The legalization of online and mobile sportsbooks in New York has been incredibly popular with all parties involved. Players have flocked to join, the state has earned record tax revenues, and New York sportsbooks have generated impressive revenues.
It has been so popular that New York has climbed into the top five states for bets handled, despite having only legalized the activity in January this year.
It hasn’t all been smooth sailing for the sportsbooks involved, though. Many have complained that the state’s tax rate is too high and call for a reduction. Some citizens have also complained that advertising is out of control and makes winning big seem too easy.
Sadly for many operators, it seems that things won’t be getting better any time soon.
Stock Prices Plummet
While not all sportsbooks in New York are publicly traded, some of the biggest ones are, including Caesars and DraftKings.
To be clear, these trading companies include all operations, not just their newly launched mobile sports betting apps. However, the figures below will still worry some operators.
First up, Caesars. Their holding company, Caesars Entertainment, recorded a drop of 26.6% in May. This may be no surprise to some, as their stocks have been decreasing steadily over the past 12 months, with their current stocks down overall by 53.31%.
Despite being one of the biggest operators in the sports betting market, their first-quarter losses this year increased from $423 million in 2021 to a loss of $680 million. A large portion of these extra costs are due to the launch of their mobile betting app and huge marketing costs.
DraftKings has also been hit, although their stock value dropped significantly less during May at just 9.61%. That could, in part, be due to the fact they completed a move to purchase Golden Nugget Online Gaming on May 5th.
DraftKings CEO, Jason Robins, said the following regarding the merger in an official statement:
We anticipate that this acquisition will provide meaningful revenue uplift.Jason Robins, DraftKings CEO
Copying FanDuel’s Success?
One sportsbook that is seemingly bucking the trend is FanDuel, which is owned by Flutter Entertainment. Unlike many others, they saw an increase in their valuation throughout May, increasing by ten points.
Part of the reason for their success is that, unlike the other two operators, they went in heavy on the iGaming sector and didn’t wager everything on the sports betting market. Will Hershey, CEO of Roundhill Investments, believes this was a very smart move for the operator:
Not only does iGaming provide a more predictable algorithm for win/loss, but it’s also more diverse than sports betting — with a closer to 50/50 male-female split as compared to sports gambling which is almost entirely male.Will Hershey, CEO of Roundhill Investments
This could explain DraftKings’s decision to buy out Golden Nugget Online Gaming, hoping that the purchase will allow them to expand their offerings in the iGaming market. This acquisition has the potential to put them in a stronger position financially and turn around the stock value depreciation seen in recent months.
It has certainly proven a successful path for FanDuel, but it would require huge costs for DraftKings if they decide to rebrand Golden Nugget Online Gaming. That would be on top of the $80 million per month DraftKing is currently spending on marketing. If they keep the brand as it is, it could help them keep costs to a minimum and maximize revenue.