Jason Robins caused quite a stir last week when he took the opportunity of a fireside chat with analysts to suggest that DraftKings wasn’t interested in players who were “doing this for a profit.”
Suffice to say, this didn’t go down well with #GamblingTwitter as poster after poster took to the social media airwaves to condemn Robins’ plain speaking.
But as one of his defenders put it, “I, for one, am shocked that a business is operating like a business.”
The sales pitch
First, it should be understood which audience Robins was speaking to.
Companies don’t use investment bank fireside chats to open up a dialogue with the players or, indeed, the media and particularly its social wing.
This was a sales pitch to investors.
You might say it’s clumsy. But Robins was attempting to convince those either already invested in DraftKings, or importantly those who might want to invest in the future, that his company is serious about making a profit.
This is not controversial stuff. All companies make profits from their customers. The sportsbook industry is no different.
It doesn’t work if it’s the other way around.
Raking it in
During another digital fireside chat, DraftKings CFO Jason Park spoke to Jefferies analyst David Katz about his company’s acquisition of Golden Nugget Online Gaming.
“We’ve scratched that itch,” Park told Katz. “Then we’ll turn our attention to extracting the synergies from that deal.”
To translate, extracting synergies is about extracting profit. From players.
No one on #GamblingTwitter blew up about the idea that online casino customers might be profitable for a company that services them with their gambling games of choice.
To reiterate, this is not controversial stuff.
Making a simple betting proposition
To reiterate this position, Chris Bevilacqua, chairman at the provider Simplebet, which is working with DraftKings on what they call micro-betting products or discrete in-gaming bets.
“Our product turns a live three-hour event into a slot machine,” Bevilacqua told the audience at the SBC Summit North America held at the Meadowlands in New Jersey.
The sharps – as everyone likes to term those who think they are adept at betting – might not like the idea of explicitly linking a betting product to slot machines. It exposes the underlying logic of all betting. “Sophisticates” might like to think they can beat the system by smarter play.
And sometimes they will. Sometimes they will take money off the bookies.
But oftentimes they won’t. Indeed, most times they won’t. Even the smartest bettor, employing the best system, will lose occasionally.
Or a lot if they are looking to get their kicks from micro-bets.
The general point is this: the vast majority of players lose money over time. Otherwise, the gambling operators wouldn’t exist. Does this need to be said out loud?
Apparently so.
Because what Robins is guilty of – if guilt is the right word – is voicing a simple truth. If DraftKings existed to cater solely for players who made a profit, then it wouldn’t be very much of a gambling company. In fact, it would go bust.
The contradictions of the meme stock crowd
In a separate social media furor, Robins hit back at renowned investor Jim Chanos over comments Chanos made about DraftKings’ current trading multiple.
The comments were then picked up by a thread on the notorious r/wallstreetbets Reddit page where traders in DraftKings stock railed against a ‘boomer’ for attacking DraftKings for its lack of profitability. It is no great leap to assume that some of those responsible for the attacks on Chanos – and they were attacks – not only are invested in DraftKings but also bet with DraftKings.
Similarly, it isn’t a stretch to assume that some of these poster/investors might well hold the contradictory thought in their heads that they win with DraftKings and everyone else loses.
It means they can both bet with the firm and invest in it without their brains short-circuiting.
The difference between winning and being profitable
But it is a lie. I would wager – and hey, I never lose – that over time these r/wallstreetbets warriors do lose with DraftKings. Maybe they even lose a lot.
They might believe they are winners – and occasionally they might even be winners – but as one wiseacre on Twitter pointed out, there is a big difference between hoping to win a bet and hoping to be profitable as a bettor. Those that achieve the latter are a very small minority. And nobody wants their action. Even those that say they want sharp action know full well the difference between those two propositions.
Yes, they will actively advertise themselves to players who think they can make a profit. But they know they are advertising themselves to people who in reality, make a loss.
So Robins’ mistake? Being truthful about this aspect of the business. #GamblingTwitter’s mistake? Not giving him credit for knowing his business better than they do.
