If you thought the sports-betting ads plastered all over New York meant the industry was having a heyday, take a look at their profits so far: likely zero.
In fact, one tally of online bookmakers’ profits shows they’ve very likely lost money – around $200 million – since launching in New York on Jan. 8, according to an analyst who’s run the numbers for The Post.
How can that be? Operators like Caesars and Draft Kings are having to spend big to lure gamblers onto their apps: Those much-advertised promotions cost money – or about $100 to $150 per new customer – according to the industry analyst who didn’t want to be named.
And New York State levies a massive 51% tax on the bookmakers’ gross revenue, eating into their bottom lines. Much to their chagrin, the sportsbooks also have had to pay the 51% tax on the promotion money they fork over.
“I got lucky by not winning a New York license,” a sports betting operator who tried and failed to secure a local license, joked to The Post.
So far, the bookmakers have attracted more people than they expected – but at a cost, with promotions that lure bettors in with a “free” $3,000 if a gambler ponied up $3,000 of his own money at Caesar’s, for instance.
Since online sports betting came online in January, there were between 1.5 million to 2 million new accounts opened, according to the industry analyst. State data shows $2.4 billion has been wagered through Feb. 13.
At Caesars alone, the company has signed up about a half million new customers in New York since launch. “The volumes in New York were about two times what we were anticipating,” the company’s CEO Tom Reeg told investors on a Tuesday earnings call. “New York is approaching as large as the rest of the business in Caesars Digital combined.”
Caesar’s latest earnings period ended in December, so its results since the state legalized online sports betting in January aren’t available, but the industry analyst who spoke to The Post said it’s a near certainty the company lost money on its operations in New York. Caesar’s declined to comment on profit figures, but said it’s since scaled back its promotions from its $3,000 bonanza. It’s latest is $300 in free gambling with a new customer’s first $20 bet.
Still, the industry analyst who compiled the numbers for The Post said the bookmakers won’t just fold in the face of losses in New York. Doing business in the state is likely to become less painful, he said.
“The initial marketing blitz should tail off given that awareness has been set,” he said. “There is a realization the entire market needs to shift to a profit focus.”
Reeg tried to downplay the real impact from Caesars’ promotions, saying that “hundreds of thousands” of smaller customers came to the site and didn’t deposit enough to take full advantage of the big promotions. He said the average amount deposited into gambling accounts was $450.
Still, the losses are likely real, according to the industry analyst’s number-crunching and from some of the bookmakers’ own results: DraftKings on Friday released earnings for the first time since its New York launch. The bookie lost about $50 million in New York from the Jan. 8 launch through the week ending Feb. 13, the analyst said – making an estimate based on piecing together numbers from the report. DraftKings didn’t respond to a request for comment.
In New York, DraftKings represents about 25% of the sports betting market, which is how the analyst extrapolated that the entire industry likely lost $200 million during the same time frame.
FanDuel in recent weeks has the biggest New York market share with about 36%. It declined to comment. It’s followed by DraftKings and Caesars, which each have between 20% and 25%, and BetMGM, with 10%.
The analyst took DraftKings’ $47 million in New York state gross gaming revenue through Feb. 13 and then factored in that it’s likely spending 150% of that revenue on promotions, based on what it’s done in other states. If one subtracts $70 million in promotions and the $24 million in taxes on gross gaming revenue, one gets to a roughly $50 million loss.
“DraftKings … is targeting a two-to-three-year path to profitability for the state,” CEO Jason Robins said on the Friday call. The company’s stock has fallen more than 15% in the past week.
There were estimates before DraftKings launched in New York that it would lose between $100 million and $150 million in the state this year, and now that number will be more toward the high end, the industry analyst told The Post.