DraftKings commits to “disciplined approach” in New York marketing blitz

DraftKings CEO and co-founder Jason Robins has committed the US sportsbook operator to a “disciplined” approach to customer acquisition in New York, despite a promotional battle between operators in the Empire State.

New York has enjoyed an explosive start to life as a sports betting market, generating almost $2bn in revenue during its first month, punctuated by significant marketing spend and promotional competition between the state’s six licensed operators – tactics which come despite the 51% tax rate on gross revenue.

Speaking at the firm’s Q4 2021 earnings call, Robins suggested early promotional activity would subside as the market becomes more mature.

“When the New York market launched, there was some aggressive promotional behavior by many operators, but DraftKings is committed to maintaining its disciplined approach to customer acquisition and is targeting a two- to three-year path to profitability for the state,” Robins told investors.

“We believe that product will be the key differentiator between operators over time,” he added.

Indeed, Robins suggested there had been “some chatter” concerning the potential reduction of the exorbitant 51% tax rate, as early as the current legislative session, something which could see the adjustment of the three-year blueprint.

New York’s tax rate is the highest for an open market in the US and more than seven times higher than Nevada and Iowa, both of which impose a rate of 6.75% on gross revenue.

New Hampshire’s tax rate is also 51%, yet DraftKings is the sole operator in that market.

“I think the approach we’re taking is a wait and see on that,” the DraftKings CEO said regarding a possible lowering of the tax in New York.

“I think if that happens, depending on where it lands, then we’ll adjust accordingly, and if it doesn’t happen, then we’ll adjust accordingly. So I think we’re kind of taking a wait-and-see approach to this legislative session,” he added.

Robins alluded to his belief that customers acquired during the first two years of a sports betting market were the “strongest cohorts” that an operator could acquire, in terms of retention and leakage.

Robins continued: “The New York customer acquisition has been so efficient, and the early player cohort results have been so strong, that we’re hopeful that with an appropriate tax rate, it can be a very profitable market for us.

“But if not, we’ll make the necessary adjustments to ensure that it meets the two- to three-year payback and that it is a very profitable market for us in the long run,” he added.

Answering questions on DraftKings’ marketing strategy, Robins referenced previous comments that DraftKings would eventually become more efficient in its advertising as legalization of sports betting evolves into a more national issue.

“Advertising at the national level is much less expensive in many channels like television on a cost per impression basis than local,” he explained.

“We have already started, starting last NFL season, shifting some of our spend into national. We crossed that threshold with the launch of New York by about one-third.

“I think you’ll continue to see more. What’s nice is that those national ads that we run, with each new state that legalizes, it’s not like we have to put more national advertising out there,” Robins said.

He continued: “I think you’ll continue to see some tailwinds coming from just more state legalization and a continued shift into national.

“Of course, with state launches, we’ll always have some heavy advertising on the local side and there are certain channels that will always be local, like outdoor digital.

“But I think the national advertising will continue to grow as a percentage of the portfolio and that should have a tailwind effect on the overall efficiency,” Robins concluded.