U.S. Sports-Betting Execs Cheer More Rational Marketing Environment

November 8, 2022
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As investors appear more focused than ever on sports-betting operations becoming profitable, executives say companies' promotional expenditures have clearly declined compared with past years.

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As investors appear more focused than ever on sports-betting operations becoming profitable, executives say companies' promotional expenditures have clearly declined compared with past years.

During third-quarter conference calls with analysts, several top executives discussed the promotional landscape at the beginning of the National Football League (NFL) season, traditionally the most competitive time of the year with the highest promotional spend.

“I would say that the competitive intensity is lower than it was last year but more competitive in the third quarter than it was in the second quarter, which is not surprising given the seasonality of the opening of the football season where many operators including ourselves are obviously focusing on trying to activate the players that are interested in betting on the football games for the season with us,” said Richard Schwartz, CEO of Rush Street Interactive.

DraftKings CEO Jason Robins said his company also sought to release several new products timed with the beginning of football season, which he feels helped increase DraftKings’ market share during the quarter, but the less competitive promotional landscape is also a factor.

“The lower promotion, which is a larger story, really is a subset of the more rational competitive environment we're seeing this year versus last year which was truly night and day as far as the competitive environment and the rationality behind it,” Robins said. “There were still certainly some aggressive investments by some of our competitors, but nothing that was, I think, out of the ordinary.

“I think certainly, the change in that promotion environment as well as in the external marketing spend of some of the competitors helped us gain some share as well.”

DraftKings has somewhat reined in its marketing spend, with chief financial officer Jason Park saying that marketing costs in states that had been launched for more than a year declined 20 percent compared with the third quarter of 2021.

But Park said the company’s sales and marketing expenses were still 8 percent higher year-over-year, and the company reported a $264m loss in the third quarter, which sent the company’s stock price tumbling by more than 25 percent on Friday (November 4).

On Monday, DraftKings shares rebounded slightly, gaining 49 cents, or 4.33 percent, to close at 11.80 on the Nasdaq exchange.

Caesars Entertainment CEO Tom Reeg also pointed to new state launches, of which there will be several in the coming months, including Maryland, Ohio, and Massachusetts, as key to the company’s promotional spending strategy.

“We’ve talked for a very long time about how your customers as they come in, in new states, that's when they're taking advantage of sign-up offers, that's your highest promotional spending,” Reeg said.

“We've got, obviously, a mix this year of states, most of which are in their second year, if not second full year, at least second year of operation during football season, so your promos are to your existing customers. That's typically a much smaller promotional bite than new sign-ups, but I'd also say, we have the ability to segment customers now, which we didn't last year,” he continued.

“Now we can look at various verticals and see what type of customer is coming in through the various channels and adjust our spend based on are we getting a return on our investment.”

Reeg stressed that Caesars had made “some significant changes there in the last 60 days ... basically shutting off particular segments and that cash has flowed immediately to the bottom line with no degradation in market position.”

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