JASON ROBINS, COFOUNDER
AND CEO OF THE SPORTS BETTING FIRM DRAFTKINGS, IS STANDING AT A CONSTRUCTION SITE ON A STREET CORNER OUTSIDE WRIGLEY FIELD ON A SWELTERING SUMMER MORNING. BESIDE HIM IS CRANE KENNEY, THE CHICAGO CUBS’ PRESIDENT OF BUSINESS OPERATIONS. THEY POSE FOR PICTURES, PENS IN HAND. THEN THEY USE THEM TO SIGN A CEREMONIAL STEEL GIRDER.
The Cubs are building a multilevel addition to Wrigley Field, a National Historic Landmark, where the team has been playing baseball since 1916. DraftKings will pay an undisclosed amount to the team for the right to transform the space into a 17,400-square-foot betting parlor, which is scheduled to debut in 2023. The DraftKings sportsbook will be open during Cubs games, and every other day of the year. The Cubs will get a percentage of food and beverage income. DraftKings will keep the gambling profits.
Like most sportsbooks, DraftKings does nearly all of its business virtually. Since betting lines rarely vary by much from one oddsmaker to the next, its products are basically commodities. In an effort to create some brand stickiness, DraftKings spends liberally— if not wildly—on marketing: an astonishing $981 million in 2021, representing threequarters of its entire income. Despite that, if competitors like FanDuel or BetMGM offer you an extra half-point on the wager you’re planning to make, you’ll probably take it. Even if you happen to be wearing DraftKings swag at the time.
How to overcome that? Wrigley is part of the strategy. The sportsbook there, Robins promises, will be “a complete social experience.” Bettors will get access to food and drink that they won’t find elsewhere in the ballpark. They’ll watch games on an absurdly large, 2,000-squarefoot video screen. Along the way, the uninitiated will become familiar with some of the proprietary ways that DraftKings bundles its bets, while frequent customers will get to experience the brand outside of their mobile devices. From the cocktails to the camaraderie, the whole idea is to generate at least a modicum of loyalty. “Maybe someone has two apps on their phone, and they need to figure out which one they’re going to pull out to make a bet,” Robins says after the signing ceremony. “I want them to think back to what a great time they had when they came here.”
Founded in 2012, DraftKings was one of the creators of daily fantasy sports, which streamlined the traditional fantasy model so that people could place wagers on these competitions with increased frequency. When the Supreme Court cracked open the doors for states to legalize online sports betting in 2018, DraftKings was among the first companies to petition for licenses from state gaming boards. Today, it’s one of America’s biggest sportsbooks, with an estimated customer base of nearly 20 million and operations in 20 states. And if a rumored partnership with ESPN happens, which could see DraftKings paying at least $3 billion to embed its brand throughout the media giant’s content, that number could soar far higher.
But its user numbers dont yet translate into profit. After the company went public in April 2020, it saw its market cap rocket past $25 billion within a year, propelled by pro-gambling legislation in statehouses across the country and a fizzy bull market. A record 1.7 million DraftKings users were on the platform during the last Super Bowl Sunday. All the while, though, operating losses have been stacking up. The company had a net loss of $1.52 billion in 2021— and $1.14 billion more in the first nine months of 2022.
Today, DraftKings market cap has dropped to around $6 billion. Its cash reserves are down to roughly $1.4 billion. Robins and his team remain bullish that profitability is around the corner, as sports gambling becomes legal for the remaining two-thirds of the U.S. population. That will unlock economies of scale, such as the ability to run more effective national advertising campaigns. Until then, the company is seeking novel new ways to make its sportsbook less of a commodity. “There are going to be 20 to 30 million new people gambling on sports in the U.S. in the next three to five years,” Robins says. “We’ve got to try to get as many of those as engaged with us as possible.”
DRAFTKINGS IS TRYING TO CONVINCE FANS THAT SPENDING MORE MONEY IS A NATURAL EVOLUTION OF THEIR ENGAGEMENT WITH SPORTS, WITH ONE ANOTHER, AND WITH DRAFTKINGS.
The brick-and-mortar betting parlor is the least surprising part of DraftKings’ strategy The company is also building up a media division, with podcasts and more, and has launched its own social media platform on its app and website—an attempt to import an entire sports-media subculture onto its sportsbook. And in a daring step into unknown territory, it has created an NFTbased fantasy football game. The idea with all of it, according to Robins, is “to take things our customers are already doing anyway”—whether it’s chatting about bets on IWitter or investing in NFTs—and fold them into the DraftKings portfolio.
DraftKings isn’t alone. In recent years, companies across the sports ecosystem have been spinning out a dizzying selection of similar products and services, all aimed at fans’ dollars. Media stalwarts are partnering with sportsbooks. Pro leagues are aligning with betting apps. Web3 startups are creating fantasy games, and NFT sports collectibles are proliferating across the blockchain.
DraftKings is ticking all these boxes, and then some. As it has from the start, the company is trying to convince fans that spending more money is a natural evolution of their engagement with sports, with one another, and with DraftKings. Along the way, it is helping to fundamentally change the nature ofwhat it means
