PENN Entertainment’s recent $2 billion deal with ESPN to launch the ESPN Bet sportsbook means that Ohio will be getting a new sports betting option in the near future.
ESPN Bet will be replacing Barstool Sportsbook as one of 18 Ohio online sportsbooks. Barstool is no longer in the sports betting business, a result of the ESPN agreement with PENN that gave the Barstool brand and media assets back to founder Dave Portnoy.
According to statements in a recent earnings call by PENN Entertainment president and CEO Jay Snowden, ESPN Bet will be launching sometime in November.
“Certainly before Thanksgiving,” Snowden said.
That timeline puts ESPN Bet’s launch almost directly in the middle of the NFL regular season.
With the NFL being the most popular and most bet-on sport in the U.S., what will ESPN Bet be missing out on with a mid-season launch? And will that later launch date hurt PENN’s ability to improve upon its current sports betting market share with Barstool Sports in states like Ohio?
ESPN Bet to miss out on lucrative first two months of NFL season
With a November launch, ESPN Bet will miss out on almost two entire months of NFL games, at the very least. The halfway point of the season, Week 9, begins Nov. 2.
Thanks to the NFL’s popularity among sports bettors (nationwide, it’s the most bet-on sport), September is the rebound month for the sports betting industry, following the traditionally slower summer months.
In June, the most recent Ohio sports betting revenue numbers made available, the entire monthly handle was $363 million. July and August will likely be in a similar range.
PlayOhio’s projections indicate September’s handle could be around $621 million, while October’s sports betting volume (which will also include the first week of the NBA season) could reach $869 million, which would be the largest monthly handle of the year besides January’s eye-popping $1.1 billion.
PENN sees late start as an advantage
If PENN were able to convert its Barstool Sportsbook to ESPN Bet by the NFL season’s early-September start, besides getting a piece of that swelling sports betting handle, the new sportsbook brand could also potentially benefit from the preseason excitement over football’s return.
Snowden said launching in November is a “product-led decision,” allowing its engineers enough time to update the new app and prepare to transfer Barstool customers to the new platform.
But Snowden said that he sees the late entry as an advantage. While building anticipation for the launch, ESPN Bet will be able to sit out the early season flood of football promotions, then swoop in when things have died down a little.
The beginning of the football season “is so noisy,” Snowden said during the earnings call.
“Everybody is spending like crazy,” Snowden continued. “Strategically, I like (the November launch) because we’re going to be out there launching at a time where maybe with everyone else, new customers have kind of burned through those promotional dollars on first-time deposit match and we are going to be mid-season offering something that probably isn’t being offered by others or it’s already been utilized with the other competitors.”
ESPN/PENN deal unlike other media/sportsbook partnerships
PENN is counting on the ESPN brand and cross-promotion across all of ESPN’s platforms (including the promotional involvement of ESPN personalities and the potential for programming streaming through the betting app) to give it a higher ceiling for growth than what it had with the Barstool partnership.
While Barstool successfully brought in a younger demographic, PENN sees ESPN’s potential to draw new users as much more expansive.
“You’re talking about a brand that everybody in the world knows about,” Snowden said. “It’s not an old brand. It’s not a young brand, it’s an everything brand. There’s a lot of affinity for that brand. And so we think it’s going to be extremely complementary to what we’ve built over the course of the last three years (with Barstool Sportsbook).”
Some pundits have wondered whether the ESPN brand and integration will be enough for PENN to substantially improve upon its sports betting efforts to date, citing failed ventures like Fox Bet, the doomed 2019 partnership between Fox Sports and The Stars Group.
Snowden said comparisons to other media/sports betting agreements is like comparing “apples to eggplants,” given ESPN’s unparalleled stature in sports media.
Snowden also made it clear that PENN is ready to spend a lot to boost its sportsbook market share. PENN is committed to spending $150 million annually to ESPN for “marketing services,” as well as a similar amount for marketing annually outside of ESPN.
ESPN Bet will have heightened promotional spending early on
Snowden didn’t commit to a dollar amount for promotional spending upon ESPN Bet’s launch, but he did suggest it will be an increase over what it had been spending on Barstool Sportsbook’s promotions.
“We anticipate an additional amount of promotional spending as we launch the ESPN Bet product and welcome newly engaged fans as first-time and reactivated depositors in the ecosystem,” Snowden said, later adding that they would probably go big on the initial promo spend in November and December, as well as the first three months of 2024.
Promotional spending — including new user bonus bet giveaways, deposit matches, odds boosts and other promotional offers — has proven to be a key to establishing a steady, respectable market share in Ohio. Bet365 Sportsbook’s high promotional spend in Ohio pushed it to a top-three market share finish in May and June, behind only dominant market leaders FanDuel Sportsbook and DraftKings Sportsbook.
With Barstool Sportsbook, PENN took a relatively conservative approach to promotional spending in Ohio. It began the year with the fifth-highest promo spend of any sportsbook — $5.4 million — which helped it to a 4.2% market share in January (fourth-best for the month).
But after the launch-month spending bonanza, PENN pulled back on promo spending considerably. After a March promo spend of over $811,000, PENN only spent $376,000 in April. That number has steadily declined since, with only $124,000 spent on promotions in June, less than what was spent for the month by BetRivers, which has yet to crack 1% of Ohio’s sportsbook market share.
PENN/ESPN have lofty market share goals
Despite the drop-off in promo spending, Barstool Sportsbook has managed to maintain about the same market share numbers it posted in January.
Barstool’s average market share through the first six months of sports betting in Ohio was 4.5%. Since April, Barstool has come in sixth in the state in terms of sports betting volume, placing it behind fellow mid-tier books like Bet365, BetMGM Sportsbook and Caesars Sportsbook, and ahead of Hard Rock Bet and Tipico Sportsbook.
Nationwide, in the second quarter of 2023, Barstool — which operates in 16 states — accounted for just 2% of the market share.
That’s not good enough for PENN, which has its sights for ESPN Bet set much higher.
The agreement between PENN and ESPN includes an opt-out option for both parties if, after three years, ESPN Bet hasn’t reached a certain market share threshold. In the earnings call, Snowden wouldn’t reveal what that number is, but he alluded to a slide in PENN’s “strategic alliance” presentation that suggested a 10% market share would be “a level that we’re starting to get excited about.” Based on his comments, anything less than 10% market share would be concerning.
Beyond that, PENN and ESPN are aiming for ESPN Bet having 20% market share by 2027.
That’s a very ambitious goal considering Barstool’s current 2% market share.
Eilers & Krejcik Gaming estimates that DraftKings and FanDuel’s combined market share is 71%. Add in the market shares of BetMGM (12%) and Caesars (6.7%) and there’s only about 10% market share left.
With ESPN’s weighty brand and cross-promotional opportunities attached — plus a substantial promotional spending budget to help acquire new customers — ESPN Bet seems likely to improve on Barstool Sportsbook’s 4.5% share in Ohio and 2% share nationwide.
Whether it’s enough to skyrocket ESPN Bet into a 20% market share within four years is hard to envision, but once the sportsbook gets a foothold in the rapidly expanding U.S. market and starts making gains, it doesn’t seem like it’s completely out of the realm of possibility.