Sports Betting And The Rise Of DraftKings - YouTube

Sports betting in the US is booming. During the 2021 NFL

season, an estimated 45 million Americans are expected to wager

at least $12 billion. Since a 2018 Supreme Court ruling sports

betting is now legal in more than 30 states.

This is that next frontier that the gaming industry has been

looking for for many years. What we've seen is just massive,

massive levels of engagement, from the perspective of people

that are excited about being able to add this component to

their viewing experience, whether it's in person or at

home in places where you have mobile betting. A flood of

new customers, eager for excitement and risk has made

DraftKings one of the nation's biggest sports books. The

company has live online sports betting in 15 states and its

iGaming casino segment, which includes blackjack, roulette and

slots, is available in five states. Well, I

think right now we're at the very early innings of the

industry, I mean, the company's revenue is almost doubling year

over year per our latest guida ce. We're still live in states

hat on average had been live on y a little over a year and I t

ink about a year and a half. S ill most of the population lef

to legalize and we're talking a out a tam that could be $60 bil

ion plus if there were ull legalizat

In the third quarter of 2021 DraftKings revenue rose 60% from

the year prior to $213 million. During that same period, with

mobile betting launching in several states, the number of

its monthly unique paying customers rose 31% to 1.3

million. And the online sports betting and gaming industry in

the U.S. is just starting to grow. As of 2021 only 4% of

gross gaming revenue in the U.S. was generated online compared

with 45% in a more mature market like the UK. The online sports

betting market in the U.S. is expected to be worth nearly $40

billion by 2033. But critics argue that greater access to

mobile sports betting could lead to an increase in gambling

addiction. The National Council of Problem Gambling estimates

the cost of obsessive gambling in the US is already $7 billion

annually, including fees related to the justice system, health

care, job loss and bankruptcy. So what does the future look

like for legal sports betting in America in what challenges lie

ahead for sports betting providers like BetMGM, FanDuel

and DraftKings. Gambling in the U.S. dates back to colonial-era

America. Lotteries were first used in the English colonies to

finance projects, including paving roads, building wharfs,

and constructing churches. Horse racing got his start in the late

1660s in New York, greyhound racing in 1919 in California and

Las Vegas's first themed resort-casino, the El Rancho

Vegas opened its doors in 1941. Betting on sports became illegal

on a state-by-state basis throughout the early 1900's due

in part to the influence of organized crime and scandals

involving a small number of athletes. In 1992, Congress

passed the Professional and Amateur Sports Protection Act

banning sports gambling nationwide in all but a few

states, including Nevada. Sports betting threatened the integrity

of the game, put adolescents at risk for gambling problems and

put student athletes in a vulnerable position, according

to a 1999 National Gambling Impact Study.

For most Americans who, you know, they bet on sports

socially, they bet on the Super Bowl, they bet on March Madness,

they all thought that, you know, this is harmless and they were

doing it in a legal manner but the reality was they weren't.

The goal

was always protecting the integrity of the game.

Unfortunately, PASPA kind of ended up having a bit of a

counter effect. But instead of actually getting rid of sports

betting what happened was it got rid of legal sports for betting

or most legal sports betting.

By the late 2010's Americans were illegally wagering $150

billion annually through black market offshore bookies,

according to DraftKings CEO Jason Robbins. But in 2018, the

gaming industry was given a boost. Led by New Jersey, the

Supreme Court struck down the sports betting ban, leaving it

up to the states to decide.

And since then, we've been seeing states really one after

the other starting to pass new laws regarding sports betting,

and in many cases, this has been accompanied by new law regarding

accessing gambling via the internet.

And that led to a surge in mobile betting. According to

media reports, New Yorkers were flocking across state lines

making New Jersey, the sports betting capital of the country.

New Jersey was one of the first states out of the box. People

that live in New York City and Manhattan would take the Path

cross the river over to Hoboken for Saturday and Sunday so they

could bet on sports.

We're going not just through the largest and fastest expansion of

gambling our nation's history, but a massive cultural shift

that the likes of which we've never seen.

By September 2021, New Jersey became the first state in the

nation to take in more than a billion dollars worth of sports

bets in a single month. State revenue that month from sports

betting reached $82 million, almost 83% higher than a year

earlier. Pro teams and media companies have also turn to

sports betting to diversify the revenue. ESPN partnered with

Caesars Entertainment and DraftKings, CNBC's parent

company, Comcast invested and FanDuel and NBCUniversal

invested in PointsBet.

There's a huge number of partnerships that have started

cropping up and so the growth as we see it in this commercial

industry is not just driven by the betting industry, but it's

also being driven by sports it's certainly being driven by media

as well.

Sports betting creates a new level of fan engagement and that

is something that it is clear that the league's understand,

clear that the broadcaster's understand.

Sports betting in the US is roughly $2.3 billion business

and includes commercial casinos with mobile ventures like

BetMGM, digital sports books, including FanDuel, the top

player in US sports betting, and of course DraftKings. In the

first half of 2021 sports betting revenue reached $1.8

billion, 19% more than the full 2020 year total. DraftKings got

its start in 2012 as a fantasy sports platform by co-workers

Jason Robins, Paul Lieberman and Matt Kalish out of Lieberman's

Massachusetts apartment. In 2018, the trio launched

DraftKings Sportsbook, becoming the first company to offer legal

online and mobile sports betting in New Jersey. A few months

later, it launched Casino, adding its online blackjack

product to the Garden State. The following year, the company

announced plans to go public merging with a special purpose

acquisition company and SPTech a European tech business. It also

added Michael Jordan as a special adviser to the company's

board of directors in 2020 and created partnerships with teams

ranging from the New York Giants to the Detroit Pistons.

