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Friday, April 25, 2025

PENN Entertainment’s High-Stakes Gamble with ESPN Bet Kicks Off on Tuesday

  • After his Barstool failure, PENN CEO Jay Snowden has plenty riding on its 10-year, $2 billion deal with ESPN.
  • PENN currently has about 2% of the U.S.’s legalized online sports betting market.
PENN ESPN
Rafael Henrique/SOPA Images/Sipa USA, Ron Chenoy/USA TODAY Sports

On Tuesday, ESPN Bet launches in 17 states, the latest and most expensive bid for PENN Entertainment to gain traction in online sports betting.

PENN’s last attempt was costly as it took a $923 million loss from its acquisition of Barstool Sports. Over about three years, PENN’s Barstool app could only secure about 2% of the U.S. legalized online sports betting market. 

It will be several months before it will be known whether PENN CEO Jay Snowden’s latest gamble will truly allow PENN to challenge leaders like DraftKings and FanDuel. 

“I couldn’t be more pleased with the way our products and design, engineering, marketing and operations teams, ESPN and PENN, have seamlessly and tirelessly worked together to prepare us for this launch,” PENN CEO Jay Snowden said on an investor call earlier this month. 

The consensus among industry insiders is that this is Snowden’s last chance to make PENN a meaningful player in the market and possibly his last hurrah as CEO if ESPN Bet fails to gain traction. 

After the Barstool misadventure, PENN entered into this 10-year deal that pays Disney $150 million annually, roughly the same fees ESPN landed in affiliate fees with its prior betting partners, Caesars and DraftKings. Disney also was granted $500 million of warrants to purchase nearly 32 million in PENN shares as part of the deal announced in August. 

And, come Tuesday, you could look at that PENN starting from zero. While those with Barstool accounts can transfer to the ESPN Bet app, those users will have to download the new ESPN Bet app. 

Snowden warned that PENN’s interactive business anticipates “losses every quarter in 2024” as it ramps up promotions to lure bettors to the ESPN Bet app. 

“You should think about the first two years of launch to be really where those cumulative losses capsize and then in the third full year, that’s where you’d expect us to be break even or better,” Snowden said.

PENN likely will need to grab about 10% of the betting market to become profitable. FanDuel and DraftKings combined control about 70% of the market. When Caesars and BetMGM are factored in, the four companies control around 90% of the market. 

And PENN will be competing with Fanatics — which purchased PointsBet’s U.S. assets in June — is currently live in 14 states. It’s expected to rebrand the PointsBet app early next year fully, and Fanatics has vast economic resources to lure in new players.

Barstool became too polarizing for PENN to leverage, which set the stage for Dave Portney to take back the company he founded for $1. ESPN gives PENN a wider audience given its reach, which is something Snowden has talked up since the deal was announced. 

“ESPN will be implementing an initial wave of exclusive integrations across the ESPN ecosystem, which includes 200 million unique monthly users in the U.S., more than 12 million of whom are regular users of the nation’s No. 1 fantasy sports app at ESPN,” Snowden said. “Following an initial advertising campaign, headlined by Sports Center anchors Scott Van Pelt and Elle Duncan, you’ll begin to see even deeper platform and media integrations with ESPN over the coming months.”

Snowden said the combination will provide “unmatched and eventually frictionless media and betting experience.

If it doesn’t, the deal can be terminated after the third year, and Snowden’s tenure that began right before PENN purchased its first piece of Barstool in 2020 could go right along with it.

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