DraftKings went live this week with a mobile sports betting app and web-based sports book. In doing so they became the first legal US entity outside of Nevada to offer an online solution for sports wagering. Their product is sharp … in more ways than one. After betting with their product for a week now, I’ve begun to wonder: Is DraftKings a market disruptor? The title, market disruptor, has become somewhat of a buzzword lately. It is essentially a company that comes along and changes the way a market has traditionally worked. For instance, Uber and Lyft disrupted the well-established taxi business. Sports wagering is due for a market disruptor to arise. I’d say it’s overdue and there is room for more than just one.
What Makes This Different?
First, the most obvious disruptive force. There is no physical sports book. No large cavernous space with multiple TV feeds. No cocktail waitresses. There are no ticket writers and no conspicuously placed tip jars. It’s all online or in the app. You can sign up, deposit, and withdraw — all without leaving your house. There will always be a place for making sports wagering feel like a social exercise. This alone isn’t a market disruption, we’ve all known sports wagering was headed in this direction for a long time.
However, DraftKings launched with some innovative features that haven’t been tried in the US before. The most notable is an import from European books: the ability to cash out a wager before it’s been fully decided. Much like placing an insurance bet in blackjack, this is very rarely the correct play. In my experience, the cash-out amount offered in relation to the live implied probability of the wager is abysmal. However, this will be a wildly popular feature for recreational bettors who want to secure cash-in-hand rather than sweat the last leg of a parlay. What makes the cash-out option especially bad is that DraftKings offers a plethora of in-game betting. You’ll likely find better odds hedging somewhere in the in-game betting than taking their offer.
Emphasis on In-Game Wagering
Speaking of their in-game betting, you’ll spend half the game just running down all the possible bets. Bettors haven’t seen this level of in-game betting since the early days of CG Technology and their fabled Midas supercomputer. For baseball, you can bet on individual innings and groups of innings (first 3, last 3). You can bet on hits, home runs, and plenty of alternate lines. That’s just the tip of the lines available. They said eventually you’ll be able to bet on individual pitches in the game. Given their background in DFS, I’m actually surprised there are not more in-game player props. Perhaps we’ll see that emerge in the NFL season. Their expansive offering for in-game betting extends to other sports as well. golf, tennis, and soccer matches around the world as they happen all have betting options.
Opinions Matter
If you’ve followed the coverage of the DraftKings launch so far, you’ve probably also seen that they’re employing a rather large vig-spread. It’s been noted in various media that the spread between either side of a wager is higher than the industry average. The narrative being DraftKings, coming from the DFS world where the vig is around 10%, doesn’t want to gamble in the sports betting world where 5% is more accepted. However, if you look closer at the lines, DraftKings is taking positions on games. On many games on the board, they offer the best line available on a certain side. As a price-conscious bettor, I welcome sports books that have an opinion on the game. Sometimes my opinion will differ from their opinion and there is value to be had.
Having sports books that want to march to the beat to their own drum is very beneficial for sports bettors. If DraftKings, or anyone, opted to just flatly straddle the standard lines (-115/-115 when the rest of the world is -110/-110 as an example), I would be among the first to voice my displeasure. However, if they want to offer -104/-117 when the rest of the world is -110/-110, then I applaud their desire to have some skin in the game. For too long, the sports betting industry has moved in lockstep. The line originates at some offshore sports book and gets hammered into place by sharp bettors willing to play it for low limits. Next, the rest of the world puts out the line and quickly reacts anytime their Don Best screen flashes red.
On the subject of Don Best, as sports wagering has expanded recently, the list of sports books listed on the Don Best screen has not. DraftKings is not listed on Don Best, nor is FanDuel. That doesn’t mean they don’t subscribe to Don Best and use the service to monitor the industry. It does mean that they aren’t looking to fully buy into bookmaking socialism. As an advantage player, I want variety. I want options. I welcome this approach even if it means I have to work a little harder to line shop.
Conclusion
Let’s get back to the question I posed in the title of this post: Is DraftKings a market disruptor? None of the different features they’ve introduced so far have individually turned this industry on its ear. However, collectively they point in a direction which could be disruptive. Valuing live betting more than pregame betting. Featuring a large array of derivative bets. Having opinions (and taking positions) on games. These are all steps that could lead to a change in how bookmaking has been traditionally conducted. If DraftKings doesn’t evolve into a market disruptor, there’s still hope. There will be other companies like DraftKings who will look to enter the sports wagering space. It’ll be exciting to see what innovations are in store. Each new thing brings about the question that every advantage player lives to ponder. Can I beat this?
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No, they’re not a market disruptor; they’re responding to a market disruption: the breaking of the de facto monopoly of casino-based sportsbooks in the US.
I find it disappointing that the initial push has been to create high-vig bets that will have the effect of shredding the ploppies. That’s the exact opposite of the tack they should take. They’re trying to be convenience stores–in which you always pay for the convenience with higher prices. What they should do is take advantage of their much lower overhead than brick and mortar sportsbooks and operate at the same margins. With their lower costs, they could offer nickel lines on baseball and football, for example. THAT would draw business away from Nevada.
They’re going with a what-the-market-will-bear approach. I agree with Captain Jack that the positional nature of their lines mitigates that to some degree.
There may be some isolated instances of improved side numbers (usually on underdogs) but they are going to have to get their lines in line with LV and the offshores. I expect that to happen as time goes on.
I don’t think it’s a disruption as much as a natural evolution as legal betting spreads to the biggest market in the world. But it’s good. Great actually! I was afraid legal books in other states were just going to be copies of Vegas books, which pretty much suck. But with increased competition and innovations from new players in the industry, such as DraftKings, who are looking to operate thriving and profitable books, as opposed to Vegas books that are primarily concerned with not losing, the future is looking brighter for serious bettors.
However, the vig issue will be huge throughout the rollouts in states that legalize. Tax and regulation costs, not to mention the greed of sports leagues, will likely push vig higher in order for books to be profitable. As a result, serious bettors will stay offshore. The DK innovations are good, but if the juice is too high, only the sharpest bettors can win, and casual bettors will find they consistently lose can’t win and business will dwindle as losers give it up.
For a book to have opinions on games will be dangerous to their bottom line. I’ve rarely seen bookies with opinions not go broke. There are too many really sharp bettors who are better at making lines than books, and if a book is offering lines no one else has, they may get bombed with sharp action to their detriment. I don’t think DK will have opinions for long, unless they employ the sharpest handicappers in the business.
Thanks Blair…great comments and you’re absolutely right on every point. It’ll be interesting to see how far DraftKings can go with this approach. For what it’s worth, they do have a few employees that have Pinnacle Sports on their resumes.
Another interesting thing DraftKings is planning for the NFL season over on their DFS product is in-game drafting. That seems like it might have a crossover demographic to those who enjoy in-game betting.
Draftkings is out of resorts casino in A.C. , I don’t know yet if it is the same line as the brick & mortar yet. Online books Not allowed to run on their own in NJ . Have to be with a casino/track.
True draftkings and fan duel not on don best screen. Some ML are lower than pinny 5-30 cents. As far as sides they run some specials. Giants vs. jags were -108 both sides. Only one app right now in NJ available last time I checked., playNJ.com is a good site to find out info. & CCC – DOGE of NJ if bettor is having problems with tickets etc. click link on page at the site ” sportsbook wagering info “
Correct, DraftKings has an online license through Resorts. However, they do not have the same lines as Resorts physical sports book which opened last week. Resorts plans to launch an online book and also has made plans to let Pokerstars use the third online license for their BetStars online sports book product.