Casino corporation Penn Entertainment has bought a betting license to launch its vertical ESPN Bet to the largest legal sports betting market in the United States. The state of New York originally made only nine sports betting licenses available to leave some leading sportsbooks out of the market. As Penn was one of them, the corporation has paid $25 million to WynnBet to take over its New York license and become eligible to enter the lucrative jurisdiction via its sports betting subsidiary.
$25 Million License Acquisition:
Penn CEO Jay Snowden said in a press release: ”This is is an important development that will bring ESPN BET to the largest regulated online sports wagering market in North America. Together with ESPN, we’re building a brand that is synonymous with sports betting, and operating in the New York market is key as we grow ESPN BET across the U.S.” The news comes after the company reportedly announced in December 2023 that it was looking to buy the New York license for ESPN. According to LSR, such intentions were different from Snowden’s earlier claims that ”not a single operator [would] make money in New York.”
As LSR reports, Snowden said that in November 2021 after the New York State Gaming Commission had denied Penn’s bid to enter the market as Barstool Sportsbook. In the meantime, Penn sold Barstool back to its owner Dave Portnoy in August 2023 after capturing only a 4% US market share to proceed with the ESPN Bet acquisition. Penn closed the $2 billion deal with the sportsbook in November 2023 and launched ESPN Bet in 17 states.
Pending Regulatory Approval to launch ESPN Bet:
With the recently purchased betting license, Penn’s portfolio is now set to include the regulated New York market. Approval from the New York State Gaming Commission (NYSGC) to launch ESPN Bet is pending. NYSGC spokesperson reportedly said: “The Commission has been notified of the sale. Penn’s operation in NYS is pending regulatory approval, which has not yet occurred. We cannot opine on the timeline.” At the same time, Wynn Bet is leaving the New York market after it terminated operations in eight states in 2023 due to high operating expenditures. The sportsbook has sought a buyer for its New York sports betting license since January 2022, as reported by LSR.
$1.7 Billion New York Market:
The same source reports that New York operators generated $1.7 billion in revenue in 2023 making it a preferred destination for sports wagering operators despite the 51% gaming tax rate. Some gaming analysts, like Brendan Bussman from B Global Advisors, argue that ”with little to no margin, it makes the operations difficult,’‘ however, operations have been accelerated since New York’s initial launch in 2022. Over the same period, BetMGM, DraftKings and FanDuel have held a combined market share of more than 80%. Jordan Bender, a senior equity research analyst at Citizens JMP Securities, reportedly said: “The market has proven lopsided since launch as operators have generally taken a conservative approach toward spending on promotions and marketing in the state with contribution profit margin well below other U.S. gaming markets.”
ESPN Market Prospects:
As LSR reports, DraftKings and FanDuel have a combined 71% stake in the US online sports betting handle. On the other hand, Penn’s sports betting vertical ESPN Bet reportedly accounts for only around 7% of US online sports betting handle. Although the sportsbook may have a marketing advantage in 12 states featuring Penn’s casinos and racetracks, the lack of a land-based property in New York may reportedly affect the ESPN market performance. As reported by LSR, Bender said: “With no competitive advantage in New York, we do not see it overperforming or underperforming its current market share of mid-to-high single digits once it launches later this year.”
Commenting on ESPN’s New York prospects, Lloyd Danzig, a gambling investor and CEO of Sharp Alpha Advisors, told the source: “While ESPN enjoys significant brand recognition, the success of ESPN Bet hinges on both effective marketing and a compelling product. It remains uncertain whether ESPN Bet can gain significant market share at the expense of established competitors who currently hold stronger product loyalty and affinity among users.”
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