DraftKings Could Buy Caesars Out of ESPN Deal Says EKG
It’s been nearly three years since Caesars Entertainment (NASDAQ: CZR) and DraftKings (NASDAQ: DKNG) each announced separate multiyear agreements with ESPN. Now, it’s possible the latter will expand that relationship, potentially buying out the casino operator to do so.
That idea was floated by research firm Eilers & Krejcik Gaming (EKG) in the most recent edition of its EKG Line report. Under the terms of the deals struck in September 2020, the two gaming companies run advertising on ESPN.com, the most-visited sports website in the world, and on the ESPN mobile application. Both link directly to their respective sportsbooks, marking the first time in US history such a deal had been reached.
With the sports wagering landscape and how operators dole out marketing dollars rapidly evolving, the time could be drawing near for the ESPN pacts to be altered.
One logical path forward, in our view, was DraftKings buying out its co-exclusive partner Caesars to become the exclusive sportsbook partner of ESPN,” according to EKG.
The economics of such a move aren’t known because the financial terms of the aforementioned 2020 agreements weren’t revealed.
Win-Win for DraftKings, Caesars
On its recent fourth-quarter earnings conference call, DraftKings noted it’s taking a close look at team sponsorships, which could be an area for added cost reductions. However, CEO Jason Robins made clear the operator is bullish on its ESPN partnership.
“We’ve really enjoyed that relationship and gotten a lot out of it,” Robins said on the call. “And we always talk to our partners about ways that we can improve and extend and grow the relationship. And Disney and ESPN have been great partners thus far.”
For Caesars, moving on from the ESPN relationship would help the casino behemoth accomplish the goal of realizing $200 million in reduced marketing expenses which, in turn, could contribute to the objective of repeating or topping the $1.2 billion in debt the company eliminated last year.
ESPN wasn’t mentioned on Caesars’ fourth-quarter earnings call on Tuesday, but the gaming company noted its digital unit, which includes sports wagering, is closing in on profitability.
DraftKings, ESPN Ties
Disney owns 6% of DraftKings nonvoting equity, which the entertainment conglomerate got via its $71.3 billion takeover of 21st Century Fox in 2019. Disney is the parent company of ESPN. That’s just one point highlighting the relationship between the network and the gaming company.
“Roughly one-third of DraftKings digital advertising spend during Super Bowl week was attributable to ads run on ESPN.com, per Pathmatics,” added EKG.
Bolstering the relationship with DraftKings could serve the aim of expanding ESPN’s sports betting footprint. That could be useful at a time of executive change at Disney and as newly returned CEO Bob Iger focuses his energy on content and initiatives that are more important than sports wagering is to the broader Disney thesis.