FanDuel parent Flutter has some big questions to answer if it wants to buy Penn Entertainment‘s digital assets, as one report suggests.
TheDeal.com reported Flutter could come in to buy the online gaming arm of Penn if Boyd buys the rest of the business. The idea makes sense from the standpoint that Boyd and Flutter are already business partners in a sense; FanDuel partnered with Boyd in 2018 for US online gaming access in return for a 5% stake in FanDuel.
But what exactly Flutter would do with the online assets, which includes a license to use the ESPN Bet brand on proprietary technology, is unclear.
Why would FanDuel get involved?
A third party to buy Penn’s digital business would likely be necessary for Boyd since a bid for Penn’s retail casino assets would likely be quite pricey and complex.
Flutter likely needs more of a reason to jump in than just being business partners with Boyd, though. Given FanDuel’s leadership position in the market, two potential reasons stand out:
- ESPN Bet could help the sports betting leader push its market share out of reach of No. 2 DraftKings.
- Flutter would rather shut down ESPN Bet instead of allowing a potentially strong brand to compete.
Could FanDuel, ESPN Bet coexist?
If past business practices mean anything, giving equal treatment to both the FanDuel and ESPN Bet brands is unlikely for Flutter.
Remember: Flutter had two US sports betting brands at one point. Flutter acquired the FOX Bet brand when it bought The Stars Group back in 2019, but the sportsbook brand saw little internal support.
FOX Bet routinely had handle shares of less than 1% in some markets as Flutter clearly was not interested in promoting both brands. Flutter made the decision to close the brand for good last summer.
It is hard to see an argument for Flutter taking on the ESPN Bet brand given past experience, especially considering the associated costs. Penn owes Disney $150 million a year throughout the 10-year contract.
Expert: ESPN Bet juice ‘not worth the squeeze’
Chris Krafcik, the managing director of sports betting and emerging verticals at gaming consultancy Eilers & Krejcik, does not see Flutter being interested, he said on LinkedIn.
Flutter could “reasonably expect to fix” the issues at ESPN Bet, he said. For example, implementing FanDuel’s same-game parlays into ESPN Bet would likely bump up the average revenue from monthly unique players.
That is a key performance indicator that ESPN Bet significantly trailed FanDuel by in the first quarter with $27 to FanDuel’s $120. Krafcik does not necessarily see the work as worth it, though:
“That is NOT to say, however, that a Flutter-ESPN Bet combination would make (enough) sense to pursue. Lots of challenges (e.g., potential tech stack switch, hefty marketing spending commitments, ESPN media ecosystem integration) to navigate.
“Our armchair view is that the juice is probably not worth the squeeze—especially given FanDuel’s market-leading positioning in U.S. online gambling.”
Earnings season may not provide answers
All three of the companies are poised to hold public calls to discuss second quarter earnings within the next month.
Rumors, though, are one thing that companies typically do not comment on during these earnings calls. Ongoing negotiations and conversations are not items publicly traded companies can comment on, so there is little reason to think the public will be told anything unless a deal is confirmed.
That being said, analysts could certainly ask hypotheticals that can explain a company’s thinking. For instance, analysts could ask Flutter management if a brand with stronger recognition than the FOX Bet could coexist with FanDuel in the US.
