DraftKings Could Wring Amazon Prime-esque Benefits from Subscription Plan

DraftKings’ (NASDAQ: DKNG) recently launched subscription plan, available only in New York, is viewed as a better bet than the operator’s flirtation with a surcharge in that state and the platform is drawing comparisons to Amazon Prime.

In a new report, Eilers & Krejcik Gaming (EKG) used Amazon Prime as a comparison to the DraftKings subscription offering, noting the Amazon plan boosts spending among consumers.

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 costs $14.99 per month while the DraftKings New York subscription plan is $20 monthly. Known as DraftKings Sportsbook+, the subscription program appears to aim at bettors that frequently embrace parlays and same-game parlays (SGPs), which are highly profitable for operators. Subscribers in New York can get a maximum boost of up to 100% on parlays of 11or more legs.

DraftKings Subscription Plan Could Face Challenges

DraftKings Sportsbook+ is a unique approach to customer acquisition and retention and one that’s more cost-effective and profitable than traditional spending. It could also face challenges.

“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 delivers fourth-quarter results on Feb. 13 followed by a conference call with analysts on Feb. 14 and those could be opportunities for the gaming company to offer color pertaining to the start of the subscription plan in New York.

DraftKings Subscription Plan Better Than Surcharge

What is clear is that the DraftKings subscription offering is a better idea than the operator’s ill-fated plan to implement a surcharge on winning bets in select high-tax states, including New York. The operator floated that proposal last August and it was quickly ripped by customers, investors, state regulators.

Upon seeing that no competitors would follow suit, DraftKings abandoned the surcharge gambit  and it could wring more benefits from the subscription plan than the tax on winning bets.

“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.