Penn Entertainment's ESPN Wager is Labeled as Disappointing Admission
Rewritten Article:
Posted on: April 30, 2025, 02:38h.
Last updated on: April 30, 2025, 03:06h.
Todd Shriber @etfgodfatherFinancial News,ESPN, Gaming, Mergers and Acquisitions Penn CEO copes to sports betting letdown in shareholders' letter
Penn Entertainment's (NASDAQ: PENN) ESPN Bet sports betting brand hasn't met the operator's expectations, and its Chief Executive Officer, Jay Snowden, isn't shying away from the disappointment. In a recent shareholder letter, Snowden and Chair David Handler acknowledged ESPN Bet as a key area of focus but admitted that, so far, it hasn't lived up to the hype.
Last August, the gaming company sealed a 10-year, $2 billion joint venture with ESPN's parent company, Walt Disney (NYSE: DIS), including $1.5 billion in payments to ESPN and $500 million in warrants to buy approximately 31.8 million shares in Penn—vesting over a decade.
However, the business isn't pulling in the expected market share or financial performance in sports betting, as Snowden and Handler pointed out. "We're working hard to recalibrate our execution and tap the full value of this partnership," the CEOs wrote.
Penn refers to ESPN as a committed partner while stressing its aim to build market share in a financially sensible manner. But the pivotal spots in the US sports wagering market are tightly held by Flutter Entertainment's (NYSE: FLUT) FanDuel and DraftKings (NASDAQ: DKNG), a grip that experts predict won't loosen any time soon.
Pressure Intensifies on Penn to Deliver ESPN Bet Results
The letter is part of a package of regulatory documents published in advance of the company's annual meeting on June 17. The meeting features voting instructions on Penn's board of directors elections.
Recently, the pressure has escalated on Penn due to a proxy fight waged by hedge fund HG Vora, one of the company's largest shareholders. On Monday, the fund announced its dismay that Penn nominated only two of its three candidates for board seats. HG Vora is pushing its candidates—Johnny Hartnett, Carlos Ruisanchez, and William Clifford—for all three board positions and is targeting a vote from Penn shareholders.
The letter was released just weeks after Penn's Q4 earnings call, where CEO Snowden indicated that August 2026 marks the third anniversary of the ESPN deal, leaving either party free to terminate ESPN Bet after three years if it fails to deliver.
Penn's Shaky Start in Sports Betting
Penn's earlier foray into online sports betting didn't pan out when it paid more than $500 million for Barstool Sports, applying the brand to its internet and retail sportsbook. The move didn't pay off, leading Penn to sell Barstool back to its founder, David Portnoy, for $1, allowing the company to focus on its relationship with ESPN.
Leveraging ESPN's brand reach and audience is now crucial for Penn as it races to close the gap between leading operators like DraftKings and FanDuel. Although their internet casino app, Hollywood iCasino, boasts a robust user base and has made strides in iGaming, sports betting is often the gateway for customers to venture online. Penn remains hopeful about ESPN Bet's future, acknowledging the need for improvements while preserving the option to pull the plug if progress stalls.
"While our initial integrations have expanded reach and driven customer acquisition, there's more work to do to deliver on the full potential," Handler and Snowden concluded. "We're optimistic that our collaborative efforts with ESPN will drive improved results in the coming quarters, but we retain the flexibility to determine our future in this vertical if the need arises."
To tackle the challenge, Penn has ramped up its recruitment efforts, bringing in former FanDuel executives like Aleksey Turchin to oversee ESPN Bet and its online gaming brands.ene
To improve the user experience and boost the app's performance, the company has overhauled the app's interface, streamlined navigation, and enhanced in-app account linking. ESPN integration is also underway, with the companies aiming to capitalize on the network's audience and rich sports content.
Besides operational and product improvements, Penn has focused on sound risk management, maintaining 71.4% green time (availability while accepting bets) during March Madness 2025. Although this falls short of rivals like Hard Rock (86.2%), Penn has minimized downtime (2.6%) to avoid unprofitable exposures, suggesting the company is refining its in-play trading algorithms to find a balance between acceptance rates and risk.
In addition to consolidating ESPN Bet's market position, the deals come with financial incentives and an exit option for ESPN, starting mid-2026 if progress is slow. CEO Snowden emphasized achieving breakeven for its interactive division in 2025, despite ESPN Bet capturing only 3% handle share in active states during the 2024 NFL season.
With these moves, Penn is positioned to seize ESPN's brand reach and attract sports bettors, though considerable hurdles remain in competing with market leaders.
- In the letter, Penn Entertainment's CEO, Jay Snowden, admitted that their ESPN Bet sports betting brand hasn't lived up to expectations, highlighting the need to recalibrate execution.
- The financial partnership between Penn and ESPN, worth $2 billion, includes payments to ESPN and warrants to buy shares in Penn, but the venture hasn't yielded the anticipated market share or financial performance.
- Experts predict that the tightly held pivotal spots in the US sports wagering market by Flutter Entertainment's FanDuel and DraftKings won't loosen anytime soon, putting pressure on Penn to deliver results from ESPN Bet.
- The letter is part of a regulatory package published before the company's annual meeting on June 17, which includes voting instructions for the board of directors elections, with pressure escalating on Penn due to a proxy fight with hedge fund HG Vora.
- To tackle the challenge, Penn has overhauled the app's interface, streamlined navigation, and enhanced in-app account linking, bringing in former FanDuel executives to oversee ESPN Bet and its online gaming brands.
- With these moves, Penn is striving to leverage ESPN's brand reach and audience, focusing on sound risk management, improving user experience, and preserving the option to pull out if progress stalls in the sports betting vertical.