Following a temporary shutdown of major sports due to the

Covid-19 pandemic, Americans found themselves stuck at home,

yearning for big league games and glued to their mobile

devices. The company's revenue surged. At the end of 2020

DraftKings reported revenue of $614 million, 90% higher than

2019. Online gaming, which includes fantasy sports,

Sportsbook, the company's sports betting product and iGaming, the

company's online casino that includes digital versions of

blackjack, roulette and slot machines, made up 84.2% of

revenue. A little over 12% of revenue came from the gaming

software segment, which includes the licensing of gaming products

to other companies. Other smaller sources of sales made up

the remainder.

This, you know, really takes fans that maybe weren't

interested in all kinds of games, and makes them interested

in every game, it takes games that maybe are well out of reach

in the fourth quarter and because the spread or your

fantasy lineup is still in play, people are still watching the

whole way through. You can make prop bets up until the last and

end game bets up until the last play of the game.

And the pandemic helped in ot er ways. Massive tax revenue los

es at the state level sped up momentum for sports gambling.

As of October 2021, sports bett ng was legal in 32 states and

he District of Columbia. he backgro

on this from a state level perspective is the state budgets

are more challenged than they would have been otherwise. And

that certainly has induced state legislatures to consider

legalization, which has accelerated the process that we

would have expected to occur post 2018's ruling. As

November 2021, DraftKings had an average of 1.3 million monthly

unique paying customers. To attract new users DraftKings has

saturated the airwaves with advertisements. DraftKings new

Sportsbook app, you can bet on he games you want anytime you

ant. From January 1 to eptember, 9 2021 DraftKings

ational TV ad spend was up 98% rom the previous year. In 2020,

raftKings spent $495 million on ales and marketing 167% higher

han a year earlier,

We're seeing not just the general public but regulators in

states where sports betting is essentially wide open and

available to the constituency we're seeing backlash from these

regulators who are talking about getting complaints about

extensive advertising.

And in addition to its barrage of TV commercials, the company's

also expanded its reach through acquisitions. In August 2021.

DraftKings bought Golden Nugget Online for $1.5 billion. The

deal brings with it 5 million Golden Nugget casino players. As

of August 2021, DraftKings had mobile or retail betting

operations in 17 states and provided sports and gaming

technologies for operators in 17 countries. It was also an

authorized gaming operator of the NBA and MLB and an official

sports betting partner of the NFL. The Super Bowl is one of

the biggest betting events on the sports calendar. In 2020 an

estimated 22 million Americans bet more than $6 billion on the

game. But according to the National Council on Problem

Gambling, about 4% of those gamblers, or 880,000 individuals

have a gambling problem. This includes betting to escape

feelings of anxiety, viewing gambling as a way to make money

or being unable to set limits on time and money spent. According

to the group, two million Americans have a severe gambling

problem and another four to six million have mild or moderate

gambling problems. Vulnerable populations include young people

and athletes.

We haven't caught up yet with the consequences. Everybody's

focused on the revenue on the good things, on the profits. And

not not a lot of us are thinking about the public health aspects

of this of this huge expansion of gambling this huge shift.

Athletes

are generally wired to be competitive. That's a big part

of what makes them such successful professional

athletes. Those same traits are the types of things that make

might make an athlete more susceptible to gambling harm.

To prevent problem gamblers DraftKings advises users to set

limits on how much money you deposit in your account, how

much money you wager, and on the amount of time you play. The

company has also provided funding to the International

Center for Responsible Gaming and collaborated with the

American Gaming Association to promote a public service

campaign in all 10 DraftKings retail sportsbooks. For most

people, it's never an issue. But the last thing we want at this

exciting stage when everyone's talking about all the great

things happening is to have negative experiences for people.

So this is something we've made a real priority at the company

responsible gaming is actually in our mission statement.

Americans have been betting on sports as long as there have

been sports to bet on. Previously they only bet

illegally and so now we have an ecosystem that is much stronger

to protect the student athletes in the cases of college. The

athletes at the professional level, it brings law enforcement

it brings in, it brings operators who can through

algorithmic analysis look at anomalous betting patterns after

a betting line has been established. And

DraftKings has faced other headwinds too. After its stock

price hit an all time high closing price of $71.98 in March

2021 it turned lower over the next few months after questions

surfaced regarding its future in the highly competitive sports

betting market. A 2021 report by Hindenburg Research alleged that

Bulgarian-based gaming tech company SBTech generates

significant revenue from questionable gambling practices

outside of the US. In a statement, DraftKings said this

report is written by someone who is short on DraftKings stock

with an incentive to drive down the share price. Our business

combination with SBTech was completed in 2020. We conducted

a thorough review of their business practices, and we were

comfortable with the findings. But despite those issues,

analysts remain bullish and say DraftKings could see

profitability as early as 2023. And it could see solid growth

over the remainder of the decade. The company could

benefit from other trends too. The three largest U.S. states,

California, Florida and Texas, which accounts for about 90

million people, or more than a quarter of U.S. residents

currently don't have online sports betting on the books.

That could change as new states gain access to legal sports

betting,

What is my player going to do? How many points is my team going

to score? How many points is the other team going to score? These

games within the game, if you will, really create

opportunities for fan engagement that just didn't exist before.

And I think that it's clear that, you know, leagues and

teams and arenas and even advertisers and food and

beverage guys all recognize that there is high value in sustained

fan engagement and that sports betting is an important piece to

that.

We want to expand geographically we want to expand it a new

product lines, I think we have a proven track record of being

able to do that mostly organically. And I think that

really what we're trying to build is much larger than sports

betting or DFS or iGaming. We want to be a big tech company.

We want to be in the same conversation with companies like

Amazon and in the like. So you know, that is where we're trying

to head.