The owner of Caesars Sportsbook says it is pivoting the business towards profitability and reducing and streamlining the bonuses offered to bettors along the way.
Caesars Entertainment Inc. has pumped millions of dollars into building its online sports betting brand, with those marketing and promotional expenses translating into stiff losses for the Nevada-based company.
In reporting its second-quarter results on Tuesday, though, Caesars executives said their digital-betting business is being whipped into shape.
“Our strong gains and unaided brand awareness have allowed us to scale back our brand-related marketing spend,” said Eric Hession, co-president of Caesars Digital, during a conference call for analysts and investors. “That reduction, in combination with a reduced promotional investment environment, translated into steadily improving results throughout the quarter.”
Hession also said Caesars expects to add "significant product enhancements" in the second half of 2022, including new parlay and alternative-line offerings.
“In addition, our marketing teams will have new and enhanced ways to deliver offers and promotions to customers, ensuring that they receive them in the most cost-effective way,” he said.
No followers?
The comments come as sports-betting companies are growing more concerned about showing stock markets their businesses can turn a profit. There is talk now of operators trimming their offerings of free bets and other bonuses as they try to achieve that profitability.
Hession’s comments also came after Caesars reported net revenues of approximately $2.8 billion for the second quarter, which ended June 30, up from $2.5 billion a year ago.
Caesars also booked a net loss of $123 million for the three months, after reporting a profit of $71 million in Q2 of 2021. Caesars Digital contributed a $116-million loss to that bottom line, which widened from the $22-million loss the business unit reported a year earlier.
Still, net revenues from Caesars Digital almost doubled for the second quarter, rising to $152 million compared to $86 million a year earlier.
Another bright spot for Caesars was its Las Vegas business, as the company's casinos and hotels generated net income of $313 million for the second quarter, up from $184 million in 2021.
“Operating results in our digital segment improved dramatically versus the first quarter and we are optimistic regarding trends in this segment for the balance of the year,” Caesars Entertainment CEO Tom Reeg said in a press release.
During the conference call, Reeg noted that the company has managed to grab about 15% of the sports-betting handle across the U.S., and, as a result, has dropped plans to spend hundreds of millions of dollars more on advertising. Caesars sees itself as blazing a trail with its cost-cutting as well.
“We don't think our competitors have followed us, we think they're still spending,” Reeg said. “And our share has been stable.”
Pigskin before profits
However, Reeg also said that they expect to "see some modest losses return" during the upcoming college and NFL football seasons, as Caesars Sportsbook will again join the rush to acquire customers. Even then, though, the CEO said they expect the business to be profitable by the fourth quarter of 2023 at the latest.
Caesars previously predicted it would burn around $1.5 billion in adjusted earnings to build up its digital-betting business, but Reeg said Tuesday that it didn't look like they would get near that much now with the way the unit is performing.
There are some new markets this NFL season, such as New York, but the Empire State launched legal online sports betting back in January. Reeg said there was no new "state of scale" coming online until Ohio, which will go live in January 2023.
“We want to prove the concept,” Reeg added. “We’ve proved we could carve out a significant piece of the business. Now we want to prove we can make a profit.”
