sport for DraftKings, saw action similar to NBA regular season games. The company also topped their previous records in May and June for the UFC this year. And then there was golf. 

“In golf, prior to this year, our top event of all time was the 2019 U.S. Open,” Robbins said. “Since the restart of the PGA Tour,  six PGA Tour events and the Match 2 have topped that major.” 

Overall, the company pulled in $75 million in pro forma revenue during the second quarter. Now as they go deep into the third quarter, that growth continues. The return of major sports set records for DraftKings with MLB and the NHL

“In the first two weeks of MLB’s return, we saw three times the handle of the first two weeks of the 2019 MLB season,” Robbins said. “In the first week of the NHL’s return, we saw twice the handle.” 

DraftKings Looking For New Opportunities

As a result of that second quarter, DraftKings heads into the fall with $1.2 billion in the bank and zero debt. While optimistic, Robbins said he’s not planning for college football to be played. Then if it happens, that’s just another positive for the third and fourth quarters. But overall, he sees nothing but growth potential. After adding sports betting in Colorado, Pennsylvania and Illinois, along with iGaming in West Virginia, the company now operates in nine states for mobile sports betting and three for iGaming. Colorado especially finished the quarter strong, pulling in $3.5 million in gross gaming revenue for the company. Robbins pointed to Colorado as one of the places DraftKings plans to step up marketing efforts, to take advantage of a strong sports culture. 

Southern states also offer some opportunities for the company. Now that Virginia and Tennessee have legalized sports betting, Robbins wants to establish a presence in both markets before the end of 2020. 

“The U.S. [sports betting] market is still in the early stages, with many years of growth ahead,” Robbins said. 

He added the company would continue to invest in the sports betting market, while also turning its attention to some new opportunities. That includes a continued pushout of the standalone casino app, which is currently active in New Jersey, West Virginia and Pennsylvania. It also means a platform shift in 2021, to a company-built operation. That technology should be ready by September 2021, Robbins said.  

Esports Seen as Long-Term Winner

More than any others, company officials look to eSports for future growth. During the call, DraftKings CFO Jason Park pointed to it as a mainly untapped market. 

“We believe eSports is going to be a huge category,” Park said. “It’s when, not if.” 

Data from Yahoo Finance backs that up. Year over year, eSports grows at a 9.7 percent rate. Last year, total video game revenue added up to $139 billion. Forecasts expect that to increase to almost $200 billion by 2022. Part of the reason, Park said, is because of the COVID-19 lockdowns. 

“When you get an economic and world shock, you see an acceleration of trends already happening,” Park said. “I believe we fast-forwarded years ahead in the past few months.”

With people stuck at home, video games became an outlet of sorts. Even ESPN jumped on board, broadcasting tournaments for both Madden 20 and NBA2K over the last five months. The only challenge right now is that it’s still illegal to bet on eSports in most parts of the U.S. That’s something DraftKings officials hope to change in the months ahead. 

“There are still only a handful of states that allow betting on esports,” Park said. “[We’re] working on increasing that.” 

About the Author

Brian Carlton

Brian Carlton is an award-winning journalist who has covered casinos, the gaming and finance industries for more than a decade. His work has been published by the BBC and a variety of newspapers across the U.S.