Caesars Sportsbook over the last six weeks featuring cameos from the likes of the Manning brothers, Halle Berry, and Curb Your Enthusiasm actor JB Smoove as the eponymous Roman dictator.
Concerned, however, that spending on sports betting advertising is about to spiral out of control, Caesars Entertainment CEO Tom Reeg is ready to pivot to a new strategy for promoting the online sportsbook division. Addressing Wall Street analysts on Tuesday’s 2021 fourth-quarter earnings call, Reeg signaled that Caesars will curtail its spending on sports betting commercials considerably.
As of Jan. 31, Caesars maintained a 21% share of the U.S. sports betting market in the states that the company operates in, Reeg noted. In New York, Caesars has already handled more than $800 million in online sports wagers, translating to online gross gaming revenue (GGR) of $70.5 million.
Just as you were getting used to those Caesars billboards: “You are going to see us dramatically curtail our traditional media spend effectively immediately,” Caesars Chief Executive Officer Tom Reeg told investors on a conference call Tuesday. https://t.co/4ahCDyNdj6
— Route 40 (@Route_40) February 23, 2022
Shortly after the rebrand of William Hill U.S. to Caesars Sportsbook last year, Caesars unleashed an ambitious plan to spend $1 billion on a new digital segment in an effort to expand its online sports betting and iGaming businesses. But after the quick start in New York and several other states, Reeg is now looking to rein in ad spending.
“We have accomplished what we set out to do. We set out to become a significant player, and it’s happened significantly quicker than we thought,” Reeg said on the call. “I think most of you know me as someone who’s not one to spend any money needlessly.”
According to Caesars earnings call someone pointed the finger at marketing after all. No more JB Smoove/Manning brothers. https://t.co/yq0rdqkVGa
— Captain Jack Andrews (@capjack2000) February 22, 2022
Staggering demand in New York 4u4x5q
Last month, Caesars raced out to the lead in New York, producing an online GGR of around $22 million on more than $250 million in handle over the state’s first 10 days of operations. While Caesars has since been overtaken by promotion, will now match a customer’s first deposit with a free bet of up to $1,500.
Reeg took exception to criticism that the initial promotion artificially increased Caesars’ handle over the first several weeks of mobile sports betting in New York. As FanDuel overtook Caesars for the lead in handle, there were some indications that customers opened an at Caesars to take advantage of the promotion before wagering more regularly at another site. Reeg attempted to dispel that notion with a metric that showed that customers deposited an average amount of $450 when opening a New York .
“I know there was a lot of focus on our $3,000 deposit match in New York and the thought that, ‘Gee, I could just put in $3,000, make a couple of easy bets, and withdraw my money,'” Reeg said. “Our results in New York were not driven by a lot of $3,000 deposits responding to our offer. It was hundreds of thousands of smaller customers that came to our site.”
Amid an intense battle among top sportsbooks to acquire new customers, sales and marketing spending has ballooned throughout the industry. Last week, WynnBET, its sports betting division, at a considerable discount to last year’s $3.2 billion valuation.
Caesars CEO Tom Reeg on US online sports betting: "That leads me to digital, where I know the market is struggling. Investors are struggling with it. Can this be a profitable business? We've gone from ever increasing bullishness to unlimited bearishness at this point." $CZR
— Jake Evans (@JakeACEvans) February 23, 2022
In total, Caesars roughly doubled the company’s expectations for New York betting volumes and doubled the company’s projections for statewide market share during the initial launch phase. The company’s New York segment has become so large that it is nearly equal to the rest of Caesars Digital’s online business from every other state combined, Reeg noted. But since Caesars hit a peak EBITDA loss over the quarter, while hitting its targets for customer acquisition in sports betting, the company will scale back levels on ad spending.
On a long-term basis, Caesars still expects to lose in excess of $1 billion on its digital ramp-up, a figure Truist Securities has modeled at $1.4 billion. But Caesars now anticipates turning a profit in the fourth quarter of 2023 on the basis of a strong football season. Truist Securities analyst Barry Jonas is conservatively lowering Caesars’ 2022 EBITDAR forecasts, in part due to the shift in digital spending. Jonas, though, is leaving his 2023 estimates largely flat.
Sending the Mannings to the sideline 6e6372
On Feb. 13, Caesars aired its first-ever Super Bowl commercial, a spot that featured Smoove, Berry, and several of the Manning family. The average cost per 30-second commercial during Super Bowl LVI came in at $6.5 million, with some spots going for as much as $7 million.
With the reduction in ad spending, viewers will likely see few, if any, spots with the Mannings during March Madness. It is unclear if Caesars will shelve the ad campaign permanently. Based on Reeg’s comments on Tuesday’s call, there is a chance the commercials could ramp up again when Caesars launches online sports betting in Ohio.
Caesars CEO Tom Reeg says the company is greatly curtailing its media spending for sports betting. The ads will largely come off the air. Reeg said the company achieved its goal.
No more Mannings and JB Smoove for a while. @CaesarsSports @TheNVIndy— Howard Stutz (@howardstutz) February 22, 2022
Over the fourth quarter of 2021, Caesars had GAAP net revenues of $2.6 billion, an increase of more than 62% compared with $1.6 billion for the comparable prior-year period. At the same time, Caesars reported a GAAP net loss of $434 million, in comparison with a net loss of $555 million for the year-ago quarter in 2020. Although Caesars topped analysts’ revenue expectations of $2.5 billion for the quarter, the company fell short of earnings expectations for the three-month period ended Dec. 31, 2021.
Caesars reported a quarterly loss of -$2.03 per share, which translated to -$1.14 per share minus one-time adjustments for various costs. Wall Street analysts, according to consensus estimates from Zack’s Investment Research, expected a quarterly loss of -$0.81 per share.
Shares in Caesars surged more than 5% in pre-market trading on Wednesday to $80.50 on the company’s plans for reduced ad spending. While Caesars is down considerably from its 52-week high of $119 a share, it has also rebounded from last month’s low of $68, the company’s lowest level over the last year.
