Online Sportsbooks Have Offered a Buffet of Bonuses to Bettors — How Long Will it Last?

“There's only so much funding any of these businesses can access and provide free money to people before they eventually run out of it."

Last Updated: Nov 15, 2021 12:49 PM ET Read Time: 7 min
Caesars Sportsbook Arizona
Photo By - USA TODAY Sports

The logic behind a casino buffet probably goes something like this: come for the all-you-can-eat prime rib, stay for the slots and table games. At one casino, though, customers were perhaps enjoying the former a bit too much more than the latter.  

To wit: Matt Maddox, the outgoing CEO of Wynn Resorts, said during a conference call last week that they had a buffet at their Encore Boston Harbor hotel and casino that was losing $12 million a year. After the COVID-19 pandemic struck, they decided it was time for a change. 

“We ripped it out when we were shut down,” Maddox said. “And we built probably the world's best sports bar that once Massachusetts legalizes sports betting, it'll be the best sportsbook on the East Coast, hands down.”

Although Massachusetts lawmakers are still haggling over if and when to permit sports wagering, there are signs operators are thinking about the buffet they’ve been offering bettors as well. 

Online sportsbooks, eager to claim a significant share of the market in states with legal sports betting, have been making generous offers to get customers to sign up and start gambling. For example, Caesars Sportsbook has recently been offering free bets in states such as Arizona of up to $1,001. FanDuel Sportsbook has been offering new users "risk-free" wagers of up to $1,000. BetMGM has been making a similar offer to bettors in states such as Michigan

"Our sense is a traveling man could make a healthy salary by merely driving state to state and taking advantage of the plethora of promotional offers and signup bonuses this fall from all of the operators," Deutsche Bank analyst Carlo Santarelli predicted in an August 3 report on Caesars Entertainment Inc.

The promos and bonuses have been flying ever since, as the expansion of legal sports betting in the U.S. is giving operators an unprecedented opportunity to acquire customers.

But some operators are already suggesting the current level of spending is unsustainable. And while not everyone may agree, it's an indication the buffet of bonuses could someday end. If and when it does, bettors may notice the seemingly generous offers they once received are no longer available, or that sportsbooks have become stingier with their odds.

Wynn Resorts was reportedly poised to spend more than $100 million this football season to market its online sports betting and casino gambling app WynnBET. That effort included hiring actor and director Ben Affleck for television commercials. 

Yet, Maddox said the market WynnBET operates in is “really not sustainable” at the moment. 

"Competitors are spending too much to get customers, and the economics are just not something that we're going to participate in, in the short term,” Maddox said. “So, while we built the brand, we launched the product in the third quarter, we're going to be focused on building a long-term business that's sustainable, that is not losing lots and lots of money."

Wynn reported last week it took a net loss of $166.2 million for the three months ended September 30, down from $758.1 million a year earlier.

The business unit housing Wynn Interactive (the company's online gaming division, which includes WynnBET) also posted an adjusted loss of $103.6 million for the third quarter and $188 million for the first nine months of 2021. This was “primarily due to ramp up” of the online betting business, the company’s report for the period said. 

Then, on Friday, Wynn announced they had agreed to terminate a transaction that could have seen Wynn Interactive merge with a so-called “blank check company” and have its shares traded on the stock market. 

“As we discussed on the Wynn Resorts, Limited third-quarter earnings conference call earlier this week, in light of elevated marketing and promotional spend in the sports betting industry, we are pivoting our user acquisition efforts to a more targeted ROI-focused strategy,” Craig Billings, CEO of Wynn Interactive, said in a press release. “In so doing, we expect the capital intensity of the business to decline meaningfully beginning in the first quarter of 2022. WynnBET’s best days lie ahead of us." 

An adjustable expense

One of Wynn's rivals even sees the bonus buffet already winding down.   

MGM Resorts International and U.K.-headquartered Entain plc are partners in and joint owners of BetMGM. And Jette Nygaard-Andersen, Entain’s CEO, said during an October 12 conference call that they saw “some pretty hefty bonusing and promotions in the market” during the first few weeks of the NFL season. 

“But we are seeing it coming down a bit and remain confident that the promotional environment will normalize over time,” Nygaard-Andersen said, according to a transcript.

Operators are also shelling out millions right now to advertise themselves to the public. Those expenses, combined with the largesse aimed at bettors, could ultimately force sportsbooks to cut back. 

FanDuel Group CEO Amy Howe raised such a possibility in an interview with CNBC, noting the company had spent $300 million in just the first half of the year on marketing. 

"I think there's only a certain number of companies that are going to be able to sustain that level of spend," Howe said in October.

One of the bigger spenders during the NFL season has been Nevada-based Caesars Entertainment, which launched a big ad campaign paired with some sign-up promotions such as a $5,000 risk-free bet.

Caesars CEO Tom Reeg said earlier this year that they expect to spend more than $1 billion over the next two-and-a-half years on their digital ambitions, namely, Caesars Sportsbook.

While they have been seeing market-share gains that are better than expected, Reeg said during their earnings call earlier this month that their spending plans could be tweaked and that the bulk of the spending is linked to customer acquisition. 

“So, if we do worse than we're expecting from a share perspective, I'd expect that the ultimate investment will be less,” Reeg said. “If we do better than we expected from a share perspective, I expect the ultimate investment to be more, but obviously the return will fall in both directions.”

'Free money'

For now, bettors are the beneficiaries of operators trying to solidify their position in the industry.

New markets are still coming online, such as New York and Louisiana, which could prompt operators to dangle an offer or two to secure customers. Football season is going strong as well, giving operators plenty of opportunities to acquire customers. 

Spending can get results, too. The parent company of FanDuel, Dublin-based Flutter Entertainment Plc, said its U.S. business (which also includes FOX Bet) had a 42 percent share of the online sports betting market for the third quarter, which ended September 30.

"We continued our significant investment in customer acquisition and retention during the quarter, including leveraging our official sports betting partnership with the NFL," the company said. 

But those investments could depend on the regulatory environment in a state. 

The New York Post, citing an unnamed source, recently reported the state's high tax rate for online sportsbooks could mean worse odds than elsewhere and no free bets for customers. In Florida, all sports betting at the moment has to flow through the Seminole Tribe, which recently launched the state's only legal online wagering app for Hard Rock Sportsbook.

The tighter controls on some states could be stoking fiercer competition in the more wide-open and competitive markets, as operators aim to take advantage of those opportunities.

Flutter's market share was achieved as “competitors threw pretty much everything at us,” CEO Peter Jackson noted during a conference call earlier this month. 

But later in the call, Jackson was asked about the kind of competitors Flutter is facing. In answering, the CEO suggested to analysts and investors there may come a time when their rivals run out of things to throw at them. 

A 24/7, loss-leading, sports-betting buffet could someday prove too pricey for some companies and their investors. 

“There's only so much funding any of these businesses can access and provide free money to people before they eventually run out of it,” Jackson said. 

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