In its second quarter earnings report, PENN Entertainment boasted of an 81% increase in ESPN BET customers since the sportsbook launched in November. The gaming company also promised to improve its NFL parlay options before the upcoming season.
ESPN BET is available as part of Illinois sports betting, but the sportsbook came under scrutiny last year during the NFL season for lackluster parlay offerings and features.
The earnings report was presented to shareholders and the media on Thursday amid rumors that PENN may be the subject of a merger or acquisition. Its ESPN BET mobile betting app is losing market share, though the company points to coming integrations into ESPN apps and website products as a remedy for that sluggish performance.
Upgraded NFL parlays part of ESPN Bet app refresh
The NFL season will kick off in early September, and that league dominates sports headlines and betting for five-plus months. PENN and its ESPN BET application aim to be a temptation for pro football bettors. But to do so, it will need to tap into new lead generation.
PENN says ESPN BET has 465,000 average monthly users, including customers in Illinois. That figure is dwarfed by its competitors, but the company has access to many potential consumers via its partnership with ESPN.
At the time of launch (Nov. 2023), CEO Jay Snowden acknowledged that ESPN Bet was still being optimized. Some of those optimizations are now being rolled out in time for football season. The PENN presentation identified a list of improvements made to the ESPN BET app. Some of those include refreshing the following:
– Home page improvements.
– Parlay carousel functionality.
– Dark Mode.
– Parlay+ being rebranded to Same Game Parlay (SGP).
As well, PENN plans to include the following new features/functionalities:
– A referral program.
– Early win payouts.
– ESPN Bet integration with theScore Media app, including “add to betslip” functionality.
PENN also showcased some of the user experience upgrades being made before the coming football season, including parlay betting interfaces. Such a strategy makes sense considering roughly one-quarter of the money wagered on sports in Illinois is via parlay betting.
“We’re now going to package [parlay bets] for you with no work. It’s going to be like magic,” said PENN Chief Technology Officer Aaron LaBerge.
The company reported that ESPN Bet Illinois parlays made up 24.2% of total handle in the Illinois market in April and May. That compares to 22.2% by the sports betting market as an industry. ESPN BET is expected to launch in New York in August, its biggest market yet. With that launch, it will be available to 46% of the U.S. population.
However, according to JMP Securities, ESPN BET market share in states with legal sports betting fell to 3.2% from 4.7% between the first and second quarter of 2024.
PENN: Winning bet surcharge ‘not even on our radar’
The sports betting industry is trying to figure out how a recently announced decision by DraftKings could transform the way sportsbooks earn money. DraftKings revealed it will place a surcharge on winning bets starting in January 2025.
The surcharge will be implemented only in states where the tax rate on sports betting operators is at least 20%. That means it will be passed along to Illinois bettors who use DraftKings. The fee amounts to about $1.60 on each $100 won, according to DraftKings.
PENN CEO Jay SNowden says it has no intention of duplicating DraftKings’ surcharge strategy.
“[DraftKings’ decision to implement a surcharge] was unexpected from our perspective, but definitely interesting. When you think about PENN’s view on this, you should expect us to be observers. We have a lot going on in front of us right now over the coming quarter.
“So, I would say when you’re talking about a potential tax surcharge in early 2025, that’s not even on our radar. I hesitate to say never, but … we would not be a first mover on something like that. We’re going to stay very close to it. We’ll observe, we’ll see what the reaction is, assuming that it does launch in early ’25. And then we’ll probably have more to share with all of you on our quarterly earnings calls throughout 2025.”
PENN has experienced a big year. The inaugural ESPN BET retail sportsbook opened in April at Hollywood Casino at Greektown in downtown Detroit, which PENN operates. Eight more retail sportsbooks will open or be rebranded as ESPN BET later in 2024.
Is PENN Entertainment for sale?
A handful of key investors have called for PENN to be sold, and rumors have led to Boyd Gaming being linked to a potential $10 billion deal. Such an acquisition would require regulatory approval in several states, and Disney, which owns ESPN, would also need to approve because of its branding agreement with PENN Entertainment, which includes options to purchase up to $500 million worth of PENN shares.
As to rumors of a sale, Snowden remarked,
“We haven’t commented and won’t comment on market rumors and speculation. What I will say is that as a company and as a board, we always have and always will evaluate opportunities to enhance value and will continue to take actions that we believe are in the best interest of the company and our shareholders. … I would say don’t believe everything you read. … Just remember that our assets, our land-based assets are all part of different leases. So, it’s not as simple and easy as you just sell off an asset.”
