ESPN Bet Launches: Success Depends on Shedding Its “Second-Tier” Sportsbook Image

Quit while you’re ahead. But if you’re behind, it’s time to double down. That’s the mentality PENN Entertainment (NASDAQ:PENN) embodies in its paltry 5% US sports betting market share.

Three years ago, PENN thought they hit it big by acquiring media giant Barstool, with high hopes to rebrand as Barstool Sportsbook. But it failed to gain traction as Barstool’s image — and its controversial founder — prevented it from securing sports betting licenses.

This August, PENN placed another big bet — and shook the betting industry by announcing a partnership with ESPN. It sold Barstool and set its eyes on a new prize: rebranding its Sportsbook to ESPN Bet.

Game Day: ESPN Bet launches today and will be available in 17 states. Last week, PENN and Disney (NYSE:DIS) set high expectations, showing that “92% of current bettors [are] likely to use ESPN Sportsbook.” But whether they stick around is another question.

• The gambling company expects to own 20% of the online sports betting market by 2027 — disrupting a market dominated by FanDuel and DraftKings (NASDAQ:DKNG).
• $PENN is still hovering near the level it traded at when the deal was announced — and is down over 20% YTD, a far cry from $DKNG’s 200% showing.

Quitters never win… and neither does bad tech

Having a large reach won’t guarantee success. Earlier this year, FOX shut down its betting platform — despite the massive reach of the ESPN rival. Lightshed analyst Richard Greenfield said, “PENN is not a market leader in sports betting and nobody believes their technology is good enough to compete with the industry leaders” (Barron’s).

• Sharp Alpha Advisors’ Lloyd Danzig told SportsHandle that PENN can win if they “leverage ESPN into something truly unique and differentiated.”
• ESPN will give PENN the exposure it needs, but whether customers continue to use the platform is uncertain — and PENN’s track record with Barstool hasn’t instilled much confidence.

Crowded field: Sports betting is becoming increasingly competitive, and if PENN wants to make it into the playoffs, it’ll need its star player to perform. Incumbents like FanDuel will list in the US to boost their public awareness next year, while new entries like sports retailer Fanatics — which acquired bettor platform PointsBet — will hope to impress sports fans with its own push.