Penn Entertainment dropped earth-shaking news on the US sports betting industry after the market closed Tuesday with its announcement of a deal to house the ESPN BET app.
PENN will pay ESPN $2 billion in cash and stock over the next 10 years to become the exclusive online sports betting home of the world’s largest sports media brand. As part of the ESPN move, Penn agreed to sell Barstool Sports back to founder Dave Portnoy.
The terms of that deal will be among the most intriguing nuggets of information that could come out Penn Entertainment‘s earnings call on Wednesday.
Penn’s stock was up around 13% in after-hours trading as of 7:45 pm Eastern.
What we expected from Penn call
Aside from closing on the $388 million acquisition of the outstanding shares for Barstool Sports, the launch to in-house, proprietary technology previously was the biggest story of the year for Penn.
Just one issue: Penn Entertainment does not have to tell the market anything about the tech switch on this week’s call. That is because the change from Kambi‘s technology to the platform that first operated theScore Bet in Ontario happened in July.
It is assumed that ESPN BET will run on the new tech stack, but more information should come out Wednesday on that item.
Ontario offers promising trend for Barstool tech
Penn CEO Jay Snowden outlined some positives of the new platform based on its Ontario performance for its adjacent brand on the company’s Q2 earnings call.
In the first six months, theScore Bet improved retention by 118% and cross-sell into casino jumped 26%. That comes from the personalized marketing improvements of the new platform, he said.
Both of those numbers are up from the first quarter, which saw an 85% increase in retention and a 19% improvement of cross-sell to casino.
Any updates on Penn marketing plans?
For the last two quarters, Penn has promised to be more aggressive about marketing for Barstool. Driving acquisition for a product that fell “a bit behind” was not a focus for Penn in the first half, but Penn previously said it would be with the new platform.
“I think you’ll see us transition when we have a product that we believe stands up well to the competition,” Snowden said on that Q2 call. “That will be more aggressive in getting some marketing dollars dedicated towards getting new people into the ecosystem.”
Did Barstool turn positive in Q2?
Another big question Penn investors want to know is, will the interactive segment see a positive quarter like others have?
BetMGM, BetRivers, Caesars and DraftKings all reported positive Q2 adjusted EBITDA.
Penn was close in the first quarter with an adjusted EBITDA loss of just $5.7 million, an improvement from a $10 million loss in Q1 of 2022.