ESPN Bet Revenues Outperforming Predecessor Barstool Sportsbook

Article ByDavid Weir

January 15, 2024

Spread the Word:

Posted in: US Sports Betting News, Pennsylvania Gambling News, US Gambling News

Penn Entertainment’s ESPN Bet, the billion-dollar collaboration with sports media giant ESPN, has been far outperforming Penn’s previous sportsbook operation, Barstool Sports.

Since going live in 17 states in November, ESPN Bet has smashed online sportsbook download records and boosted revenues significantly for Penn.

In Ohio, ESPN Bet achieved the third-largest handle of all online sportsbooks in November, behind only FanDuel and DraftKings. In December 2023, the new book achieved record handles for Penn in the Maryland and Iowa sports betting markets. It more than doubled Barstool’s December 2022 handle in both states, hitting $42.4 million in Maryland and $18.8 million in Iowa.

Nationally, ESPN Bet aims for a 20% market share by 2027. That would significantly challenge the current dominance of FanDuel and DraftKings, who jointly control more than 70% of the market.

Despite being up in share price since the launch of ESPN Bet, Penn is still hugely down on its peak 2022 share price. New York-based investment firm HG Vora, which owns 18.5% of the operator, recently issued public criticism of Penn’s performance and asked for a seat on the company board.

Market Dynamics

U.S sports betting saw substantial growth throughout 2023, with the overall handle surpassing $100 billion for the year. On the other hand, only the two market leaders are showing consistent profits.

Given all that, Penn Entertainment’s pivot from Barstool Sportsbook to ESPN Bet is showing early signs it could break into the upper echelons of the market and secure profitability in the long-term.

Penn execs have set a target of $500 million to $1 billion in extra long-term revenues in the next few years. However, huge initial investments in promotions and marketing mean that ESPN Bet is not expecting a profit in 2024.

The Pennsylvania-based operator paid some $500 million to fully acquire Barstool Sports across 2022 and 2023, before selling the media portion of the brand back to founder Dave Portnoy for a reported $1 fee.

It then spent what could amount to a further $1 billion on the ESPN brand for its new venture, which launched in November 2023.

Two months later, Penn claims ESPN Bet already has high levels of app engagement and usage time, which closely rivals that of the established market leaders.

Challenges and Opportunities

While ESPN Bet’s initial success is promising, continuing this momentum in a market dominated by heavyweights will be challenging. The company’s aggressive $30 million promotional spend in the Ohio sports betting market illustrates the point.

The sportsbook handled its personal best $70.8 million while achieving the highest hold of any operator at 16.9%. However, it failed to break either DraftKings or FanDuel’s out of the top two market places.

In the long-term, $30 million a month in promos will not be sustainable, even if market share booms. At some point, ESPN Bet will need to balance promotional expenses against eventual profitability.

Additionally, ESPN Bet faces the challenge of entering highly competitive but lucrative markets like sports betting in New York, where the sports betting industry is tightly regulated and highly taxed.

On the other hand, since Penn launched ESPN Bet, it may have also forced the hand of other operators to increase bonus offers to counter its promotional blitz.

“Unsurprisingly, industry-wide promotional reinvestment accelerated in November, largely due to the mid-month launch of ESPN Bet,” said one analyst for Missouri-based financial services operator Stifel.

“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.”

Going into 2024, Penn Entertainment is also ambitiously expanding its existing gambling operations outside of sports betting. Shortly after opening EPSN Bet, the operator announced the ground breaking on four multimillion expansion projects across its casinos in Illinois, Pennsylvania, and Nevada.