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a number two seed against number three seed all right we'll give it to duke see this is a very highly scientific process i'm doing here as you can see [Music] for all the buzz around online sports betting you might think that holding shares of gaming companies would be a winning hand but over the last year that's hardly been the case shares of draftkings are down 74 over the past 12 months while rival penn national gaming shares have fallen 63 meanwhile the s p 500 is up 15 over the same period so how is it that one of the most talked about industries which has added millions of new users is seeing such weak stock performance for starters it costs money to be a buzzworthy sector the american gaming association estimates that 45 million americans were granted permission to gamble legally in their state in 2021 and gaming companies have been spending top dollar to attract gamblers to their platforms in an investor day presentation earlier this year draftking said it takes about two to three years for the company to earn profits in various states big states such as new york illinois and colorado have only allowed gambling in recent years so draftkings as a company hasn't been profitable even though states which allowed betting earlier turn to profit will revenue double between 2020 and 2021 losses widened as draftkings faced increasing costs setting up its business in new states and nearly doubling its sales and marketing spending for someone looking to place a bet draftking's offer of a deposit bonus of up to a thousand dollars or a free bet when signing up may be enticing but draftking's investors see their losses mounting from those promos similar dynamics are at play at rival betting sites although penn national gaming has been profitable it was the worst performing stock in the s p 500 in 2021 the company's bid last year to get a betting license in new york wasn't accepted and that hurt the shares and profits in the fourth quarter of 2021 penn national earned 26 cents a share well below analyst estimates of 52 cents states see a revenue opportunity in gaming and that's another cost for gaming companies new york state has one of the highest tax rates for sports betting 51 of gambling revenue since online sports betting launched in the state on january 8th there has been roughly 2 billion dollars wagered in the first month leading to 138 million in gross revenue for betting companies and 70 million dollars for the state's coffers other states have much lower tax rates on gaming revenue in the single digits or low teens but it's worth noting the size of the new york market in just five weeks the state saw more than two million player accounts launched new york became the largest bookmaking market in the country quickly surpassing nevada and new jersey even if other states have better tax treatment the size of their business may not compare to new york here's what my colleague andrew berry has to say about the prospects for betting companies the big problem for the sports gambling industry right now is it's very competitive they're probably about a dozen participants right now they're all fighting for market share and they're spending very heavily on marketing and promotions the regional uh companies are doing better because they have existing land-based uh s often riverboats and other regional properties throughout the country the country which are doing quite well and that gives them significant cash flow and earnings that can basically offset some of the losses that they're taking now as they build out their online sports gambling businesses essentially what's going on is that throughout the stock market investors are really demanding the companies show a path to profitability or are profitable i mean in the tech world and biotech i mean there's been a big sell-off in companies that basically are not profitable investors a year ago were very forgiving they're willingly willing to forgive a lack of profitability for the potential down the road now investors are saying show us the money now at least show us the money relatively soon and the sports gambling industry uh is kind of been a been a victim of that for now i'm going to try my hand at draftkings okay after sitting out the second round of march madness i am ready to play again so we are placing bets on the sweet 16. upping my bet from a dollar a game to two dollars a game i know i'm a high roller so here's who i have winning in the matchups i'm for miami ucla providence st peters houston duke villanova because of philly and gonzaga so we'll see how i did payouts on these games is looking like uh three dollars and eighty one cents on the two dollar bet except for that miami matchup where i could get a whole three dollars and ninety cents so in the next few days we'll see how i did okay so the sweet 16 is behind us now that was a bracket buster for many but you remember i placed my bets on the spread and let's take a look to see at how i did so on the miami game came out ahead ucla they didn't do so hot and i ended up losing providence that was a win for me houston was a win for me duke a win villanova philly girl here a win for me gonzaga did not have it st peters and they prevailed over purdue and that was a bet that i won i don't know how many others had it but feeling pretty good about that because i heard a lot of guys complaining about that after that game so let's take a look at my final tally in my draftkings account you remember i started with a hundred dollars in my account um i did place that bet on the sixers that didn't go my way that took me down to 80. i tried to win some of it back in the first round of march madness uh didn't quite get me completely back but a little bit better and now i have a balance of 89.22 so i'm feeling a bit better let's see what happens next [Music]