DraftKings' Strategy Amid Betting Market Volatility

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00:00I do think, Sam, based on what I saw last week, with a lot more of the dogs covering

00:08and winning outright, I think this will probably normalize, but DraftKings certainly is hoping

00:13for that, aren't they?

00:14Yeah, definitely.

00:15You talk to traders in the industry, and they're all very adamant not to react too much to

00:22something.

00:23Definitely week to week, if you have ... A few weeks ago, I think 14 favorites covered

00:27the spread, and only one underdog did.

00:30They try not to react to this week to week stuff, but then when it becomes a trend of

00:33two weeks, three weeks, four weeks, five weeks, then they start to say, hey, maybe we should

00:39be changing the odds a little bit.

00:40But to your point, Craig, this is something that just happens in the industry every now

00:45and then.

00:46They can't really explain why it happens.

00:49You play the sport.

00:50You play the game.

00:51The outcomes on the field are different.

00:53That's why it's so hard to be good at sports betting.

00:54It's hard for the books themselves to be good at it as well.

00:57It's a low margin business.

00:59So they're hoping it normalizes.

01:00It seems like so far, in the recent weeks, it's normalizing a little bit.

01:05But still, because of how bad those weeks have been, DraftKings is advising $175 million

01:12cut to their guidance.

01:13Now, they're going to offset it in their own way.

01:14They say they're going to lower promotions and marketing as a result, which should save

01:18them about $55 million on that front.

01:21But when the math shakes out at the end of the day, that's still four times as much as

01:25FanDuel says they're going to lose.

01:27And pretty important to note here as well, while very similar companies, DraftKings is

01:31pretty much only US sports betting, only Canada sports betting, only Canada iGaming.

01:37They don't have these 14 other brands that Flutter, the parent of FanDuel has, that can

01:40lean on across the rest of the world to offset company costs.

01:44Flutter's actually raising their guidance when DraftKings is very dependent on the US

01:48is lowering their guidance overall.

01:50So that's another important distinctive factor between these two companies.

01:54I will say as well, compounding the issue is when you get people to bet parlays so much

01:59and when that is really good for your business and it drives higher margin bets, when those

02:03parlays hit, then that can create a really volatile kind of situation for your company.

02:08And that's what DraftKings is dealing with right now in this quarter.

02:12Parlays were up about 5% in terms of the percentage of all the money that goes into them.

02:16And in a lot of those parlays, you have big favorites on the money line, lower odds put

02:21together for a better payout.

02:24Most of those have hit a lot as well, but yeah, they're kind of taking the same approach

02:27as traditionally traders have in Las Vegas, like hoping it shakes out, doing what they

02:31can to offset the costs.

02:33In the meantime, I've been hoping to make up for some lost ground as they enter quarter four.

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