Posted on: Feb 22, 2022 at 7:30 am.
Last updated on: February 22, 2022, 07:30.
As Caesars Entertainment (NASDAQ:CZR) gains more market share and tries to stem associated losses, it is reducing its traditional media spend to attract customers to its burgeoning online sportsbook business.
CEO Tom Reeg made the announcement earlier today in a conference call with analysts to discuss the gaming company’s fourth-quarter results. Noting that he “is not one to spend unnecessarily,” the Caesars boss said the company had achieved its sports betting goals and it was now time to scale back spending.
You will see that we are drastically cutting our spending on traditional media, effective immediately. We have achieved what we set out to do,” he said. “We set out to become a major player and it has happened a lot quicker than we thought.”
Reeg’s comments come as Wall Street continues to worry about the money online sportsbooks spend, both in terms of advertising and advertising spend, and how that spending will limit operators’ timelines to profitability in the nascent extend understood industry.
Good idea to call it back
Reeg reiterated that Caesars Sportsbook will post a $1 billion loss this year on an earnings before interest, tax, depreciation and amortization (EBITDA) basis. This is largely due to recent launches in Louisiana and New York, and the chief executive notes that the current quarter should represent the peak of the sportsbook unit’s losses as the operator works towards reaching profitability in late 2023.
Citing January data for the states reported so far, the Caesars boss adds that the operator has a 21 percent share of the US sports betting market, with a small share of the large markets of Illinois and Pennsylvania, where the gaming company has yet to actively advertise its digital offerings.
With Caesars cobbled together impressive market shares and investors increasingly demanding profitability from sports betting, now could be an ideal time for the company to scale back its advertising, which isn’t resonating well with some audiences. Some viewers don’t like the spots starring actor/comedian JB Smoove Patton Oswalt.
“So we are where we need to be. You will see our commercials largely disappear from your screens,” adds Reeg. “There’s some media spending that we couldn’t avoid in some states when we come to March Madness. But we will largely steer clear of traditional media except in new launch states from here and launch dates in both iGaming and esports.”
Strip asset sale
The chief executive reiterated that Caesars would sell one of its Las Vegas Strip venues earlier this year, but didn’t specify what property might be on the block. However, he reiterated the company’s previous agreements with VICI Properties (NYSE:VICI).
VICI has first refusal rights to acquire Flamingo Las Vegas, Bally’s Las Vegas, Paris Las Vegas and Planet Hollywood Resort & Casino. Should Caesars decide to sell another Sin City asset, VICI has first refusal rights to purchase one of the first group’s remainders and the LINQ Hotel & Casino.
Analysts estimate that Caesars could bring in as much as $3 billion by selling one of its properties on the Strip.