ESPN Bet Rapidly Outperforming Barstool Sportsbook

Posted on: January 12, 2024, 05:14h. 

Last updated on: January 12, 2024, 05:14h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Penn Entertainment’s (NASDAQ: PENN) ESPN Bet mobile sports wagering application has been live for about two months and in that brief period, state-level data indicate the app is outperforming predecessor Barstool Sportsbook.

ESPN Bet Penn Entertainment sports betting
The ESPN Bet logo. The new sports betting app is generating more revenue for Penn Entertainment than predecessor Barstool Sportsbook. (Image: ESPN Bet)

The app debuted in 17 states on November 14 on while not all of those states have delivered November data let alone reports for December, the early indications from some states confirm ESPN Bet is generating more revenue than Barstool Sportsbook.

Out of the gates, ESPN Bet garnered a double-digit share of gross gaming revenue (GGR) in Indiana, Iowa, and Maryland. Last month in Maryland, ESPN Bet’s handle was $42.4 million, more than double the $16.4 million notched by Barstool Sportsbook a year earlier. In Iowa, ESPN Bet’s December handle was $18.8, well ahead of the $7.2 million generated by the predecessor app in December 2022.

Impressively in Maryland, ESPN jumped to third in terms of market share last month, trailing only FanDuel and DraftKings (NASDAQ: DKNG).

Promotional Spending Helping ESPN Bet

When new operators enter the ultra-competitive US sports wagering space, the typical concern is that those firms will spend heavily on promotions to lure new clients, but prove ineffective at retaining bettors when the bonuses wear off.

Indeed, Penn has doled out attractive promotions since launching ESPN Bet, but Bank of America analyst Shaun Kelley recently noted that the operator’s promo spending in Kansas, Kentucky, and Maryland was tolerable. Jefferies analyst James Wheatcroft pointed out the operator’s current bonus offer for new clients is $150, down from the original offer of $250.

Spending effectively is critical for Penn because the regional casino operator is paying ESPN $2 billion in cash and stock over 10 years to use the sports network’s brand.

Penn estimates the relationship with “the worldwide leader in sports” could add $500 million to $1 billion in long-term, adjusted earnings before interest taxes, depreciation, and amortization (EBITDA) to its interactive gaming unit. Still, ESPN Bet is expected to generate a loss of at least $100 million this year, indicating 2025 will be the earliest at which the app turns profitable.

ESPN Bet Having Overall Positive Impact on Market

The emergence of ESPN Bet and Penn’s willingness to spend to attract clients is being felt across the industry as highlighted by some elevated promo spending activity.

Unsurprisingly, industry-wide promotional reinvestment accelerated in November, largely due to the mid-month launch of ESPN Bet,” observed Stifel analyst Jeffrey Stantial. “However, we also observe modestly higher spend for certain well-established incumbents (in particular DraftKings), as well as continued above industry-average reinvestment for Fanatics & bet365.”

Some data points seem to suggest that ESPN Bet may have pilfered market share from BetMGM and DraftKings immediately following its November debut, but DraftKings noted its customer churn that month was normal and that it believes ESPN Bet has the potential to grow the market of US sports bettors, which would be a positive for the industry at large.