In many respects, PENN Entertainment has slow-rolled the early chapters of the ESPN BET narrative.
After all, ESPN BET made its much-hyped debut last November around the midpoint of the NFL season. Instead, PENN opted to wait until the start of the 2024 football season to introduce a wide range of product enhancements.
With kickoff mere weeks away, the time has come for ESPN BET to flex its proverbial muscle.
On Thursday’s quarterly earnings call, PENN touted the product improvements as part of the company’s pre-football roap for the season. The enhancements are viewed as a key cog to inject energy into an operator that lags behind rivals in an intense battle for market share.
PENN CEO Jay Snowden addressed analysts Thursday amid a challenging period in which a prominent activist investor called on the company to entertain a sale. As ESPN BET nears a launch in New York later this month, Snowden is focused on critical areas, such as conversions from ESPN’s fantasy database and customer retention.
“We have an opportunity to grow through the integrations and all the cross-sell we’re getting from ESPN,” Snowden said. “The great thing about our relationship with ESPN is that it is a driver of both top of the funnel and ongoing retention.”
Are You Ready For Some…Integrations? 433v3n
For close observers of the online sports betting (OSB) market, the term integration has become one of the industry’s top buzzwords since the Supreme Court’s historic PASPA decision.
In the coming months, ESPN BET’s ability to integrate some of the network’s vast media assets with the operator’s betting products will likely be instrumental in its growth. Among the enhancements expected during football season, ESPN BET will introduce targeted offers through ESPN’s fantasy football app, fantasy cast integrations from the network’s experts, and additional statistical integrations.
The roap dovetails off a proposal Snowden outlined last fall centered around a slew of personalized offers.
Days before the debut of ESPN BET last November, Snowden teased a product that will enable a bettor to wager separately on of their fantasy team. For instance, a player with A.J. Brown on their fantasy squad may receive personalized offers with a boost on Brown’s odds to score a touchdown. While a fantasy needs to wait until the completion of Monday Night Football for the final results of the week, a Brown prop offers more immediacy in the grading process.
“It’s all about prioritization on the product road map,” Snowden told Sports Handle at last fall’s ESPN Edge presentation. “We know that fans love the idea.”
When addressing plans for deep-linking certain markets, which PENN intends to roll out in November, Snowden believes it will take personalization to a “new level.”
PENN also spent a considerable amount of time on Thursday’s call articulating its new omnichannel strategy, which will be spearheaded by new chief technology officer Aaron LaBerge. LaBerge began his tenure on July 1 after spending more than 20 years with the Walt Disney Company.
More recently, LaBerge served as chief technology officer at Disney and ESPN, where he was responsible for driving technology and product development in of Disney’s two media divisions. The executive’s ability to identify synergies between ESPN BET and the main network may be critical in his new role.
Already, LaBerge has conducted a deep dive into the company’s OSB product roap, he noted during the call.
In detailing its customer base, PENN disclosed in a presentation that the company’s PENN Play database grew to approximately 31 million s in the quarter, including 3.8 million on the digital side. The increase represents a spike of 81% since the launch of ESPN BET, PENN emphasized. While LaBerge remains proud of the rapid expansion, he indicated that ESPN BET has ground to make up in parlay and prop construction.
“I see this as an exciting opportunity to roll up my sleeves with our engineering and product teams,” he said. “Our goal here is simple — we want to create the best product for sports fans. ESPN and PENN share a common vision: We want to make ESPN BET America’s sportsbook.”
PENN held the call nearly a year after last summer’s announcement on the transformative partnership with ESPN. ESPN may receive up to $1.5 billion from PENN through the 10-year partnership, though there is an opt-out after three years. The network could receive an additional $500 million in warrants.
While Snowden was upfront last year on his long-term market share goals, he did not adjust the targets on the hour-long call. By the end of 2027, Snowden hopes to attain a nationwide OSB market share of at least 20%.
When monitoring gross gaming revenue trends, ESPN BET’s OSB market share came in at 3.2% in the second quarter, according to JMP Securities analyst Jordan Bender. ESPN BET ended June with gross gaming margins of 8.5%, trailing only FanDuel in a sample of six leading operators, the research found.
Earlier this year, Donerail Group, an activist investor, criticized PENN for a perception of excessive spending on digital gaming expansion. In a letter to shareholders, Donerail attempted to drum up for a potential sale of the company.
Reports surfaced in late June that Boyd Gaming approached PENN on a possible acquisition bid, followed by subsequent rumors that Flutter Entertainment began to “size up” certain PENN assets.
Snowden declined to comment on the rumors Thursday, noting that the company does not publicly address any M&A speculation.
Initial reports of Boyd’s potential overture into acquiring PENN sent shares of the latter soaring nearly 10%.
"Shares in PENN Entertainment spiked 9% on Thursday amid reports that Las Vegas-headquartered regional casino operator Boyd Gaming Corp. has approached PENN on a potential acquisition attempt," @MattRybaltowski reports.https://t.co/C5TEEvwhky
— Sports Handle (@sports_handle) June 21, 2024
PENN slightly topped analysts’ expectations with its financial results during the second quarter. PENN Entertainment generated second-quarter revenue of $1.66 billion, beating estimates of $1.65 billion in revenue for the period.
PENN also posted diluted earnings per share of $-0.18, topping expectations for an adjusted per-share loss of $-0.20 for the quarter. Ahead of Thursday’s earnings call, PENN ticked up 0.4 or 2.5% to $17.69 a share in pre-market trading.
PENN posted further gains on Thursday morning, trading at $18.25 a share, up 5.75% on the session. Over the last year, PENN has struggled on equity markets, with shares down more than 25% during the last 12 months.
