ESPN Bet is slated to launch November 14 pending final regulatory approvals, Penn Entertainment announced Thursday as it released third quarter earnings results.
Penn sold Barstool back to founder Dave Portnoy for $1 after failing to gain double digits in sports betting market share. It is paying roughly $1.5 billion with up to $500 million in stock options over the next 10 years to use the ESPN name.
Penn stock was up over 12% to $22.08 a share shortly after the call.
Losses expected as ESPN Bet launches
Snowden anticipates EBITDA losses between $100 million and $150 million in the fourth quarter from costs associated with launching the app. That includes significant promotions and bonuses, which most other sportsbooks dialed down nearly two months into NFL betting.
Penn Interactive posted an adjusted EBITDA loss of $50.2 million on $196.3 million of revenue during the third quarter. Snowden attributed that primarily to winding down Barstool Sportsbook, which remains up and running ahead of the ESPN switch:
“We literally spent no money on marketing because we’re switching brands on November 14, so it doesn’t make sense to spend money on the brand that you were using previously. But you should assume that we had a significant ramp on the payroll side of things because we’re getting ready for a launch we expect to be at a certain level of scale and volume that we have not seen before.
“It’s sort of like you have the downside of preparing for the launch, but you don’t have any of the upside of the revenues that come with the launch. I wouldn’t use the 3Q number for any purposes of modeling out the future.”
More details on ESPN Bet tech
Snowden said ESPN Bet could have launched earlier, but the company wanted to ensure proprietary technology from theScore Bet was fully in place to power the app. Penn’s sports betting app in Ontario is showing good results from using that tech so far, according to Snowden.
Much of what plagued the Barstool app’s market share issues stemmed from outdated technology.
While their details will be automatically rolled over, customers of the old Barstool app will still need to download the new ESPN Bet app. Snowden likened it to the change from HBO Max to Max, and dismissed the notion that it creates an extra point of friction.
Losses to peak this quarter and next, Snowden says
Expect losses from Penn Interactive to reach their peak in Q4 2023 and Q1 2024, as ESPN Bet doles out first-time deposit match promos during a sports-heavy portion of the calendar, Snowden said. He added that ESPN Bet will have losses in every quarter of 2024.
“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.
Both parties can terminate the deal after three years if the market share falls below a certain number. Snowden has previously suggested a figure of around 20%.
ESPN assets begin integration
In association with the launch, ESPN will implement an initial wave of exclusive integrations on their linear and digital platforms, including an advertising campaign headlined by SportsCenter anchors Scott Van Pelt and Elle Duncan. Penn said that will reach roughly 200 million ESPN fans.
“Looking ahead, we will be introducing even deeper platform and media integrations with ESPN over the upcoming months, providing an unmatched and seamless media/betting experience that will appeal to sports fans across the country,” Penn said in the press release.
Where Penn will go Hollywood
In the four states where Penn has iGaming licenses, ESPN Bet will also feature Hollywood Casino-branded games within the app. Those states are:
- New Jersey
- West Virginia