Penn Entertainment plans to bring ESPN Bet to the largest legal sports betting market this year after buying WynnBet’s New York license.
Penn paid $25 million for the New York sports betting license to deliver ESPN Bet, the same price WynnBet paid when it entered the market. Unlike most legal betting states, New York caps licenses at nine, which kept sportsbooks like bet365 and Fanatics from the market after failing in the initial bidding process.
“This is an important development that will bring ESPN BET to the largest regulated online sports wagering market in North America,” Penn CEO Jay Snowden said in a press release. “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.”
Penn comes around on New York
Penn’s interest in New York made headlines in December when Truist said the company was actively working to buy a license for ESPN Bet.
That came a few months after Snowden walked back comments he made when Penn tried to enter the market as Barstool Sportsbook years ago.
“I don’t think a single operator will make money in New York,” he said in November 2021, after a report that the New York State Gaming Commission would deny Penn’s three-way bid with Fanatics and Kambi.
Another step before ESPN Bet launches in New York
Penn still needs approval from the New York State Gaming Commission before it can launch ESPN Bet.
“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,” an NYSGC spokesperson said.
WynnBet to leave 10th state
WynnBet has sought a buyer for its New York sports betting license since January 2022, just weeks after the market opened.
It announced a departure from Massachusetts last week after it shut down in eight states last year, citing high spending associated with customer acquisition and marketing. Once it leaves New York, WynnBet will only operate in Arizona and Michigan.
Smaller outfits struggle in NY market
New York operators generated $1.7 billion in revenue in 2023, though more than half of that went to the state because of a nation-high 51% tax rate.
“The challenge with New York continues to be how any company can compete. With an excessive tax rate already in place, it will be hard to capture additional market share,” said Brendan Bussman, gaming analyst and managing partner at B Global Advisors. “[I’m] not saying it is impossible because the brand will resonate, but with little to no margin, it makes the operations difficult.”
BetMGM, DraftKings and FanDuel have combined to capture more than 80% of the market every month following New York’s initial launch in 2022, according to Citizens JMP Securities. Meanwhile, Bally Bet, Resorts World, Rush Street Interactive and WynnBet have averaged 2% of the market.
“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,” said Jordan Bender, a senior equity research analyst at Citizens JMP Securities.
The road ahead for ESPN Bet
Penn launched ESPN Bet in 17 states in November after agreeing to a 10-year deal in which it will pay ESPN up to $2 billion. It replaced Barstool Sportsbook, which Penn bought for $551 million but captured just 4% of the market in three years.
Snowden has been vocal about potential transformation the ESPN partnership allows, though much of that is yet to be seen.
“While ESPN enjoys significant brand recognition, the success of ESPN Bet hinges on both effective marketing and a compelling product.” Lloyd Danzig, a gambling investor and CEO of Sharp Alpha Advisors, told LSR. “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.”
The partnership has an option to terminate after three years if certain thresholds are not met, though those terms are not made public.
ESPN Bet market share so far
ESPN Bet accounts for roughly 7% of US online sports betting handle since it launched, according to Citizens JMP Securities. DraftKings and FanDuel, meanwhile, combined for roughly 71% during that span, despite issuing fewer promotions and free play given their established positions.
Penn holds a potential marketing advantage in 12 ESPN states by owning casinos and racetracks. However, the legacy casino operator does not own a property in New York, Bender highlighted.
“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,” Bender said.
LSR reporter Mike Mazzeo contributed to this story.
