Digital lottery supplier Jackpocket has dominated the online lottery ticket market for the last several years, so when DraftKings, one of the leading sports betting companies in the U.S., agreed to buy the company last week, it seemed to be a marriage made in heaven. DraftKings will pay $750 million for Jackpocket—$412 million in cash and $337.5 million in DraftKings stock.
Jason Robbins, the CEO of DraftKings, says the deal could drive up to an additional $340 million in incremental revenue in the 2026 fiscal year.
“We are very excited to enter the rapidly growing US digital lottery vertical with our acquisition of Jackpocket,” he said. “This transaction will create significant value for DraftKings not only by giving our customers another differentiated product to enjoy but also by improving our overall marketing efficiency similar to how our daily fantasy sports database created an advantage for DraftKings in OSB (online sports betting) and iGaming.”
While Jackpocket served as a digital courier service for lottery buyers, legal in 16 states, Puerto Rico and the District of Columbia, it recently expanded into online casino gaming in New Jersey.
“Together with DraftKings, we will be able to bring tremendous value to our customer base as we advance our mission to create a more convenient, fun, and responsible way to take part in the lottery,” said Jackpocket CEO Peter Sullivan. “DraftKings’ broad footprint and exceptional mobile products present an opportunity to meaningfully expand the digital lottery vertical, and we could not be more excited to come together with DraftKings.”
Earlier last week, just minutes after the conclusion of the Super Bowl, DraftKings also announced that it had reached a multi-year deal with Barstool Sports, the company recently jettisoned by Penn Entertainment, in favor of a deal with ESPN.
Penn, which spent $388 million to buy Barstool, sold it back to founder David Portnoy for $1. While there will be no Barstool-branded sports books, the company will quote DraftKings odds whenever sports betting is mentioned. Financial details of the deal were not announced.
“DraftKings has a portfolio of advertising deals and our exclusive agreement with Barstool represents another valuable, high-reach addition to our marketing mix,” DraftKings CMO Stephanie Sherman said in a statement.
Portnoy was prohibited via non-compete from getting back into the sports betting business until the end of the NFL season, but betting has always been a part of Barstool since its launch in 2003. DraftKings odds were always quoted in those early days.
“We’re back to our roots,” Portnoy said in a Twitter post. “DraftKings is once again the exclusive betting partner of Barstool Sports.”
As if those two deals weren’t enough positives for DraftKings, a stellar earnings report threatened to overshadow them.
In the fourth quarter of 2023, DraftKings posted revenue of $1.23 billion, a 44 percent increase over the same quarter in 2022. Revenue for 2023 reached $3.66 billion compared to $2.24 billion in 2022, another 44 percent increase. These increases, however, were not enough to make the company profitable, but the losses have shrunk substantially.
Fourth-quarter losses in 2023 equaled $44.6 million compared to $242.7 million in Q4 2022, with an annual loss of $802.1 million in 2023 compared to a net loss of $1.38 billion in 2022.
During the earnings call, Robbins discussed the Jackpocket deal and why it works for DraftKings. He compared it to the company’s daily fantasy sports business.
“It’s not something that is going to drive top-line growth,” Robins said. “That’s really the OSB and iGaming. It’s more a vehicle to be able to continue to acquire customers and engage customers that we don’t have yet.”
Analysts were excited about the acquisition and the earnings results.
“The results and guidance, in addition to their recently announced acquisition of Jackpocket, further our view that DKNG remains secure in its leadership role in the U.S. digital,” said David Katz of Jefferies. “Apart from the possibility of further state legalization, we believe business execution improvement is ample support for estimates progressing higher and the continued positive momentum in the shares.”
