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DraftKings beat expectations with its third quarter results on Friday, reporting revenue of $ 133 million (exceeding the $ 131.7 million expected by analysts) and a loss per share of 57 cents (less than 61 cents expected). The company also claims to have hit 1 million unique “payers” per month, a 64% increase from a year ago.
Shares climbed on Friday, mainly due to the company’s forecast for 2020 earnings rising from $ 540 million to $ 560 million. These forecasts suggest revenue growth of 25% to 30% for 2020 compared to 2019, despite the hiatus from live sports for almost four months due to COVID-19.
DraftKings’ growth has also occurred despite a significant drop in TV ratings in almost all major professional sports. According to Nielsen data, viewership for the 2020 MLB World Series on Fox reached an all-time high, down 32% from the previous record in 2012; the 2020 NBA Finals on ESPN were down 51% from last year; NHL Stanley Cup Finals on NBC were down 61% from last year; the 2020 Kentucky Derby on NBC, moved from May to September, was down 49%. (The WNBA was an exception, with an audience up 15% for its full season; NASCAR’s audience for its full season only declined by 2%.) NFL audience was down 6% until week 9.
This is a phenomenon that you think would be damaging for a fantasy sports and sports betting operator like DraftKings.
But CEO Jason Robins says that while TV ratings have fallen, DraftKings has seen year-over-year user growth across all of its sports, “so I guess where there are declines, that are very casual viewers and not people. we are after.
The cause of the drop in grades has been the subject of much debate. Was this the distraction of the presidential election? Or the mental toll of the pandemic? Too many sports leagues all playing at the same time? Have some viewers been put off by the social justice messages? Is it just too weird to see game broadcasts without fans in person?
Robins favors the explanation of the election.
“It’s good to speculate, but nobody really knows,” he told Yahoo Finance. “I remember four years ago when the NFL took a dive and everyone was like, ‘Is this the end of the NFL?’ As it turned out, the election had a bigger impact than people thought … so we’ll have to see if that’s the case here, but intuitively it makes sense that when a large percentage of the The country’s attention to be diverted from the sport and that they are glued to channels like CNN and Fox News instead, they probably won’t have the same kind of NFL audience levels that they would have in a year or so. electoral. So that’s my guess, but there are so many moving parts this year that it’s really hard to tell.
Will the NFL bounce back after the election?
The NFL, behind closed doors, has favored the same explanation: that the presidential election has diverted attention from football.
In 2016, the NFL saw a similar drop in odds at the start of its season, and at the time its executives told franchise owners the election was to blame. This time the league would take the same turn.
But that would suggest that with the election on the sidelines, the NFL odds are expected to rebound quickly. That’s not what happened in Week 9, which was the first full list of games after the election and ended on November 9. According to Sports Media Watch, every Week 9 game window has shrunk from the previous year, with the exception of the Steelers vs. Cowboys in CBS’s National Afternoon Window, which gained 2% per compared to last year. (Saints vs Buccaneers was the least watched Week 9 TV broadcast on NBC Sunday Night Football in three years, but it was also a blast.) Viewership fell 2% in week 9.
On the flip side, the overall drop in NFL odds has eased over the past few weeks. Viewership was down 12% until week 5, but only dropped 6% until week 9, so the trend is improving.
If you ask FanDuel CEO Matt King, the drop in sports ratings has been caused by the glut of sports more than anything else. “I think people just aren’t used to watching NBA basketball in August, and they’re not used to the Kentucky Derby happening in the fall,” King says. “And I think when you see the sport go back to its normal schedule, you’ll see the grades come back. The other reality is that when the NFL started you just had a lot of sports going. King, like Robins, says the drop didn’t hurt FanDuel Group, which grew revenue 80% year-over-year in the third quarter. Is owned by Ireland-based Flutter Entertainment.)
Always bet on TV commercials
DraftKings and FanDuel continue to spend heavily on customer acquisition. DraftKings spent $ 100 million on marketing in the first half of the year; FanDuel plans to spend $ 185 million in the second half of the year. The two companies have flooded the airwaves of television and radio with advertisements promoting their legal sports betting, reminiscent of 2015, as they competed one-on-one over their daily fantasy sports apps (DFS ).
Jason Robins, CEO of DraftKings, says there are good reasons for their 2020 advertising blitz to look like their 2015 advertising blitz: The legal online betting market is now in its infancy, as is the DFS market. was at the time.
“This is the customer acquisition stage,” says Robins. “To put it in perspective, we had two live states with online sports betting at the start of the last NFL season, we’re now in 10. So that’s a lot of new customers who are capable, for the first time, to bet on the NFL on DraftKings, and we’re working hard to bring them to the platform … The natural expectation one might have, the natural pattern one would expect the industry to follow – and it was no different with everyday fantasy sports – if there is a period of significant customer acquisition, then there is a period of profit taking that occurs afterwards. But what’s interesting here is that it’s happening state by state, so you’re going to have states like New Jersey that might be in their fourth or fifth year at a time when other states are in their first. year.
FanDuel CEO Matt King in an interview earlier this week echoed the same thing: “We think we’re in the first or second round” of sports betting legalization, he said. declared.
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Daniel Roberts is a senior editor at Yahoo Finance and covers sports affairs closely. Follow him on Twitter at @readDanwrite.
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