alt Hacker NewsThis is backwards. Casinos offer huge cross subsidization opportunities like getting people to spend lots of money in clubs and bars or gamble on games like slots that have a huge house edge while apps have near zero cross subsidization opportunities and massive overhead. An app running at draftkings scale costs a lot to operate.
I’ve believed for a long time and continue to that the math on these businesses just doesn’t work. Eventually they won’t exist because they aren’t profitable.
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DraftKings is profitable as of a few months ago.
>gamble on games like slots that have a huge house edge
This is what they're working on next: legalization of online casino-style games. They've already got seven states. Profit margins will only go up.
> I’ve believed for a long time and continue to that the math on these businesses just doesn’t work.
Particularly for Las Vegas, the business may not be what you think it is. Vegas is, amongst other things, a global money laundrette.
Bookmakers can always lay the odds so that there’s equal money on each side. Then they’re just taking a 10% rake with zero risk. If they start getting killed by pros they’ll just move to the low risk strategy.
They've existed in other jurisdictions for decades and seem to be doing very well financially.
Fair enough, I'm not knowledgeable about casino economics. Focussing only on the gambling, however, I'm scpetical they need whales.
And if you keep pulling on that thread: are casinos only profitable because they’re laundering money?
Its not a matter of belief its a matter of math.
Their net income is either positive or negative
>> I’ve believed for a long time and continue to that the math on these businesses just doesn’t work.
These companies and their apps feels like they're framing this as a social media app. Get together with your friends, play against each other. Its very, very much like fantasy football which generates billions in revenue every year. To me, those are the people and the money they're aiming for - not the casino betters.
I would assume this is the early stages of any market. You have a lot of companies jumping into the fray and trying to make it work. Then as time goes on, like you said, the money just won't work for them and at which point you'll see the standard consolidation where the companies who figure it out will still be there, possibly buy up some smaller companies and so on and so forth.
It will be interesting to see if companies like Draft Kings and Fan Duel can outlast some of the bigger players coming in like BetMGM and other casino backed companies. I don't think we'll be seeing "Bob's Bets" app anytime soon, which would support your idea that this is most likely a loss leader for these casino's, and what's the threshold where they will pull out?