Now that DraftKings has completed its acquisition of leading lottery courier Jackpocket, it may be pleased to note the early performance of the latter’s new online casino product in New Jersey. Jackpocket Casino earned nearly $1.6 million in casino revenue in April, its second full month of operations.
That may not seem like a particularly big number, and it isn’t compared to the $750 million DraftKings paid for Jackpocket—or the $40 million its own New Jersey online casino has earned on average each month this year. DraftKings’ interest in Jackpocket was presumably not for its online casino potential but for its core business of selling draw lottery tickets over the internet.
When it announced the takeover in February, DraftKings said it expected Jackpocket to provide between $60 million and $100 million in added profit by 2026. By comparison, $1.6 million in a month equates to less than $20 million in revenue per year. And that doesn’t account for the cost of running the casino.
However, that casino revenue represents a 63% increase over what Jackpocket Casino earned in March. If Jackpocket can add to that in May, it will exceed a 1% share of the New Jersey market, a small but important milestone.
The dollar value of Jackpocket Casino’s earnings won’t matter much to a company whose gross revenue exceeded $3.6 billion last year. However, it’s an important signal for the brand’s value in several ways.
Making Any Kind of Splash in New Jersey is Impressive
Historically, New Jersey has been the jumping-off point for new online casino brands coming to the US. It’s the longest-running multi-license market in the country, partnerships are easy to come by, and the cost of entry is comparatively low.
By the same token, it’s the most crowded market, with over 30 brands currently operating, not counting those that have come and gone. The top five hog 70% of the market, leaving 26 brands to fight over the remaining 30%. By that measure, Jackpocket Casino is already holding its own against the remainder of the field.
It’s instructive to look at some of the other brands it is already beating in terms of market share and revenue. These include longstanding names like:
- PokerStars
- BetPARX
- Tipico
- Mohegan Sun
It’s also beating the secondary brands of DraftKings’ rivals, like BetMGM’s Wheel of Fortune Casino and Caesars’ Harrah’s.
DraftKings’ secondary brand is Golden Nugget, which was among the first sites to launch in the New Jersey market in 2013. Despite that long head start and an iconic retail presence, it holds only 3.5% of the market.
In that context, grabbing 1% within a few months with an untested product and a brand not previously associated with the casino vertical is impressive.
Proof of Concept for Lottery-to-Casino Cross-Marketing
Presumably, what the purchase of Jackpocket means for DraftKings is primarily a new customer acquisition channel. Lottery players are a different breed of gambler from casino users and sports bettors. However, what the success of Jackpocket’s core business shows is that they also value convenience.
The only trouble with that business model—from a financial perspective—is that the hold rate for draw lotteries is very high. It’s often around 50%, compared to around 3.2% for an online casino. Meanwhile, Jackpocket only charges a variable service fee on deposits, typically around 10%. So, the bulk of its users’ spending goes to the lottery, not to Jackpocket.
Jackpocket, and now DraftKings, has a lot to gain from cross-selling those users on casino products. The hold rate is much lower for online casino games. That means players will spend more time engaged with the product for a similar deposit size. Moreover, they’ll tend to re-wager most of their winnings. In the end, more of each deposit remains with the operator.
The main question one might have had about that plan is how easy it would be to convert those users. Many more people buy lottery tickets than play casino games, so there was no guarantee that Jackpocket Casino would be a success. The fact that it has quickly established a small but meaningful share of a competitive market suggests that DraftKings might have similar success working with that customer database.
Jackpocket Casino’s launch also served as a weather balloon, gauging the lottery’s response to a courier pivoting to casino. Where Jackpocket’s core business operates, it does so with the blessing of the relevant lottery agencies. Had the New Jersey Lottery kicked up a fuss over potential cannibalization, that might have signaled future problems for DraftKings’ integrating its new acquisition with its existing business. Having established some precedent, it can now feel more comfortable about the prospects in other states.
About the Author
