Questions surround DraftKings deal with Caesars as William Hill looms large

Questions surround DraftKings deal with Caesars as William Hill looms large

  • Howard Stutz, CDC Gaming Reports
August 19, 2020 12:00 AM
  • Howard Stutz, CDC Gaming Reports

The rapidly expanding legal sports wagering landscape has led to some unusual partnerships.

For example, how many “official sports betting partners” do the Denver Broncos require?

On June 15, the NFL team announced FanDuel as the team’s official sports betting partner. A little more than three weeks later, the Broncos struck a similar deal with BetMGM.

The same question could also be asked about the relationships between casino companies and sports betting operators.

Last year, DraftKings and Caesars Entertainment announced a market access agreement, which would allow the sports betting operator’s online gaming products to have a presence across the more than dozen states where Caesars operates casinos.

That was in late February 2019. Much has changed in the past 19 months.

DraftKings became a public company in April through its merger with a blank-check acquisition company and the buyout of sports gambling platform supplier SBTech.

Meanwhile, Caesars was acquired by Reno-based Eldorado Resorts in a $17.3 billion merger that closed on July 20. Eldorado’s management took over operations of Caesars, and the combined companies assumed the Caesars’ name.

Along with Eldorado in the deal came sportsbook operator William Hill US. The former Eldorado owns 20% of Las Vegas-based William Hill, which has a 25-year deal to operate sports betting at the company’s regional and Nevada casinos.

Where this leaves DraftKings is an unanswered question.

In a research note Monday, Eilers & Krejcik gaming analyst Chris Grove said the DraftKings-Caesars arrangement was the “one salient storyline that went undiscussed” during DraftKings’ first-ever quarterly earnings conference call last week.

As sports betting has expanded – the activity is legal now in 18 states – many casino operators have signed sports wagering “skin’ deals with various operators for an online and mobile sports wagering presence.

The DraftKings logo on an NHL arena dasherboard

Full House Resorts has touted its sports betting skins in Colorado and Indiana with Wynn Resorts, Churchill Downs, and Smarkets. CEO Dan Lee says the deals are worth “a minimum” of $7 million annually to the company in revenues. Penn National Gaming, months before striking its $163 million deal with sports media platform Barstool Sports, entered into agreements with four sports wagering operators over sports betting skins in the company’s multiple states.

DraftKings said last week it has $1.2 billion on its balance and is looking beyond just sports betting, focusing efforts on potential igaming opportunities. During the second quarter, DraftKings launched sports betting in Colorado and igaming in Pennsylvania; since the end of July, DraftKings has begun sports betting in Illinois and igaming in West Virginia. The company is also working to enter Virginia and Tennessee for sports betting and Michigan for sports betting and igaming. All three states have passed legislation.

Grove suggested DraftKings – if the Caesars deal is dead – could lose potential sports betting access in three states on the sports betting expansion list: Kentucky, where Caesars operates a racetrack; Louisiana; and Maryland. Together, the analyst said, the three states comprise roughly 5% of the U.S. population.

“Maryland, a populous, relatively wealthy state where market access slots will very likely be tightly limited, would be the most significant loss here, in our view,” Grove said.

William Hill is the process of assuming the operations and management of 11 Caesars sportsbooks in Nevada, including the venerable location at Caesars Palace. The company expects to establish an online sports betting presence for Caesars, along with its William Hill app.

Jefferies gaming analyst James Wheatcroft, who is based in London and follows UK-based William Hill, said in a research note the U.S. subsidiary’s “enlarged retail footprint,” through the Caesars deal and a branding agreement with CBS Sports, is supporting the company.

“William Hill boasts a 29% share of real money sports betting in the U.S.,” Wheatcroft said. “As more states legalize more quickly than we expected, the prize is substantial. We estimate the U.S. market will be worth some $19 billion in net revenue by the end of 2023.”

So where does this leave DraftKings and Caesars?

A DraftKings spokesperson did not respond to an email request Tuesday. A Caesars spokeswoman said Monday she would review the question; at the time of publication, the company had not replied.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at Follow @howardstutz on Twitter.