DraftKings CEO: US sports betting now entering first “bear” market

DraftKings CEO Jason Robins has suggested US sports betting is entering its “first true bear market” since the launch of the firm’s foundation as a DFS operator in 2012.

Robins remarks were made as part of a letter penned to DraftKings shareholders and released in advance of the firm’s Q4 2022 financial results presentation.

In those results, DraftKings reported an 81% year-on-year (YoY) increase in its group revenue to $855m with the firm significantly reducing its adjusted EBITDA and operational losses over the quarter.

Historically, DraftKings losses have been substantial in nature, but have been offset by equally substantial revenue. However, in the increasingly competitive sports betting market, shareholders have become dissatisfied with a lack of returns, often leading to dramatic downturns in share price.

In response, DraftKings has committed to making cost savings across its entire portfolio, thinking that Robins explained the rationale behind in his letter.

“In less than three short years as a public company, we have experienced an incredible bull market and now the first true bear market since DraftKings’ launch in 2012,” the CEO wrote.

“We have learned a lot and grown a lot, and now is the perfect time to share how we are thinking about 2023 and beyond with our shareholders.

“The financial world changed in 2022. Gone are the days of free money. Gone are the days when investors would accept outsized losses as long as revenue grew or share increased.

“However, difficult environments create the opportunity for great companies to differentiate competitively and take major leaps in maturation – often by orders of magnitude not achievable in the business climate of 2020 or 2021,” he added.

Outlining his thoughts, Robins suggested the future would see three types of operators: those that are “under-capitalized and must take draconian actions to survive”, those that “may be well capitalized but cannot deploy capital in a sophisticated way”, and those that “know it needs to become more cost efficient and preserve capital… [but] will continue to invest behind initiatives that support long-term competitive advantages”.

Speaking about the third operator type, Robins wrote: “These companies have the conviction to invest because they have the data and the analytical know-how to be confident that they are making the right choices.

“These are the companies that view years like 2020 and 2021 warily and years like 2022 and 2023 as times of great opportunity. These are the companies that thrive when conditions become more challenging. I believe DraftKings is one of these companies,” he added.

As justification for this assertion, Robins cited DraftKings “tremendous” 2022 in which the firm trimmed more than $100m in costs while also raising its revenue expectations every quarter.

Launches in new states and Ontario in a “more cost-efficient” manner, and progress in addressing competitive gaps with products, were also highlighted by the CEO as major factors in the firm’s success.

“I believe that our product and customer experience is objectively better than it was a year ago and is being appreciated by our customers. And the best part is that we are just getting started,” he wrote.

“Over the past 12 months, we have also focused inward. We improved retention of top talent, fixed internal processes that had not scaled, and streamlined organizational structures so we can accomplish more with the same resources.

“We evangelized a culture of ‘rapid escalation’ whereby employees are expected to quickly inform senior leaders when they identify inefficiencies that need to be addressed or decisions that are blocked.

“To be clear, our work is not done here, and it probably never will be. But our appetite and ability to focus on these areas increased in 2022,” he concluded.