MBA 649
5 May 2020
Introduction and Main Issue:
DraftKings Inc., an online-gambling and fantasy sports company, went public through a blank-
check company merger. The deal valued DraftKings at over $6 billion and was completed on
April 23, 2020 (Cherney). DraftKings merged with Diamond Eagle Acquisition and SBTech.
Diamond Eagle Acquisition is a special purpose acquisition company, or SPAC. SBTech is a
business-to-business technology and trading services provider for gaming companies. Diamond
Eagle acquired DraftKings and SBTech, changed its name to DraftKings, got a new trading
ticker, and re-incorporated as a Nevada company. The new DraftKings is now the only vertically
integrated American sports betting and online gambling company (Duprey).
The purpose of this paper is to develop an analysis of DraftKings and the industry in which it
operates in order to evaluate their strategic choices and offer potential alternatives. The company
operates in multiple industries, but this paper concentrates on the online sports betting industry.
The focus will be on their recent move to take the company public.
Background:
Founded in 2012, DraftKings Inc. entered the daily fantasy sports industry. The company allows
users to compete against each other for cash prizes. Users can compete in fantasy services for
baseball, football, soccer, golf, mixed martial arts, and other sports (Gambardella). In 2018, the
US Supreme Court struck down an Act which had prevented states from allowing sports betting.
DraftKings quickly entered the sports-gambling business through a phone application and
website. They also added online versions of casino games to their offerings, in states that allow
it. The company now operates in daily fantasy sports, sports betting, and casino gambling
(Cherney).
DraftKings’ vision is to “build the best, most trusted, and most customer-centric destination for
skin-in-the game fans; to develop the most innovative and entertaining real money products and
offers; to forever transform the manner in which people experience sports; to be a fully vertically
integrated sports betting operator.” They refer to activities that involve users winning or losing
money based on the outcome of a sporting event as “skin–in–the game”. Their mission is to
“responsibly create the world’s favorite games and betting experiences” because “life’s more
alive with skin in the game” (“Who We Are”).
External Environment Analysis:
Political: The nature of DraftKings’ business has led to some legal issues for the company. Daily
fantasy sports are considered a game of skill in most states, thus allowing DraftKings to operate
that portion of its business in all states except Arizona, Montana, Louisiana, Iowa, and
Washington. These states either have more strict tests of what constitutes gambling or have
specific laws outlawing paid fantasy sports (Hohler). The sports gambling portion of DraftKings’
operations is currently only allowed in New Jersey, Indiana, Pennsylvania, West Virginia,
Colorado, and New Hampshire (“Where Is Sports Betting Legal?”).
Economic: The sports betting world has been challenged by the ongoing global pandemic.
Despite nearly all sporting events being canceled, DraftKings has tried to satisfy their user-base’s
desire to continue playing and betting. They allow users to bet on unique events, such as the NFL
draft and table tennis in Eastern Europe (Sprung).
Socio-Cultural: The challenge for DraftKings in this area is the persistence among some portion
of society that gambling is an unsavory activity. The prevalence of gambling addiction is also
something DraftKings needs to address. Alternatively, there is a shift among some portion of
society that sees online sports betting as a way to enhance their enjoyment of sports and
entertainment.
Technological: Technology has a high degree of impact on DraftKings. Over 10 million
registered players interact with DraftKings’ software and place billions of dollars in wagers
every year. DraftKings employs over 1000 people, many of whom are technical experts who
constantly work to manage and improve the technology that allows this high volume of
transactions. Further, they rely on software that creates appropriate betting lines and ensures
profitability, all while preventing abuse of the system by players (Feldman).
