Caesars Entertainment to Cut Advertising Expenses Following Q4 Earnings Call
Caesars Sportsbook commercials have become a staple of any sports viewing experience with high-profile cameos from the Manning brothers and even Halle Berry alongside JB Smoove as the Roman dictator. However, in Tuesday’s fourth-quarter earnings call, Caesars Entertainment CEO Tom Reeg told analysts that Caesars would be curtailing its spending on those commercials considerably.
Caesars $1 Billion Marketing Plan
In April 2021, Caesars acquired William Hill, the UK-based bookmaker, with plans to become a significant player in the rapidly growing United States sports betting industry. The first step was announcing a $1 billion advertising campaign to expand its online sports betting and iGaming businesses by focusing on customer acquisition and retention.
On February 13, Caesars aired its first-ever Super Bowl commercial featuring JB Smoove, Halle Berry, and several Manning family members. However, it’s now unlikely we see the Mannings and Smoove on the national stage, at least for a while. That may not be as true in new markets where Caesars plans to launch, such as Maryland and Ohio.
Reeg said on the fourth-quarter earnings call that Caesars has “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 also said that he’s not one to “spend any money needlessly,” and with their strong market presence, Caesars can put marketing on the backburner for the time being.
Huge Success in New York Market
The launch of mobile sports betting in New York has been well-chronicled as the state has quickly become the biggest market in the country. With over $2.4 billion in wagers placed in the first five weeks of operation, New York has hit numbers in that span that some states won’t ever reach in a full calendar year. Caesars Sportsbook has been the leader in the New York market with numbers that have far exceeded expectations.
Over just the first ten days of operation, Caesars generated online gross gaming revenue of about $22 million on over $250 million in total wagers placed. Overall, Caesars has already handled over $800 million in online sports wagers with gross gaming revenue totaling over $70.5 million. The sportsbook’s 100% deposit match up to $3,000 made it stand out in the new market, but that offer has been decreased to $1,500 now that customer acquisition has been achieved at such a high level.
Caesars Sportsbook’s Impressive Results
Caesars feels confident in cutting advertising spending because of the significant market share the company has established. As of January 31, Caesars maintained a 21% share of the United States sports betting market in states where its platform is currently live, according to Reeg. Over the fourth quarter of 2021, Caesars generated net revenue of $2.6 billion, increasing over 62% year-over-year.
Caesars reported an adjusted loss per share of $1.14, greater than the Zacks Consensus Estimate of a loss of 81 cents but still reduced from $1.70 per share in Q4 2020. Net revenue also increased in the Caesars Digital segment from $37 million in Q4 2020 to $116 million in Q4 2021. That’s more than double the amount, making it very likely that Caesars could have a huge financial performance in 2022 as it looks to cut expenses.
After the announcement of reduced ad spending in 2022, Caesars’ stock (CZR) surged by about 5% in pre-market trading on Wednesday before leveling out throughout the day. However, the price is down by about 34.4% from its 52-week high. With revenue expected to increase in 2022, however, the stock price could reach its 52-week high of $119 by the end of this year.
Other sportsbooks have seen their fourth-quarter reports fall below expectations due to staggering advertising spending. DraftKings spent $278 million on customer acquisition through sales and marketing in the fourth quarter alone, leading its stock to fall considerably last week. With Caesars setting the path forward for less spending on marketing, other sportsbooks may soon follow suit in 2022.