How is DraftKings incentivising employees with the stock under so much pressure?

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Jason Robins insists DraftKings is focusing hard on optimisation as investors continue to grapple with the US sports betting operator’s path to profitability.

“I think there’s been a real strong energy put towards optimising faster or having to do better,” Robins said during a fireside chat with Goldman Sachs’ Stephen Grambling on 6 June.

“That’s what we should be doing at this stage of business and that’s what the environment is demanding we do. Certainly, that’s led to us focusing on efficiencies more than we have been, not just with marketing, but with everything up and down the P&L.”

While much of the focus to date has centred around DraftKings’ above-the-line marketing spend, another major expense relates to staffing costs and stock-based compensation.

The stock closed on 6 June at $13.08 per share, representing a 75% annual decline. Grambling asked Robins how the operator has been able to incentivise employees during this difficult period, with the share price under so much pressure.

DraftKings CEO Jason Robins: “That has led to us focusing on efficiencies more than we have been, not just with marketing, but with everything up and down the P&L.”

“It is definitely something we are paying attention to. People look at us as this company where maybe the multiple has to get back up to where it was for the stock to go up. But no, we just need to actually grow what’s underneath the multiple, and everybody understands that it’s going to be a profit multiple and not a revenue multiple.

“We’re able to say to the team, if you do this and drive these numbers, here’s where we can get back to and get above those multiples.”

Robins said DraftKings was a great place to work for reasons beyond compensation, with the company at the cutting edge of technology in a fast-growing industry where the rules and regulations are changing constantly.

Interestingly, Robins said DraftKings was content with losing its mediocre employees to rivals if it gave the company a better shot at retaining its top talent.

“We are making sure that the compensation is being directed differentially towards top performers and we are getting more aggressive with the bottom performers,” said Robins.

“Those employees who were sort of skating by as B players, we want to make clear that that is not enough anymore. That doesn’t mean mass layoffs, but it might mean we’re going to pay them less than the market and somebody else may recruit them away and we’re going to be okay with that, because we’re going to focus on retaining our top people,” he added.

DraftKings has also had to be wary of increasing staff costs relating to its acquisition of Golden Nugget Online Gaming (GNOG), although that purchase should bring customer acquisition and technology costs down over time.

DraftKings CEO Jason Robins: “Those employees who were sort of skating by as B players, we want to make clear that that is not enough anymore.”

The company will be able to cross-sell sports bettors into the higher margin GNOG iGaming segment while there will be fewer third-party technology expenses once the brand has been migrated onto DraftKings’ proprietary technology platform.

These synergies won’t be immediate, however, which is why the operator has immediately focused on keeping the bloat down with the swift termination of duplicate job roles.

“The first step for us, which largely we already have done, was to look at the headcount and make sure that the duplicate roles were synergised, and that people were allocated into the right parts of the organisation,” said Robins.

“I think the other thing is marketing – we talked about really validating that thesis and showing that we can spend less total in marketing by taking a segment we were not as cost effectively reaching with DraftKings and do so instead with GNOG for more efficient customer acquisition costs.”

About the author

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Jake Evans

Jake Evans is an NCTJ-accredited journalist and editor who has covered the online gaming and sports betting industry since 2017. He is the managing editor of iGaming NEXT and has previously worked in both content and data for EGR, Stats Perform and Football Radar.

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