DraftKings CEO Jason Robins has dismissed concerns that the company’s prediction market expansion is eating into its sportsbook business, insisting the new offering is generating incremental growth rather than cannibalising existing betting revenue.
Speaking during the operator’s Q2 earnings call, Robins said there was “minimal, if any, cannibalisation” between DraftKings’ sportsbook and prediction market offerings. Instead, he said the two products were serving different customer groups.
Robins continued that activity on prediction markets in states where online sports betting is already legal is being driven largely by institutional and professional traders who were not previously active on DraftKings. He said it was not the case that existing sportsbook users were switching products.
He went further by saying DraftKings’ prediction market strategy is focused on states where legal online sports betting remains unavailable. Robins highlighted California and Texas in particular, saying DraftKings is seeing customer profiles similar to those in regulated sportsbook markets.
“We looked at a lot of internal data,” Robins said. “We also used some third-party data, and we have a number of different ways that we’ve triangulated various metrics to come to the same conclusion. First, there is minimal, if any, cannibalisation happening.
“Second, where volume is coming from legal online sports betting states on the prediction markets, it is from institutional, professional syndicates, and people that were not previously active on DraftKings. It is great to see it is an incremental opportunity, and not something that we believe will ever be cannibalistic.”
Prediction markets fuel wider momentum at DraftKings
Robins also said the company’s investment in prediction markets was helping to strengthen its broader business. He pointed to continued customer engagement after the World Cup – with sportsbook handle continuing to grow at double-digit rates in July after the tournament ended – and strong momentum heading into the NFL season, which begins in September.
In addition, Robins revealed DraftKings acquired significantly more customers than expected during Q2. This prompted the operator to increase customer acquisition spending by around 10%. Despite the higher investment, acquisition costs were around 25% below expectations, reinforcing the company’s confidence in its predictions strategy.
“I think what’s happening here is that both the World Cup impact, predictions and having everybody talking about this all the time is really just going to lift everything,” he said.
Robins’ comments came on the back of DraftKings reporting a $67.6m net loss for Q2, due in part to lower revenue and higher spending. However, such was the group’s confidence in its strategy – as alluded to by Robins – it elected not to cut its full-year guidance.