Caesars Turns Focus To Sportsbook Upgrades After Slashing Ad Spend

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Caesars will continue its pullback of online sports betting marketing spend, but executives feel there is still market share growth to be found.

Last year, the company relaunched its Caesars Sportsbook and secured 15% overall online US sports betting market share, according to Tuesday’s second-quarter Caesars (CZR) earnings call. CEO Tom Reeg said the company will pull back planned ad spend dollars heading into football season but expects to maintain, or even grow, its market share.

“If you’re watching TV, part of our ESPN deal includes advertising buys. So you’ll see some commercials largely on ESPN, and you’ll see some local ads that run locally as well,” Reeg said. “I mean, compared to last fall, it’s going to seem like we’ve left the air entirely, but you will run into a commercial or two depending on where you are and what you’re watching.”

Overall, Caesars revenue climbed 10.6% to $2.82 billion for the quarter, including a 29.9% increase in its digital revenue, up to $152 million. With the company posting an overall net loss of $123 million, here are some key takeaways about its sports betting business.

Caesars ad spend drops, confidence stays high

Caesars first announced it was done with its big spending days for online gaming in February. According to Reeg, that plan is holding true.

He said the company maintains a 15% nationwide handle share, with Caesars active in 25 jurisdictions, including 18 online states. Caesars is working on Ohio and Maryland online launches, but there was no mention of plans for upcoming markets Kansas or Massachusetts on the call.

“Our unaided awareness got to a point where we were comfortable pulling back on advertising spend,” Reeg said. “So we have pulled a planned hundreds of millions of dollars that we were planning to spend. We don’t think our competitors have followed us. They’re still spending and our share has been stable.”

Despite Reeg’s comments, recent state revenue reports show the sportsbook is leaking some handle share:

Sportsbook market share

Caesars Sportsbook profitability coming?

Reeg noted digital losses decreased month-over-month all year until almost breaking even in July. He expects those losses to increase again heading into football season.

Still, he does not believe digital losses for the year will reach the previously forecasted $1.5 billion. Digital losses for this quarter were $69 million.

“Given that we damn near turned profitable in July, I’m extremely confident that we will be a profitable business at least by the fourth quarter of ’23,” Reeg said. “We’ve proved we could carve out a significant piece of the business. Now we want to prove we can make a profit and then we’ll talk about fighting for additional share on the other side of that.

“But we are extraordinarily pleased with where digital is in a short period of time and really excited about this football season, where we come in with our legs under us rather than running as fast as we can to keep up.”

California sticky spot for Caesars Sportsbook

Despite many of its competitors supporting a mobile sports betting ballot initiative in California, Caesars remains neutral. Tribal relationships across the US mean Caesars is not against the retail-only ballot initiative backed by California tribes, Reeg said.

“We have a decade-long relationship with a number of tribes across the country where we’ve been managing their assets through multiple contract renewals,” Reeg said. “And we don’t want to be in opposition to tribal interest when we’re their partners. So we’ve remained neutral in California throughout.

“You should expect that to be the case in any state where tribes are at odds with the commercial interest.”

Emphasis on product as expansion continues

EVP Eric Hession said all Caesars-branded apps will be on the Liberty tech stack by the end of the year. He admitted the company has lacked from a tech perspective and will focus on enhancements for the rest of the year.

Hession said several product improvements will be coming, including a focus on cash-out speed, parlays and alternative lines.

“We will continue to remain focused on growth through new state launches, investing from a tech perspective on product enhancements and remaining acutely focused on our expenses,” Hession said.

William Hill helps pay down debt

In the past 18 months, Caesars has eliminated $2 billion in debt, according to information from the call.

The most recent reduction was $730 million from the William Hill international business sale.

Caesars completed its sale of the William Hill international business to 888 in July. Caesars purchased all of William Hill in 2021, in an effort to improve its sports betting operations.