DraftKings Could Wring Amazon Prime-esque Benefits from Subscription Plan
DraftKings’ (NASDAQ: DKNG) newly introduced subscription plan, currently exclusive to New York, is seen as a more favorable option than the company’s earlier consideration of a surcharge in that region, with the service being likened to Amazon Prime.
In a recent report, Eilers & Krejcik Gaming (EKG) compared the DraftKings subscription service to Amazon Prime, pointing out that the Amazon plan increases consumer spending.
"On the subscription model itself, we lean positive, given the potential for an Amazon Prime-style effect. Amazon Prime members in the United States spend $1,400 per year on Amazon, while non-Prime members spend $600 per year,” according to the research firm.
Amazon Prime is priced at $14.99 each month, whereas the DraftKings New York subscription plan is $20 per month. Referred to as DraftKings Sportsbook+, the subscription service seems designed for bettors who often engage in parlays and same-game parlays (SGPs), which yield significant profits for operators. Subscribers in New York can receive a maximum enhancement of up to 100% on parlays featuring 11 or more legs.
DraftKings Subscription Model May Encounter Obstacles
DraftKings Sportsbook+ offers a distinctive method for acquiring and retaining customers that is more cost-efficient and profitable compared to conventional spending. It might also encounter difficulties.
EKG observations indicate that the concept does not possess a significant competitive edge, implying that any rival could replicate the idea if they notice its growing popularity in New York — the largest sports betting market in the nation. Moreover, it remains uncertain whether all state regulators will endorse the model.
“One question we still have, though, is how arguably the most activist regulator—the Massachusetts Gaming Commission—will receive this proposal if and when it arrives in the Bay State,” adds the reseravh firm. “Specifically, we wonder whether the subscription model, which may promote higher levels of customer spend via a sunk cost effect, will raise hackles related to operators’ duties to promote responsible gambling.”
DraftKings reports its fourth-quarter results on February 13, followed by a conference call with analysts on February 14. These could provide the gaming company a chance to elaborate on the launch of the subscription plan in New York.
DraftKings Subscription Option Superior to Extra Charge
It is evident that the DraftKings subscription model is a superior option compared to the operator's unsuccessful strategy to impose a surcharge on winning bets in certain high-tax states, like New York. The operator proposed that idea last August, and it was swiftly criticized by customers, investors, and state regulators.
Noticing that no rivals would replicate the strategy, DraftKings dropped the surcharge plan, as it could gain greater advantages from the subscription service than the tax on victorious wagers.
“The New York State Gaming Commission (NYSGC) said subscription fees would not be taxed as wagering revenue, though wagers placed by subscribers will still be taxed at the state’s infamous 51% gross gaming revenue (GGR) rate,” concludes EKG.