Take a look at how much money the sports-betting industry has made so far: It’s likely that they haven’t made any money at all.
There is a good chance that online bookmakers have lost money since they started in New York on Jan. 8, according to an analyst who has done the math for The Post. They’ve lost about $200 million.
That’s not possible. Operators like Caesars and Draft Kings are having to spend a lot of money to get people to use their apps. In the words of an industry analyst who didn’t want to be named, those promotions cost money. They cost about $100 to $150 for each new customer, the analyst said.
And New York State levies a huge 51% tax on the bookmakers’ gross revenue, which eats into their bottom lines. The sportsbooks also have to pay a tax of 51% on the money they spend on promotions. This is not good news for them.
In a joke, a sports betting operator who tried and failed to get a New York licence said, “I got lucky by not getting a New York licence.”
It hasn’t worked out as well as the bookmakers had hoped; for example, they offer “free” $3,000 to gamblers who put down $3,000 of their own money at Caesar’s, for example.
People are spending a lot of money on advertising, which hurts the companies’ bottom lines.
Since online sports betting started in January, there have been between 1.5 million and 2 million new accounts set up, says an industry analyst who works for the company. State data shows that $2.4 billion has been bet so far this month, until Feb. 13.
The company has signed up about half a million new customers in New York since it began. There were more people in New York than we thought there would be, company CEO Tom Reeg told investors on Tuesday. “New York is close to being as big as the rest of the business in Caesars Digital.”
Because Caesar’s most recent earnings period came to an end in December, its results since New York legalised online sports betting in January aren’t available. An industry analyst who spoke to The Post said it’s almost certain that the company lost money on its operations in New York. Caesar’s didn’t say how much money it made, but it said it has since scaled back its promotions from the $3,000 bonanza. If a new customer bets $20, it will give them $300 in free gambling.
Still, the industry analyst who did the math for The Post said that even though the bookmakers lost money in New York, they won’t just give up and go out of business. Getting things done in the state is going to get easier, he said.
“The first marketing blitz should stop now that people know about it,” he said. “There is a realisation that the whole market needs to focus on making money.”
It was Reeg’s goal to make it seem like Caesars’ promotions didn’t have a big impact. He said that “hundreds of thousands” of smaller customers came to the site and didn’t deposit enough money to take advantage of the big promotions. He said that the average amount that people put into their gambling accounts was $450.
There’s still a chance that the bookmakers lost money, based on the industry analyst’s calculations and on some of their own results. On Friday, DraftKings released its first earnings report since it opened in New York City, and they were very good. Between Jan. 8 and Feb. 13, the bookie lost about $50 million in New York, the analyst said. He came up with this figure by taking the numbers from the report and adding them together. DraftKings didn’t answer a question about the incident.
This is how the analyst came up with the figure that the whole industry lost $200 million in the same amount of time. In New York, DraftKings makes up about 25% of the sports betting market.
A lot of people in New York have been using FanDuel in the last few weeks, and it has about 36% of the market. It didn’t want to say anything. There are three other companies in the top three: DraftKings, Caesars, and BetMGM. Each of them has between 20% and 25%, and they all have 10%.
Analyst: The analyst looked at DraftKings’ $47 million in New York state gross gaming revenue through Feb. 13. Then, he or she took into account that the company is likely to spend about 150 percent of that money on promotions, based on what it has done in other states. If you take away $70 million in promotions and $24 million in taxes on gross gaming revenue, you’re left with a loss of about $50 million, or about the same amount.
The CEO of DraftKings said Friday that the company is aiming for a two-to-three-year turnaround for the state, and he said that was what he was aiming for. The company’s stock has lost more than 15% in the last week.
It was thought before DraftKings came to New York that the company would lose between $100 million and $150 million in the state this year. Now, that number will be closer to the high end, an industry analyst told the New York Post.