We can achieve the same long-term profit margins in New York
DraftKings was among nine operators that the New York State Gaming Commission (NYSGC) recommended be issued a mobile sports wagering license in the state.
The regulator recommended the nine operators, all industry heavyweights, at its meeting last week. The operators were included in two “super bids” by industry consortia led by FanDuel and the Kambi Group.
Although fierce sportsbook rivals in several states, DraftKings joined FanDuel’s application to the NYSGC, along with Bally Bet and BetMGM.
The other application by Kambi featured Caesars Sportsbook, PointsBet, Resorts World, Rush Street Interactive (RSI) – owner of the BetRivers and PlaySugarHouse brands – and WynnBET. The Kambi consortium is also aligned with two tribes: the Oneida Indian Nation and the Saint Regis Mohawk Tribe.
DraftKings already has a presence on the ground in the Empire State. It runs a retail sportsbook at the del Lago Resort & Casino in Waterloo.
The nine operators will be levied at a gross revenue tax rate of 51%. The licenses will have 10-year terms and cost each operator $25 million.
During the process of setting up a gaming regimen for the state, the NYSGC considered a tax rate that ranged from 35% to 64% , depending on the number of operators and platform providers.
The regulator had planned to award licenses to at least two platform providers and four operators. In the end, they wound up selecting eight platform providers – Resorts World uses the PointsBet platform – and the nine operators.
The NYSGC reportedly plans to launch mobile sports betting before Super Bowl LVI on February 13.
Not every operator that submitted applications was picked. Kambi had submitted a second application on behalf of Fanatics Sportsbook and Penn National Gaming, which would have deployed its Barstool Sportsbook brand. Separate bids by bet365, FOX Bet and theScore Bet were also rejected.
Had the NYSGC decided to issue 10 licenses, the additional operator would have lowered the tax rate to 50%.
DraftKings CEO: “Levers we can pull”
During an earnings call this month to discuss Q3 2021, held just before the NYSGC announced that DraftKings had been awarded a license, CEO Jason Robins said he had hoped rumors to that effect were true.
“That said, if we were to be awarded a license, we feel just like we do in other states: that we can achieve the same long-term profit margins in New York,” Robins said.
“There’s a lot of levers we can pull, such as cutting back on rate of promotion and spending less on external marketing. Those are things I would expect everyone in the industry would do because I don’t think anyone is going to want to run at a long-term unprofitable rate in any state.
“Certainly, early on, we’ll approach it just like we do other states, where we’ll invest into it and look for that two- to three-year path to profitability. But over the long term, we feel we can achieve something in a similar range to what we’re achieving in other states from a long-term margin perspective.”
Prediction: “In a year, we eclipse NJ”
One of the biggest hurdles to getting mobile sports betting launched before the Super Bowl was having servers set up properly, according to Sen. Joseph Addabbo Jr. (D-Howard Beach), chairman of the Committee on Racing, Gaming and Wagering.
“We can have the best providers, but if you don’t have that server that actually accepts and validates the mobile sports bet, that’s the end of the game,” Addabbo said in an interview with Spectrum News NY1.
Despite concern in some quarters that New York’s tax rate may be too high, Addabbo was optimistic. He told Spectrum’s Capital Tonight program that “in a year or so, I think we eclipse New Jersey.
“People see New York as one of the sports capitals, if not the sports capital of the world, and I think there is such an appetite about us entering the sports betting arena that I think the potential is there. I think the potential is there as long as we have a premiere product.”
