DraftKings' Reignmakers Adding to Profitability and Income.
DraftKings' (NASDAQ: DKNG) Reignmakers, a fantasy sports game driven by non-fungible tokens (NFTs), is a prime illustration of blockchain gaming and could boost the company's revenues and profits.
This innovative platform, introduced about two years ago by the Boston-based sportsbook operator, enables users to accumulate NFT player cards through auctions, pack drops, and secondary market transactions. These cards are utilized in NFL, PGA Tour, and UFC fantasy contests throughout the respective seasons.
Each player card represents an athlete, scoring points based on their statistical performance in specific events or games, as per DraftKings. "Within the football season, there's a large variety of fantasy contests posted in the Reignmakers lobby for participants holding both a substantial and a minimal collection of player cards," they add.
Reignmakers operates on the Polygon blockchain and is yielding results for the operator, possibly not receiving the recognition it merits in the investment community. Sigel and Wood from VanEck's digital assets team pointed out that Reignmakers brought in $52 million in sales in its initial year, making up 2% of DraftKings' total revenue over that period.
They forecast that within the following four quarters, the NFT-based fantasy game would generate revenue over $70 million, or more than 3% of DraftKings' overall revenue, and up to 5% of the entire gaming firm's profits.
Reignmakers Tapped a Receptive Audience
An NFT is a piece of digital data stored on the blockchain. These tokens can be applied to various digitized items, such as audio and video files or pictures.
With Reignmakers, DraftKings harnesses its significant customer base of devoted daily fantasy sports (DFS) players, who are not only sports card collectors but also crypto aficionados. This nurtures multiple benefits for the operator in this novel kind of fantasy sports. Sigel and Wood further revealed that DraftKings targeted fantasy sports, implying potential savings in creating Reignmakers as the company didn't need to develop new, potentially pricey intellectual property.
"The success of Reignmakers demonstrates the benefits of minimizing blockchain components within a game, allowing developers to tap into larger audiences while optimizing economic aspects, including marketplace charges," according to VanEck. The experts also note that the company didn't need to create new intellectual property.
Marketplace and Reignmakers Deserve More Attention
Although the DraftKings investment thesis primarily relates to online sports betting and mobile gaming, the NFT marketplace and Reignmakers should receive more credit than they currently do with regard to these businesses.
As noted by Sigel and Wood, Reignmakers ranked sixth in NFT sales for the 30 days ending August 18. Moreover, DraftKings Marketplace took the lead in terms of NFT fees generated.
"Our base case predicts that Reignmakers' revenue could contribute around 3% to DKNG's revenue," said the experts. "Regarding the cost, we can't access that information, but we assume a 90% margin, given the negligible production costs and reduced customer acquisition costs through cross-selling opportunities. In our base case, we estimate that the profits from the Reignmakers business segment can heighten DKNG's EPS by about $0.15, which equates to 5% of their 2022 EPS of -$3.16."
