esports betting shows a ‘pent-up demand’ for sports

Sports bettors turned to video games after sporting events across the spectrum were canceled due to the coronavirus pandemic, DraftKings CEO Jason Robins told CNBC’s Jim Cramer Friday.

“Esports was really small for us until, you know, about 2 months ago,” Robins said in a “Mad Money” interview. “Really, it was the only thing for a little while that people were still playing.”

The NBA season was cut short in March as multiple players contracted Covid-19, the disease caused by a coronavirus, as the virus began to sweep across the country. Soon after the MLB, whose season typically kicks off in late March and early April, postponed Opening Day, and the NHL put its own season on hold as states limited public gatherings in efforts to get a handle on the novel virus.

“Esports has stuck,” Robins explained. “It’s been a huge growth area over the last couple months for us and [it’s] hard to say what it will look like once the traditional sports are back, but I think a lot of people are finding it fun.”

Players like DraftKings and Penn National in the budding sports betting industry took a hit and were forced to improvise operations because of the cancellations. DraftKings, which became public in April during the outbreak’s height in the U.S., pivoted to creating more web content and supporting a budding industry in competitive gaming.

DraftKings did record numbers during the NFL Draft last month and strong results during Ultimate Fighting Championship events, Robins said. The company is anticipating the return of Nascar and other sports in the near future as states ease quarantine orders.

“I think what it shows you is there’s a lot of pent-up demand for sports,” Robins said. “People are hungry for sports to come back.”

Illinois, Michigan, Tennessee and Virginia have legalized online sports betting, while more than a dozen other states are mulling legislation.

On an earnings call earlier that day, Robins said the intersection of the digital sports entertainment and gaming arenas has an addressable market projected to be at least $30 billion in the U.S. That includes online sports betting, fantasy sports and iGaming, he said.

He added that esports and other budding betting markets could grow exponentially. In the midst of stay-at-home orders across the country, DraftKings developed engaging content for esports events, including simulated Nascar and Madden football games. People are also placing bets on Korean baseball, which has made a return in a dearth of live events.

It’s a matter of getting customers to try something new, Robins told Cramer.

“We actually just added live streaming for table tennis so people can watch it now while they’re betting on it,” he said.

DraftKings posted a surprise in its first-quarter report, which ended March 31, since coming public. The digital company registered 2 cents of earnings per share on $113 million in revenue. Wall Street estimates pegged the company at a loss of 15 cents per share and $104 million in revenue, according to FactSet. Net revenue grew 30% year over year, the company said in a press release.

The company also said it does not expect that Covid-19 will impact plans it has for 2021 or its long-term vision.

Since coming public April 24, DraftKing shares have surged more than 42%. The stock spiked more than 15% to $29.23 Friday after the company reported earnings that morning.

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