DraftKings Projects Sports Betting Business Surpasses DFS By ‘21

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DraftKings Projects Sports Betting Business Surpasses DFS by ‘21

DraftKings CEO Jason Robbins is projecting that in 2-3 years the company will generate more revenue from sports betting than its daily fantasy sports (DFS) business, dependent upon “how quickly the states (the other +/- 25 states expected to pass legislation legalizing sports betting) roll it out”. Once it does happen though, Robbins believes it becomes feasible for the company to grow revenue by 5-10x. Interestingly, the excitement created from the pending legalization in those +/- 25 states has created a “halo effect” in new DFS sign-ups; sports bettors with the urge to wager but no existing legal outlet to do so.

Howie Long-Short: Just 5 states will have legalized sports betting when the NFL season kicks off on Sunday September 9th and the company currently only operates in NJ, so it’s unreasonable to expect sports betting revenues would surpass DFS in the short-term. Longer-term, I would suspect that would be the case and increasing revenue by 5-10x sounds feasible, when you consider the company only generated $192 million in ’17. Robbins also isn’t content just pursuing “the traditional sportsbook stuff”, he wants to capture the underground gambling business (think: survivor pools, Super Bowl squares, March Madness brackets). There’s a lot of money to be made there, just 3% of the $10 billion bet on March Madness is said to be done legally.

There’s one point Robbins made that I don’t agree with. It’s his belief once 30+ states have legalized sports betting, DraftKings’ U.S. sports betting business would hold a $10 billion valuation; I wouldn’t think so. While U.S. gaming companies can trade upwards of +/- 13x EBITDA, DraftKings would still need to generate $770 million in earnings on $1.6 billion in revenue. That’s probably not going to happen considering the company managed to lose $92 million on $160 million in ‘16 revenue and they’ll need to continue to spend to acquire customers as they roll into new markets.

Fan Marino: DraftKings only offers mobile and online products in New Jersey, but that won’t be the case when sports betting gets legalized within the state of New York. The company has partnered with del Lago Resort and Casino (Waterloo, NY) and intends on opening a DraftKings branded sports book on site; the pact also enables the company to launch mobile and online products within the state. Oddly, the State of New York is expected to include an integrity fee (a fifth of a percent) for the pro sports leagues within the bill they’ll put forth in ’19; none of the 4 states currently offering sports betting cut the leagues in.

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American Express Wows U.S. Open Fans with Super Rally

American Express is celebrating its 25th Anniversary as a partner of the USTA and U.S. Open, the company’s longest running sports sponsorship. A contactless payment wristband (Amex Band), the American Express Card Member Club (open to all cardholders) and the American Express Centurion Lounge (for platinum and centurion members) are among the benefits/conveniences available to fans visiting the Billie Jean King National Tennis Center over the next 2 weeks, but the biggest draw has been Super Rally; an interactive tennis gaming experience, featuring Venus Williams. Using custom-designed 3D printed rackets, fans standing in front of life-sized transparent monitors return virtual tennis balls in augmented reality against physical targets with the goal of collecting the most points. Not able to make it out to Queens? Here’s video of JohnWallStreet exhibiting some rare athleticism and working up a sweat playing the AR game; don’t laugh, Dante Hall (a real athlete) did too.

Howie Long-Short: Super Rally is the product of a collaboration between American Express and Momentum Worldwide, a global brand experience agency. The company, which manages upwards of $4 billion in sponsorship assets for top clients like Amex, Coca-Cola and Chevron, resides under the Interpublic Group of Companies (IPG) umbrella. IPG shares are +5.5% (to $23.06) since the company reported that “growth in the U.S. (revenue +4.6%) continued to be strong and international growth accelerated (revenue +7.2%)” during the 2nd quarter, back on June 24.

Fan Marino: After cooling down, I had a chance to connect with Lindsay Ulrey, Director, Global Experiential Marketing & Partnerships at American Express (AXP). I noticed that most Amex activations are geared towards card members, but Super Rally seems to target a younger demographic. Who is the AR experience designed for?

Lindsay: We know that a variety of types of groups of people are coming, so for us it’s about designing an activation that offers something for everybody; especially when we do a huge custom technology build like Super Rally, it’s super important that the skill level is not too advanced. In Super Rally, we have sensors when you walk into the booth that can tell what height you are and sets the skill level accordingly; it also makes sure balls fed aren’t out of reach. If we’re highlighting something big, we want to make sure it’s accessible to kids through people in their 80s and 90s.

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What is JohnWallStreet?

JohnWallStreet, located at the intersection of sports and finance, is a destination for the educated sports fan.

While we won’t be publishing “hot takes” on LeBron’s relative greatness to Jordan, we will be offering up the most relevant sports related business news, in easily digestible bites, with commentary from both the sports money and sports fanatic perspectives.

We’ll cover publicly traded professional teams & stadiums (MSG, RCI, BATRA, MANU), television networks (DIS, FOXA, CMCSA, CBS, TWX, MSGN), apparel & footwear companies (NKE, UAA, ADDYY, FL, LULU), equipment companies (GOLFELY, FIT), ticketing companies (EBAY, LYV) content and facilities providers (CHDN, DVD, ISCA,TRK, LMCA).  If it trades on Wall Street, and has a sports angle, it’s in our wheel house.

Howie Long-Short and Fan Marino will be providing their expert opinions on each story. They have slightly different areas of expertise. Fan Marino is a firm believer that the SEC is the premier football conference. Howie Long-Short knows it as the Securities & Exchange Commission. Fan Marino lives and dies with the college selection of 5 star, blue chip recruits. Howie Long-Short spends his days analyzing blue chip stocks. Howie Long-Short knows that Black Monday occurred on October 19th, 1987. Fan Marino swears it happens every January after Week 17. You get the point.

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