Key Highlights
- Penn Entertainment willing to increase spending by 5x for customer acquisition
- The November launch provides unique opportunities
- Hollywood-branded iCasino on ESPN Bet
- Sale of Barstool Sports back to Dave Portnoy
ESPN Bet Basics
Following the announcement of ESPN and Penn Entertainment's collaborative project, ESPN Bet, Penn CEO Jay Snowden held a conference call today to discuss the details.
ESPN Bet will be a sports betting platform, facilitated through Penn Entertainment rebranding and tweaking its existing sportsbook products.
This will include its websites, mobile apps and, as was discovered through the conference call, even the possibility of ESPN-branded physical sportsbooks in the future.
Penn Entertainment will be required to pay $1.5bn to ESPN as part of the 10-year deal, as well as $500m in warrants to purchase around 31.8 million Penn common shares.
Commenting on this, Snowden said “we will be getting significant value” in its deal with ESPN, which he regarded as a “powerful, new, strategic alliance.”
At the time of the announcement, ESPN has over 370 million social media followers, 100 million monthly digital unique users and 25 million ESPN+ subscribers.
Notably, however, ESPN has 11 million fantasy app unique users and Snowden stated that through ESPN Bet, “we have the opportunity to dramatically transform” how fans engage with sports betting and daily fantasy products.
“We are confident that our newly launched products will catapult ESPN in the industry.” - Snowden
How will they make it a success?
One of the biggest factors Snowden kept driving home throughout the conference call was the level of marketing Penn Entertainment was committed to for the ESPN Bet product.
He explained how, during the launch, there could be up to a 5x increased leverage in spending, with the majority going towards new player acquisition.
ESPN is expected to launch at some point in November, which will be a few months into the existing football season.
This means that, in some people’s eyes, ESPN Bet will be launching too late in the year. Snowden disagrees.
With an average time of two months needed to “burn through” standard sports betting promotions, Snowden believes the November launch will be strategically placed to appeal to customers who have already completed their bonus bets with other operators.
He said: “I think we have an opportunity to get in here and be a major player.”
“I think the launch in November is good, because it won’t get lost at the start of the football season.”
The late launch isn’t just planned to try and snag up new customers with its fresh, mid-season offers, but also to ensure that the product itself is ready.
Snowden explained: “Part of the reason we want to launch in November is not only to make sure that we’ve done the rebranding properly, but we want to make sure that we have the right capacity to manage the volume.”
“We feel comfortable managing more volume as we move forwards.”
“Getting to launch is really important to us, we want to launch flawlessly, and we’ll hold the investor day after launch.” - Snowden
With a November launch, ESPN can expect to dive right into the sporting season.
Not only will it be right around the time of the National Football League (NFL) playoffs, but the Super Bowl will kick off just after the new year, with March Madness right behind it.
The team at Penn Entertainment seems to understand just how critical the next 12 months will be for ESPN Bet, with Snowden stating that he’s expecting to see returns as early as 2025.
So, how will Penn Entertainment and ESPN ensure a high amount of player acquisitions this winter?
Well, the answer is quite simple. Snowden stated that he’s “comfortable” with increasing spend by 5x to manage the marketing over the winter.
He explained: “We’re going for it, we’re certainly not going to be cheap in our approach. We don't wanna have regrets about how we launch the product, about how we launch the brand.”
Why is the team so confident?
Penn Entertainment certainly didn’t shy away from how confident the team is about the upcoming ESPN Bet product.
When asked why he’s so confident that ESPN Bet won’t fail in the same way that other major media sports betting platforms have recently, Snowden's answer was simple: “There's really no comparison to ESPN in the world.”
“As we got to know the folk at ESPN, it felt good and we met a lot of people at ESPN and we were blown away by their passion for being the best at what they do” - Snowden
While ESPN will have the chance to take advertising deals from Penn Entertainment’s competitors, the team at Penn “aren’t worried” as they believe it’ll be clear ESPN is completely supporting ESPN Bet.
He went on to explain five specific points as to why he believes ESPN Bet will succeed in the fragile sports betting industry:
- It's an exclusive product
- ESPN branded
- Fully integrated
- Includes content from top ESPN talent and personalities
- Strategic relationship
Snowden then took the time to explain the future plans to fully integrated a Hollywood-branded iCasino offering within ESPN Bet, which would be available in all states where online casinos are legal.
Seeing as “the Hollywood brand, in our retail brick-and-mortar properties, takes up two-thirds of our portfolio”, he explained that this would create a unique cross-sale opportunity for Penn Entertainment to include them in ESPN Bet.
There could even be a standalone Hollywood Casino app launched in the future, which would be fully integrated into the ESPN Bet app, similar to how Barstool Sports offers its sportsbook offering.
Speaking of Barstool Sports…
It’s no secret that one of the most sudden parts of this whole deal is Penn Entertainment selling Barstool Sports back to Founder, Dave Portnoy.
After all, Penn Entertainment only fully acquired the company back in February.
Snowden explained: “We felt great at the time when we were partnering and launching with Barstool.
“It became obvious that there is only one natural owner of Barstool Sports, which is Dave Portnoy. We were an unnatural owner.”
Not only has Penn Entertainment sold its shares back to Portnoy, but it has also included a clause to receive 50% of the gross proceeds in the next sale of the company.
Snowden went on to say that Penn Entertainment “has invested significant capital” into the Barstool Sportsbook offerings, which will now undergo a transition period, while the details are finalised.
“The ESPN player base will be complementary to what we’ve built over the last three years.” - Snowden
This will include the Barstool branding being removed from the sportsbooks themselves.
When asked to address whether this could lead to ESPN Bet sportsbooks, Snowden answered that while the “ESPN folks have not had a chance to visit out properties yet”, there is a chance for ESPN-branded sportsbooks to evolve in the future.
Although, it wasn’t all negative in the sale of Barstool Sports, as Snowden explained how the company was the “ideal partner” for Penn Entertainment to expand its digital footprint with.
Since launching the Barstool Sportsbook, Penn Entertainment has acquired an additional 1.5 million players.
While the average demographic of the Barstool Sportsbooks is 29-years-old, Snowden is confident this “great foundation of younger customers” could also make use of the ESPN Bet products too.
