Entertainment <\/p>\n
With the future of ESPN Bet seemingly in question, criticism of Penn Entertainment is coming from many corners.<\/strong><\/p>\n Ever since Penn Entertainment CEO Jay Snowden in late February addressed the idea that his company or ESPN could exit their 10-year deal for ESPN Bet in 2026, the wagering world has been raining negatives. Some analysts have downgraded Penn stock and, on 18 March, the founder of theScore and theScoreBet had his say.<\/p>\n Prior to that, two investors had accused Penn of mismanaging its interactive strategy. In May 2024, the Donerail Group<\/a> said \u201cguidance misses\u201d by Penn executives had \u201cdamaged the credibility of the management team and board of directors\u201d. And in January, HG Vora accused<\/a> the company of \u201creckless spending\u201d on digital projects.<\/p>\n John Levy was the founder of theScore and theScoreBet, which Snowden called a \u201cvery good story for us in Canada\u201d as a result of Penn acquiring them<\/a> in 2021. Levy, however, this month shared<\/a> his not-so-warm-and-fuzzy thoughts about his company\u2019s transition to Penn.<\/p>\n \u201cI just think you had to give more trust to the people who brought you to the party, which was us,\u201d Levy said at the NEXT Summit gaming conference. \u201cThere was a bit of \u2013 we bought it and we\u2019ll take it from here, thank you very much. When you\u2019re as involved in the business as we always were and you can see where it was going and when things you might have been doing were happening differently \u2013 it was very hard, very frustrating.\u201d<\/p>\n Levy had a front-row seat to both of Penn\u2019s US digital wagering forays. He and other family members left their positions<\/a> at Penn between February and April 2024. By then, the Levys had witnessed Penn\u2019s ill-fated partnership with Barstool Sports, which married a cutting edge but somewhat raunchy brand with a far more staid and conservative land-based casino company.<\/p>\n The $2 billion (\u00a31.54 billion\/\u20ac1.83 billion) Score Media and Gaming Inc acquisition included theScoreBet\u2019s tech stack. That means Penn has its technology in-house, a key goal for many online gaming companies so they can correct problems or make alterations more seamlessly and quickly.<\/p>\n Penn\u2019s partnership<\/a> with Barstool Sports, in order to use the brand for its sportsbook, lasted just over three years. In February 2020, Penn bought a 36% stake, and it completed the $551 million acquisition in February 2023. Penn then sold Barstool Sports back<\/a> to founder Dave Portnoy for $1 in August 2023. That was the same month Penn announced a $2 billion deal with ESPN to create ESPN Bet as its new online sportsbook.<\/p>\n The relationship with Barstool had been fraught, at least from a regulatory perspective. In particular, Penn struggled to sell the partnership<\/a> to the Massachusetts Gaming Commission (MGC). Commissioners questioned how much control Penn would have over Barstool advertising and marketing. The commission\u2019s concerns about the Barstool Sportsbook persona and how that fit with responsible gambling and consumer protections made it delay issuing a wagering licence.<\/p>\n \u201cSo now we have an obligation to reconcile what is very available publicly as to Barstool and really the significant personality attached to Barstool and what we\u2019re gonna do about it as we think about this application,\u201d then commission chair Cathy Judd-Stein said in July 2023.<\/p>\n The MGC eventually issued the licence. But in 2023, Barstool Sportsbook was fined $250,000 in Ohio<\/a> for marketing to underage students on college campuses and it had to pay $25,000 in Massachusetts<\/a> for noncompliance in its advertising of a parlay product.<\/p>\n All the while, Levy\u2019s theScoreBet continued thriving under Penn\u2019s ownership in Ontario, where digital betting went live in April 2022.<\/p>\n \u201cOntario is our number one market in North America in terms of revenues, gross profit and contribution margin today and we delivered another strong year of performance in 2024,\u201d Snowden said during a recent earnings call<\/a>. \u201cWe believe the strength in Canada will only grow once we launch in Alberta, pending all requisite approvals, given the affinity for and loyalty to theScore brand across the country.\u201d<\/p>\n But Penn has struggled first with the Barstool Sports partnership and now with ESPN Bet to replicate that success.<\/p>\n \u201cThey had to settle this whole Barstool relationship, which was a fiasco right from the get-go,\u201d Levy said. \u201cDave Portnoy\u2019s not a stupid guy. He\u2019s very smart. But it\u2019s all about Dave and, unless you manage him properly, unless you control that properly, you\u2019re not going to get the synergies you need. He\u2019d go to a university, have his pregame parties, get a shitload of signups and then there\u2019d be no follow-up.