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Online gambling in the US: companies undaunted by losses alarming investors

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Online gambling in the US: companies undaunted by losses alarming investors.

All the enthusiastic players on the cold streak claim that luck will change quickly. But what if the odds are against you? DraftKings was once the hub for enthusiasts who crossed paths at sports games and special-purpose company acquisitions. Its share has cooled down and has fallen 44% in the last three months. In the most recent quarter, adjusted operating loss was $ 550 million.

Online gambling and betting companies have prioritized market share over profits. DraftKings commercials are scattered on American television. The well-funded copycat offers its own expensive promotions to build loyalty.

The two companies claim that marketing costs will drop in a few years and the competitive environment will streamline. The future does not seem near or reliable.

DraftKings has blamed the third-quarter explosion on temporary factors. First, Panther beat home more often than expected earlier in the season for the National Soccer League, America’s most popular sport. Second, the legalization of sports betting in the United States exceeds expectations. This, in turn, requires more promotional activity. According to the company, fourth-quarter losses should be cut in half.

The company expects to generate $ 5.4 billion in revenue between the sports betting market and online casino units, achieving $ 1.7 billion in Ebitda annually, and at the same time capturing a quarter of the sports betting market. However, the market is crowded. New York has approved nine different betting platforms.

The main rivals include major casinos like Caesars Entertainment and MGM, which have strong brands and customer relationships. Both can use the profits from land-based casinos to subsidize online expansion. Caesars expects cumulative losses in the digital business to be $ 1 billion. Ultimately, “cash on cash” returns are said to exceed 50%.

DraftKings investors have bought an optimistic outlook for tens of billions of “total addressable markets” with the advent of a stable oligopoly. It can still develop. However, sponsors must spend more cash to increase the likelihood that an entry will be paid.

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