For DraftKings, 2021 is likely to be remembered as the year that a potential blockbuster for the company fizzled out.
That’s not to say that the Boston-based company didn’t enjoy its share of success in 2021. It launched its online sportsbook in five states. It rolled out its casino product in two states. It won a highly coveted recommendation for a mobile sports betting license in New York. It announced a deal to acquire Golden Nugget Online Gaming (GNOG), one of its largest competitors.
But those accomplishments all pale in comparison to the collapse of its proposal to acquire Entain, a UK-based gaming conglomerate.
DraftKings had proposed purchasing Entain in a cash-and-stock deal valued at $22.5 billion in September. The deal was heavily scrutinized by both companies, as well as analysts, regulators, and other entities in the gaming space, many of whom predicted such a deal was likely to kick off a wave of M&A activity.
MGM Resorts International also inserted itself into the potential merger, with CEO Bill Hornbuckle insisting that DraftKings couldn’t consummate a deal with Entain without getting MGM’s blessing first. A merger would have likely complicated — or even terminated — the joint venture between MGM and Entain that created one of DraftKings biggest competitors, BetMGM.
The deal ultimately fell apart because Entain had asked DraftKings to sweeten its offer. UK rules stipulated that DraftKings could not make another offer for Entain for six months.
More Bad News
The scuttled Entain deal wasn’t the only bad news to hit DraftKings in 2021.
In June, Hindenburg Research, a forensic financial research firm, published a report alleging SBTech — a gaming technology company that DraftKings first announced it would acquire in late 2019, and completed its merger with in 2020 — had a long history of engaging in black-market gaming and money laundering and had ties to organized crime. Shareholders have since filed a class-action lawsuit in New York alleging DraftKings’ board of directors had breached its fiduciary duty during the SBTech merger.
DraftKings announced plans to launch a digital marketplace for non-fungible tokens (NFTs) in July, but the scheme came under withering criticism after some users were able to game the system and obtain multiple NFTs while other users were shut out of the market.
In late October, DraftKings announced that it would bring back its Sports Betting National Championship (SBNC) for a second go-around. The event ended in controversy the first time it ran in 2019 after an NFL game went longer than expected and prevented players from obtaining payouts to bet on a later game. Despite optimism that the SBNC would run without a hitch the second time, technical difficulties forced the event to be canceled on the second day.
The next month, the operator had to solve another mess with its Millionaire Survivor Pool. Confusion set in after the Detroit Lions and Pittsburgh Steelers skated to a 16-16 tie. While initial tweets by DraftKings’ customer support told players who picked either the Lions or the Steelers were still alive in the contest, the company did an about-face and eliminated many players because the rules actually stipulated that a tie is treated as a loss.
In early December, Colossus Bets announced that it was suing DraftKings for patent infringement. At issue were seven specific patents involving various gaming features, including a Cash Out feature that DraftKings had allegedly continued to offer despite repeatedly being notified by Colossus that it had run afoul of patent law.
Other Developments in 2021
There were plenty of other, less controversial developments for DraftKings in 2021.
- March 30: Acquired the Vegas Sports Information Network (VSiN) for an undisclosed sum.
- July 2: Agreed to a partnership with Sports & Social (S&S) to open a chain of high-end sports bars across the US. The first two bars were to open in Detroit and Nashville.
- August 9: Announced it would acquire GNOG for $1.56 billion. The move could help DraftKings gain market access in Nevada.
- September 8: Launched its DraftKings Rocket game to its suite of online casino products.
- October 7: As part of Breast Cancer Awareness Month, renewed its Pink ‘Em charitable initiative and pledged to raise $100,000 for the Larry Fitzgerald Foundation.
- October 13: Became an official sports betting, daily fantasy sports (DFS), and iGaming partner of the NHL.
- October 18: Extended its partnership with the New Hampshire Lottery to open a third retail sportsbook in the state.
Five New States in 2021, More on Horizon
DraftKings began 2021 with its casino product live in three states and its online sportsbook live in 10. That quickly changed in Q1, when it launched mobile sports betting in Michigan and Virginia. Online casino games were also launched in Michigan in Q1.
During Q3, DraftKings launched mobile sports betting in Arizona, Connecticut, and Wyoming, and online casino games in Connecticut — bringing the total number of states where its casino product is live to five and online sportsbooks to 15.
More states are coming. Last month, regulators in New York recommended awarding mobile sports wagering licenses to nine operators, including DraftKings. In its Q3 presentation, the company added that it has market access in Louisiana and Maryland as well.
As an added bonus, the company was awarded a contract in August by the Oregon Lottery Commission to replace the Lottery’s sportsbook app, Scoreboard, with DraftKings Sportsbook. A timeline for the transition has not been specified.
Quarterly Revenue Declined as Year Progressed
DraftKings reported a combined $823 million in revenue during the first three quarters of 2021, but the totals declined as the year went on. The company reported $312 million in revenue in Q1, followed by $298 million in Q2 and $213 million in Q3.
Conversely, full-year revenue guidance for 2021 began in the second half of 2020 and increased from that point. DraftKings first introduced full-year guidance of $750 million to $850 million in Q3 2020, but it was increased to a range of $900 million to $1 billion during Q4 2020.
Full-year guidance for 2021 was raised to a range of $1.05 billion to $1.15 billion in Q1 2021. It was raised from $1.21 billion to $1.29 billion in Q2. During the third quarter, DraftKings set the midpoint of its guidance at $1.26 billion and narrowed the range to $1.24 billion to $1.28 billion.
Also during Q3, DraftKings set full-year revenue guidance of $1.7 billion to $1.9 billion for 2022.
