PENN Entering Critical Period With ESPN BET

PENN Entertainment CEO Jay Snowden acknowledged ESPN BET is not where the online sportsbook is expected to be in terms of market share and said 2025 will be a pivotal year during PENN’s earnings conference call Thursday.

“Both sides of this partnership made it very clear that we expected to compete for a seat at the podium,” Snowden said. “We’re not on pace to do that right now. Our expectations as we’re moving through 2025 are that we’re continuing to show improvement in the sports betting business.”

PENN is in the second year of its 10-year, $2 billion agreement with ESPN signed in the summer of 2023 as it rebranded from Barstool Sports. Snowden originally targeted a 7% market share in terms of online sports betting handle for 2024, but ESPN BET failed to deliver that metric in most states and has struggled to gain traction in New York after its late-September launch there.

Perhaps more concerning for PENN and ESPN BET is that Fanatics Sportsbook accelerated its growth to position itself in the second tier of operators behind FanDuel and DraftKings. Fanatics has done that partly by continuing to aggressively spend in terms of promotional bonuses and credits.

Could the two sides part ways?

Snowden said it is possible either PENN or ESPN could exercise an opt-out clause in 2026 if growth is not at a satisfactory level.

As an example, ESPN BET’s $59.2 million handle in New York for January represented a 21.7% increase from December. But it accounted for only 2.4% of the $2.48 billion wagered online in the state.

ESPN BET’s handle ranked sixth among the nine mobile operators in the state, beating out BetRivers, Bally Bet, and Resorts World Bet. It was also less than one-third of the $194.1 million handle Fanatics generated.

“We have levers at our disposal, and as you get into 2026, the third anniversary of our relationship with ESPN, both sides expect to be in a really good place,” Snowden said. “We are heads down, laser focused, we have tremendous plans in place for 2025 and 2026.

“But [if] for whatever reason, we are not hitting the levels that we need to, then obviously, as you’re approaching that anniversary, we have a three-year clause in the contract that both sides will have to do what it’s in their best interest. That’s always out there. We do have conviction in showing improvement throughout the year.”

ESPN BET’s issues in terms of competing are not isolated to New York. Its $650.2 million handle in Illinois — the second-largest market in the U.S. — ranked last among the seven mobile sportsbooks in operation for the full 2024 calendar year. Despite not rebranding from PointsBet until April 5, Fanatics still generated more handle than ESPN BET with $664.6 million.

ESPN BET had a 4.7% market share in Illinois last year as competition increased with the launches of Circa Sports and Hard Rock Bet. Bet365 could launch next month with the NCAA Tournament weeks away, and it is another operator unafraid to seek business via aggressive promotional spend.

Reasons for optimism

Putting a positive spin on things, Snowden cited ESPN BET’s growth during the recently completed football season the final four months of 2024. It is difficult to put that in a year-over-year context for that span given the aggressive promotional spend that came with ESPN BET’s launch in November 2023, but in states where promotional spend figures are available, there was overall year-over-year growth in 2024 while promotional spend declined.

In Pennsylvania, the $468.2 million handle for 2024 was an increase of 10% from 2023. After a $22.8 million spend in November and December coinciding with ESPN BET’s launch, that figure fell 40.8% to $13.5 million for all of 2024.

In Kansas, where PENN has the dominant retail sportsbook in the state, online sports betting grew 18% to $146.7 million. Its promotional spend of just over $4 million for the 2024 calendar year was less than half the $8.8 million outlay that accompanied ESPN BET’s launch.

“We ended football season from a handle share perspective better than we began the football season,” Snowden said. “It’s not as much progress as we wanted to make or planned to make as we move forward, but we have great product enhancements … great teams, a great partner, and we feel like we can continue to make really good progress.

“But if we don’t, we have levers that we can pull if we need to as we conclude 2025 and head into 2026.”