Amid an ongoing slowdown in the U.S. advertising market and fears that consumers are about to default to a sort of grimly ascetic recessionary belt-tightening mode, TV sales execs are keeping a close eye on the sports-betting category. While gambling dollars have served as a welcome panacea during a time of shrinking automotive spend, at least one top-tier online sportsbook is scaling back its TV investments.
Speaking to investors earlier this week, Caesars Entertainment CEO Thomas Reeg said the casino conglomerate had slashed its marketing costs down to the bone. “We have pulled…hundreds of millions of dollars that we were planning to spend,” Reeg said, noting that the company has maintained a 15% market share of the national online sportsbook (OSB) handle.
Since the year began, Caesars has reabsorbed “almost a half-billion dollars” in funds that originally had been earmarked for customer-acquisition/marketing efforts. And while the reduction in ad spend may have reduced sports fans’ exposure to Caesars pitchman J.B. Smoove—according to iSpot.tv estimates, the comic’s two most-deployed spots served up 519 million impressions during the 2020-21 TV season—the cuts thus far haven’t coincided with a proportionate decline in share.
The free-spending FanDuel boasts the highest profile among OSB operators, closing out 2021 with a 40% national market share. In New York, FanDuel last month laid claim to a 45% share in the market, topping DraftKings (26%) and Caesars (15%). All told, nine sportsbooks have been given the OK to operate within the bounds of the Empire State.
Caesars’ austerity measures are also tied to a sheaf of blank pages in the metaphorical legalization docket, which hasn’t given rise to a major market launch since OSB kicked off in New York on Jan. 8. Ohio will be the next major state to roll out mobile wagering, as the state’s casino commission will flip the switch on New Year’s Day 2023—a day too late for locals to place their bets on the College Football Playoff semifinals, but well in advance of the Jan. 9 national championship game.
Reeg told shareholders that Caesars’ rivals haven’t turned down the dial on their own marketing activities. “We don’t think our competitors have followed us; they’re still spending,” he said, which is consistent with last year’s trends. According to a year-end filing with the Securities Exchange Commission, DraftKings’ sales and marketing costs nearly doubled in 2021, adding up to $981.5 million. DraftKings went on to disclose that nearly 80% of that outlay was spent on activities related to the acquisition and retention of gamblers.
As has been the case with rival FanDuel, DraftKings hasn’t deviated from its you-gotta-spend-money-to-make-money philosophy. In a note to investors, MoffettNathanson analyst Robert Fishman on Wednesday wrote that DraftKings was likely to “continue to invest in its business to maintain long-term share,” before adding that a “slightly more restrained approach on [customer acquisition costs] levels of investment” may be in the offing in the near term.
For its part, FanDuel looks to be taking its marketing push to an even more immersive level, with plans to rebrand its in-house horseracing network, TVG, as FanDuel TV. With deals in place with the likes of Pat McAfee and Bill Simmons’ The Ringer, FanDuel may choose to develop a daily roster of studio shows and low-stakes live sports programming. The new-look cable outlet is expected to bow ahead of the fall football season.
Speaking of which, Reeg said Caesars’ existing deal with ESPN ensures the brand will still have a presence on TV come September, even if its airings won’t be anywhere near as frequent as they were a year ago. (Per iSpot, Caesars accounted for 22% of all sportsbook TV ad impressions between September 2021 and May 2022, making it the second most-visible brand in the category behind only FanDuel.) “This fall, you’ll see some [of our] commercials, largely on ESPN, and you’ll see some local ads that run locally as well,” Reeg said. “Compared to last fall, it’s going to seem like we’ve left the air entirely, but you will still run into a commercial or two depending on where you are and what you’re watching.”
Reeg went on to note that Caesar’s online sports unit “was nearly breakeven in July,” following a loss of $116 million in net income during the April-to-June quarter. He went on to say that the reduction in marketing expenses qualifies as a “dramatic pivot” for the OSB unit, and that the relative stability in market share suggests that the scheme is paying off. For all that, the casino expects that its online division won’t become profitable until the fourth quarter of 2023.
Investors and network sales execs will have a better sense of how DraftKings will approach the fall ad market when the company reports its quarterly earnings before the market opens on Friday morning. In the meantime, many of the larger sports-gambling markets have been experiencing pronounced seasonal downturns, with New York’s handle dropping to a low-water mark of $149.7 million during the week ended July 24.
The amount wagered via the state’s approved mobile books has dropped steadily throughout the slow-burn summer season. Back in March, when the novelty effect was still in bloom and the NBA postseason picture was shaping up, the handle reached $1.64 billion. In April, the take dipped to just under $1.4 billion, while May’s handle dropped to $1.27 billion and June’s hit $1.05 billion.
Any suggestion that the go-go gambling market is slowing down is particularly troubling for the networks, as many execs are counting on the emerging category to help defray some of the losses in the automotive sector. Among car manufacturers, national TV ad spend in June plummeted 23% versus the year-ago period, to $161.3 million. Per iSpot, auto spend was off by nearly $50 million compared to June 2021, while sports buys made up just 21% of all car-ad impressions, down from 26%.
Auto spend has been hampered by a microchip shortage that has made new vehicles harder to come by on even the busiest dealer lots. The diminished supply is driving prices up, and talk of a recession has prompted many Americans to hold off on making any big-ticket purchases. In the absence of cars to move, the annual holiday sales spots that usually dominate the airwaves in the run-up to Memorial Day and Independence Day all but failed to materialize this summer, and overall media spend is predictably low.