Tuesday, June 7, 2022

DKNG's is Just Another Corporate in this New World

Draft Kings CEO Jason Robins caused quite the stir yesterday with his comments to analysts

That he told investors looking for higher returns (on a stock that is completely beat up) he will deliver higher returns is nothing too exciting. But the fact he brazenly told the audience his company does not want winners and would look at increasing holds to generate profit was eye-opening. 

For a company sinking so much marketing money into getting people to play with them, then telling them they only want losers and at some point prices will go up to make you more of a loser, doesn't seem to be the best tag line to me. But maybe this is all part of some master plan little people like us can't figure out. 

This seems to be indicative of the space with the corporates, from what I've seen over the years. There's so much invested to be big, getting big is the easiest part, but being big in online gambling does not mean controlling a market. You're just big with other big companies. Low margin and high volume that comes from big (think Amazon) is replaced with nickel and diming, and squeezing your customer base to meet an EPS target. 

What's worrisome about all of this is the lack of innovation and invention. With larger and larger companies squeezing a lemon, we tend to see what we see in horse racing. Very little is spent on making the customer experience better to grow the entire business. It isn't like that, either in the past, or with new private companies. 

Betfair, for example, was not created by a corporate, but by a few people that liked to gamble, and were interested in tech. It won tech awards, both inside and outside gambling. The company hummed along beautifully until it hit similar snags. When it was taken over it already had "premium charges", and almost immediately the new corporate bosses were shuttling users into the regular sportsbook. 

One of the greatest gambling innovations of our lifetimes was relegated to an afterthought. 

Business books and studies (I think even Prof Betts linked a study to this on her twitter feed) have delved into this phenomenon, and it's not just with the DK's of the world. The private sector has done less and less in the way of innovation, and is more concentrated on hitting a "street" target. History books might not look kindly on this part of this era, but often times with hitting that target, the consumer benefits through lower prices and uniform access. In the sports gambling world, this somehow (how, I do not know) perversely means higher prices and less access. 

A few weeks ago, Racing the Rockefeller Way, was written for HRU. In it, Rockefeller's business strategies were examined. One section not touched on was his creation of a medical research group - the first of its kind. His mission statement was to be curious, innovate, discover new things, be proactive. It was a Bell Labs for medicine. The research saved millions and millions of lives and exists to this day (running certainly profitably, if need be). I wonder what it would've become if its benefactor's initial KPI was an EPS target. 

Most of us want to see gambling on sports and horses to grow, to innovate, to get better, to offer more access at low prices to achieve that every day huge volume. That to us is a sound business. I think that's why most of us are so confused when the business seems to wish for the opposite. 

Have a nice Tuesday everyone. 

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