\u201d<\/p>\n That same lack of \u201cexecution\u201d, Levy says, is plaguing ESPN Bet.<\/p>\n \u201cYou just have to look at what\u2019s happening,\u201d Levy said. \u201cIt\u2019s kind of like Barstool \u2013 Barstool in conception was right, but then in execution fell off. There wasn\u2019t a unified approach and they weren\u2019t managed properly, in my view.\u201d<\/p>\n On 27 February, during Penn\u2019s fourth-quarter earnings call, Snowden addressed the ESPN Bet partnership. The goal is to reach 20% market share nationwide. But 16 months in, most analysts say ESPN Bet has less than 4% market share. Competitors DraftKings and FanDuel combined have up to three-fourths of the market. BetMGM, their next closest competitor, had about 12% as of last fall<\/a>. No other operator has cracked double digits.<\/p>\n Ohio sports betting revenue market share for June in %: <\/p>\n FanDuel \u2013 44.9% \u2014 Waterhouse VC (@WaterhouseVC) August 8, 2024<\/a><\/p><\/blockquote>\n<\/div>\n<\/figure>\n During the earnings call, Snowden acknowledged that Penn or ESPN could exit the partnership after three years, which would be about August 2026. He also said Penn has been operating ESPN Bet as if it were a major player, even though it\u2019s not.<\/p>\n \u201cWe\u2019ve got a cost structure that right now is built for us to be a scale player because that\u2019s where we expect to be,\u201d he said at the time. \u201cThat\u2019s where ESPN expects us to be. But if you\u2019re not trending that direction, then obviously you\u2019re not going to be operating a business from a cost structure standpoint at a scaled level.\u201d<\/p>\n Wall Street downgraded price targets for Penn last fall. In a 17 March note, Stifel analyst Steven Wieczynski dropped his rating to a hold and his price target to $19 from $22. A survey of seven analysts<\/a> showed mixed projections, with two lowering price targets, four raising targets and one sitting even.<\/p>\n From 12 March 2021 to Wednesday (19 March), the stock has dropped from a five-year high of $130.47 to $17.40.<\/p>\n Stifel analysts recommend\u00a0shifting focus to online casino and exiting the ESPN Bet deal. Other scenarios include growing market share for ESPN Bet, which has proved challenging thus far. A third option is to divest of either the digital or land-based assets. In that scenario, Penn would be hyper-focused on the remaining business.\u00a0<\/p>\n Another big launch from the best team in the business!! If you\u2019re in the great state of New Jersey, check out our new Hollywood Casino \u2014 now live! https:\/\/t.co\/2zaapr3MV2<\/a><\/p>\n \u2014 Aaron LaBerge (@aaron) March 11, 2025<\/a><\/p><\/blockquote>\n<\/div>\n<\/figure>\n The Stifel note reinforces what it appears many in the industry think: Penn has a strong land-based casino business, but its foray into online sports betting in the US has been a fail. Since launch, Penn has invested in upgrades ranging from personalisation<\/a> to improving functionality. But so far, nothing has significantly moved the needle.<\/p>\n On the online casino side, Penn is hoping for more success. The company has rolled out its Hollywood Casino platform in Michigan, New Jersey and Pennsylvania. Early numbers aren\u2019t yet available, but multiple analysts point to online casino as a better bet. Traditionally, online casino is a significantly bigger revenue generator than sports betting. According to the Pennsylvania Gaming Control Board, in December 2024 igaming gross revenue<\/a> was $221 million versus $47.3 million for sports betting gross gaming revenue<\/a>.<\/p>\n The Stifel comments echo what the Donerail Group and HG Vora previously said. In its letter, the Donerail Group wrote: \u201cWhile we understand that ESPN Bet appears as the company\u2019s newest bright and shiny object that may very well have significant value under the right owners, we ask that the board take a moment to reflect objectively on the past four years of execution, assess the shareholder capital that has been destroyed and recognise that shareholders may simply be tired of continued gambling on uncertain outcomes.\u201d<\/p>\n HG Vora was equally as direct: \u201cTo date, there have been no repercussions for the board\u2019s persistent bad judgment and disappointing shareholder returns. We believe this is in part due to Penn\u2019s weak corporate governance, which disenfranchises shareholders and entrenches board members while rewarding its CEO with excessive compensation.\u201d<\/p>\n<\/p><\/div>\nLevy: Bad management the issue?<\/h2>\n
Downsizing could be coming<\/h2>\n
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DraftKings \u2013 30.3%
bet365 \u2013 9.1%
BetMGM \u2013 4.9%
ESPN BET \u2013 3.5%
Fanatics \u2013 2.7%
Caesars \u2013 1.4%
Hard Rock \u2013 1.3%
Remaining 11 sportsbooks combined for 2% market share pic.twitter.com\/EcpQWnV2qL<\/a><\/p>\n<\/div>\nMight be time to narrow focus<\/h2>\n
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Penn needs a change<\/h2>\n