Caesars’ CEO Tom Reeg was amazed by the launch of online sports betting in New York.
“When I was a kid, we’d drink out of the garden house when you’re playing outside,” Reeg said on Caesars’ latest earnings call Tuesday. “It was as if you were getting ready to drink from a garden hose — and then a tidal wave came and hit you.”
Reeg said Caesars amassed 500,000 customers in its first month in the Empire State. The online sportsbook operator also received twice the volume and market share, compared to internal expectations.
“It was absolutely staggering the demand in New York,” Reeg continued. “To give you an idea — we had 75,000 inquiries to our customer service portals in the first two days post-launch in New York.”
Drop-off for Caesars after hot NY sports betting start
Due to a combination of massive advertising and promotional spend, Caesars Sportsbook NY surprisingly rose to No. 1 in the NY online sports betting market in terms of initial market share, reaching 44% during the Week of Jan. 10-16.
But a series of issues — including confusion over bonuses, significant delays in withdraws and spotty customer service — combined with a decrease in promo spend, have presumably caused the online New York sportsbook to drop to 22.7% market share — third behind traditional industry titans FanDuel and DraftKings — in the state’s latest report for the Week of Feb. 7-13.
Reeg didn’t address any of those issues during the earnings call. However, Caesars Sportsbook co-president Chris Holdren did discuss them previously with PlayNY.
“Opening weekend brought about massive numbers and we took in more than one million bets within the first 39 hours. Unfortunately, the demand was so great that we didn’t have the flawless performance right out of the gates that we would’ve liked,” Holdren said. “New Yorkers have shown us this state will operate on an unprecedented scale and we’ve made numerous updates every day since launch to improve the customer experience while also increasing our customer service capacity.”
Despite slide, Caesars NY still satisfied with standing
Regardless, Reeg remains pleased with how Caesars has performed in New York sports betting industry so far.
“In terms of the ultimate cost, we have more market share than we anticipated in New York, so the cost of that launch is more than we had originally modeled,” Reeg said. “But that’s also a part of the reason that we can start to cut back on the traditional media (advertising) immediately and end up in about the same place — except with much more market share than we anticipated.”
Overall, Caesars has generated $809.9 million in online sports betting handle and $70.5 million in total gross gaming revenue in New York from Jan. 8-Feb. 13. Granted, it’s unclear how much of that is promo spend — which is also taxed. New York has the country’s highest tax rate at 51%.
Caesars came out swinging with a $3,000 deposit match plus $300 bonus for new customers in the Empire State.
“I know there was a lot of focus on our $3,000 deposit match in New York, and the thought that, ‘Gee, I can just put in $3,000, make a couple easy bets and withdraw my money,’” Reeg said. “Our average deposit in New York was about $450. So our results in New York were not driven by a lot of $3,000 deposits responding to our offer. It was hundreds of thousands of smaller customers that came to our site.”
Could Caesars make a play for downstate NY casino?
Reeg said Caesars has generated a 21% market share on sports betting in the US, thanks in-large part due to a $250 million advertising budget for traditional media. But Reeg added that all those commercials featuring JB Smoove, Halle Berry and the Mannings will “largely disappear from your screens.”
“We’ve accomplished what we set out to do,” Reeg said.
Still, Reeg said Caesars expects to lose more than $1 billion in terms of EBITDA before seeing a better than 50% ROI at market maturity, potentially by 2024.
Don’t expect Caesars to be a significant player for one of New York’s three remaining downstate casino licenses, however.
“New York, how do I answer this politely — New York is a difficult regulatory state. I think it’s going to be extremely expensive to build there. I think it’s going to be an extremely expensive license fee. And I think there’s a likelihood that you’re going to have to solve some other problem for the city in addition to creating the jobs that you do in building a casino,” Reeg said.
“So it’s not going to be enough to pick a site, build a casino, create the jobs and generate a return. There’s going to have to be other investment there as well. So I would say on our balance sheet it’s extraordinary unlikely that we make a material investment into New York land-based.”